How the New Section 45X Legislation Will Impact Manufacturing

The federal government rarely updates manufacturing tax credits, but when it does, the ripple effects move faster than most manufacturers expect — impacting supply chains, investment decisions, and energy strategies simultaneously.

Representative Blake Moore (R-UT) has introduced legislation to expand the Section 45X Advanced Manufacturing Production Credits, and this proposal deserves more attention than it's currently receiving. The update would extend eligibility to lead and all other materials designated by the U.S. Geological Survey (USGS) — a change that sounds technical on the surface but carries significant weight for domestic producers across multiple sectors.

What Section 45X Actually Does

Section 45X was created under the Inflation Reduction Act to incentivize domestic production of critical components for clean energy and advanced manufacturing. Unlike investment tax credits that reward you for building a facility, Section 45X is a *production* credit — meaning you earn it for what you actually make, not what you spend to get started.

That distinction matters enormously. Investment credits favor developers with capital and patience. Production credits reward manufacturers who execute — who actually run lines, hit volumes, and deliver output. The structural design of 45X was intentional: push money downstream to producers who are actively building American manufacturing capacity, not just planning it.

The original credit covered components like solar cells, wind turbine parts, battery cells and modules, inverters, and certain critical minerals. The credits are generous — $35 per kilowatt-hour for battery cells, for example, or 10% of the production cost for critical minerals. For facilities running at scale, these numbers compound quickly into material competitive advantages.

What the Moore Amendment Changes

The proposed update does two things worth understanding separately.

First, it adds lead to the list of qualifying materials. Lead often gets dismissed as an "old economy" material, but that framing misses its ongoing industrial role. Lead-acid batteries remain dominant in automotive, backup power, and grid storage applications where weight and cost matter more than energy density. The secondary lead smelting industry — which processes spent batteries back into usable material — is substantial, predominantly domestic, and currently excluded from 45X benefits.

Second, and more consequentially, the legislation would extend credits to *all* materials designated by the USGS as critical minerals. This is the expansion that could reshape procurement strategies across the entire advanced manufacturing sector. The USGS critical minerals list currently includes 50 minerals — from cobalt and lithium to bismuth, tellurium, and indium — many of which are essential inputs for semiconductors, defense systems, and clean energy equipment. Broadening 45X to cover all of them removes an arbitrary ceiling that has limited the credit's reach.

The insider perspective here: the original 45X list was essentially a political negotiation frozen in time. Specific materials made the cut based on what could pass in 2022. The USGS designation process, by contrast, is a technical and scientific assessment updated periodically based on supply chain risk and economic importance. Tying 45X eligibility to USGS determinations makes the credit dynamic rather than static — it can evolve as the threat environment evolves without requiring another act of Congress each time.

Why This Connects to Clean Energy Policy

The clean energy angle isn't incidental. The materials that keep falling off the edge of current 45X coverage — tellurium for thin-film solar, indium for photovoltaics, bismuth for various defense and industrial applications — are precisely the materials where domestic production gaps create strategic vulnerabilities.

China currently dominates refining for the majority of USGS-designated critical minerals. That's not just a talking point; it's a documented supply chain reality that multiple federal agencies have flagged as a national security concern. Extending manufacturing production credits to the full USGS list creates a financial incentive for U.S. producers to close that gap, without requiring direct subsidies or mandates.

From a clean energy manufacturing standpoint, the implications are direct. Solar panels require tellurium and indium. Battery chemistries beyond lithium-ion depend on materials like cobalt, manganese, and nickel. Wind turbines use rare earth elements for permanent magnets. If domestic producers of these inputs can claim production credits, the economics of building American clean energy supply chains improve materially — not just for the miners and smelters, but for the downstream manufacturers who currently depend on imported materials at variable prices.

What This Means for Manufacturers Right Now

If the legislation advances, the strategic implications break down into two categories: who benefits immediately and who should be repositioning now.

Immediate beneficiaries include secondary lead smelters, producers of any USGS-listed mineral currently excluded from 45X, and manufacturers of components that use those materials as primary inputs. For these operations, the credit could represent a meaningful shift in unit economics — potentially the difference between a domestic facility being competitive with overseas production or not.

For manufacturers not currently producing qualifying materials, the relevant question is sourcing strategy. If your domestic supplier suddenly qualifies for a production credit that their foreign competitors don't, that changes the cost calculus on domestic versus imported inputs. Some procurement decisions that looked straightforward six months ago should be revisited.

Navigating the application and compliance side of 45X requires real attention. The credit is claimed on IRS Form 7207, and the eligibility rules around what constitutes a "qualified facility" and what counts as eligible production are specific. The USGS connection adds another layer — manufacturers will need to track whether their materials appear on the current USGS critical minerals list, which is updated periodically. Getting outside counsel familiar with advanced energy tax credits involved early is not optional if you're planning to build a strategy around this.

The Longer Arc

This legislation reflects a broader shift in how Congress thinks about industrial policy. The old model was tariffs and trade barriers — blunt instruments that protect domestic producers by raising costs on foreign competition. The emerging model uses tax credits to make domestic production genuinely competitive on its own terms. That's a more durable approach, though it takes longer to compound.

The Moore amendment's alignment with USGS designations signals something else worth watching: policymakers are increasingly willing to delegate technical determinations to scientific agencies rather than encoding specific materials lists in statute. If that approach holds, future updates to the critical minerals landscape can flow through the regulatory process rather than requiring legislation — which means 45X could remain relevant and responsive as supply chain priorities evolve.

The manufacturers who treat this as a one-time tax opportunity will capture some value. The ones who treat it as a structural shift in what domestic production economics look like will capture much more.

The bill still needs to move through committee and pass both chambers — there is no certainty in that process. But the direction of travel is clear: Section 45X is not a finished policy. It's a framework that's actively being expanded, and the window for manufacturers to position ahead of those expansions, rather than scramble to catch up after, is open right now.

[INTERNAL LINK: Section 45X Overview] [INTERNAL LINK: Clean Energy Manufacturing] [INTERNAL LINK: USGS Critical Minerals]

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EDITOR NOTES

• Consider cutting the paragraph discussing the historical context of the original 45X list, as it may feel like filler to some readers.
• Ensure that the internal links are relevant and lead to appropriate content on the blog.