Financial Incentives for Hydrogen and Fuel Cell Projects

The Advanced Energy Project Credit extends the 30% investment tax credit and creates funding for manufacturing projects producing fuel cell electric vehicles, hydrogen infrastructure, electrolyzers, and a range of other products:

• It also expands tax credit to include projects at manufacturing facilities that want to reduce their greenhouse gas emissions by at least 20%
• Tax credit is funded at $10 billion for eligible projects
• Can be applied to retrofitting facilities for low-carbon industrial heat, carbon capture, transport, utilization, and storage systems, and equipment for recycling, waste reduction, and energy efficiency.

The Alternative Fuel Refueling Property Credit extends the credit sunset and increases the 30% credit cap:

• Extends tax credit to property placed into service before 2033
• Increases the tax credit to 30% of the cost of alternative fuel refueling property up to $100,000 (previously $30,000)
• Eliminates the restriction to allow for the credit to be used only once so that taxpayers who install qualified equipment at multiple sites are allowed to use the credit toward each site location
• Includes new census tract restrictions on location restricting development to low-income and not-urban communities.

The Carbon Capture and Sequestration Tax Credit provides an enhanced rate of carbon dioxide captured for storage and utilization for qualified facilities through 2032:

• Enhances the tax credit for carbon capture and direct air capture
• Extends the deadline for construction to January 1, 2033, and increases the credit amount.

The Clean Hydrogen Production Tax Credit creates a new 10-year incentive for clean hydrogen production tax credit with up to $3.00/kilogram. Projects can also elect to claim up to a 30% investment tax credit under Section 48. The level of the credit provided is based on carbon intensity, up to a maximum of four kilograms of CO₂-equivalent per kilogram of H₂. The credit provides a varying, four-tier incentive depending on the carbon intensity of the hydrogen production pathway. The credit measures emissions up to the point of production using the Argonne National Laboratory Greenhouse gases, Regulated Emissions, and Energy use in Technologies Model:

• Projects must begin construction by 2033
• Eligibility includes retrofit facilities
• Cannot stack with the Carbon Capture and Sequestration Tax Credit (45Q)
• Can stack with renewable energy production tax credit and zero-emission nuclear credit
• Projects are required to promote good-paying jobs by following prevailing wage standards and apprenticeship requirements to receive the full credit
• The four-tier incentive breakdown is detailed in the following table:

  Carbon Intensity (kg CO2e per kg H2)	Max Hydrogen Production Tax Credit ($/kg H2)
  4–2.5	$0.60
  2.5–1.5	$0.75
  1.5–0.45	$1.00
  <0.45	$3.00

The Clean Vehicle Credit maintains the existing $7,500 for the purchase of fuel cell electric vehicles by creating a qualified new clean vehicle credit built on the 30D credit for plug-in battery electric vehicles:

• Adds a retail price cap of $55,000 for new cars and $80,000 for pickups, vans, and sport utility vehicles
• Credit is reduced or eliminated if a certain percentage of the critical minerals utilized in battery components are not extracted or processed in the United States or a Free Trade Agreement country or recycled in North America; the percentage required increases from 40% in 2024 to 80% in 2026
• Credit is reduced or eliminated if electric vehicle is not assembled in North America or if the majority of battery components are sourced outside of North America; the percentage increases from 50% in 2024 to 100% in 2028
• Implements an income eligibility limit of $150,000 or $300,000 for joint filers
• Eliminates the previous manufacturer quota, which phased out the tax credit for manufacturers as they neared 200,000 clean vehicles sold.

Elective Payment for Energy Property adds an election for direct pay provisions to a range of tax credits including the clean hydrogen production credit, the energy investment tax credit, the carbon capture and sequestration credit, alternative fuel vehicle refueling property credit, advanced energy project credit, and others:

• Allows direct payments to be made in lieu of a reduction in tax liability ("direct pay") and/or an option to monetize the credits by transferring them to an entity with greater tax liability ("transferability")
• Direct pay is limited to certain tax exempt and governmental entities for most of the eligible tax credits
• This limitation does not apply to the first 5 years of the section 45V clean hydrogen credit, section 45Q carbon capture and sequestration credit, and section 45X advanced manufacturing credit
• Direct pay expires at the end of 2032.

The Energy Credit extends the 30% fuel cell investment tax credit through 2024 before a transition to the technology-neutral Clean Energy Investment Credit, which begins in 2025. Can receive a bonus for domestic-sourcing of materials and for siting projects in "energy communities".

The Energy Storage Credit adds a new provision to the energy investment tax credit for energy storage, including hydrogen storage, available through 2025 before a transition to the Clean Energy Investment Credit.

The Qualified Commercial Clean Vehicles Credit creates a new 30% credit for commercial fuel cell electric vehicles through 2032, which is capped at $40,000:

• For class 1–3 (under 14,000 lb) vehicles for commercial use, creates a $7,500 tax credit tax for the purchase of electric vehicles or other qualified clean vehicles
• For class 4 and above (over 14,000 lb) vehicles for commercial use, increases the credit to $40,000.