applicable. The IRS’s 80/20 rule essentially means that the facility may be considered newly in place even if it contains some existing property, so long as the fair market value of the existing property is not more than 20% of the total value of the newly placed in service facility.Use of Renewable Natural Gas (RNG) in Hydrogen ProductionThe Proposed Regulation includes some criteria for facilities that produce clean hydrogen using RNG, such as biogas, in their processes, but largely seeks comments on how to incorporate them. Firms with a stake in these production methods should comment.The Proposed Regulation significantly clarifies the credit amounts and the means to claim the highest amount, with a clear preference for “green” hydrogen, as opposed to “blue”3 hydrogen, which is produced using natural gas with CCS. There is still, however, significant questions that DOE and the IRS have requested comments.FOOTNOTESInflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat. 1946.88 FR 89220, 89221 (Dec. 26, 2023).Blue hydrogen is defined as hydrogen produced from natural gas, using a steam reforming process. A byproduct of this process is carbon dioxide, which is then captured using CCS technology. While this is considered a carbon neutral process, the fugitive emissions from the natural gas extraction process means there usually is some leakage.

ize regulations that would include additional methods for hydrogen production using renewable natural gas and fugitive methane sources, such as coal mine and coal bed methane—though it is clear from the wide-ranging questions the agencies pose that there is a current lack of clarity on how RNG should be treated under the regulations. As a result, companies potentially impacted should provide comments on the issues raised by Treasury. Written or electronic comments must be received by 26 February 2024, which is 60 days after 26 December 2023, the date in which the Proposed Regulations are scheduled to be published in the Federal Register. A public hearing on the Proposed Regulations is scheduled for 25 March 2024 at 10:00 AM EST.1 All “Section” or “§” references herein are to the Code, unless indicated otherwise.2 See Internal Revenue Serv., Section 45V Credit for Production of Clean Hydrogen; Section 48(a)(15) Election To Treat Clean Hydrogen Production Facilities as Energy Property, 88 Fed. Reg. 89220 (proposed Dec. 26, 2023) (to be codified at 26 C.F.R. pt. 1).3 Inflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat. 1946.4 Prop. Treas. Reg. §1.45V-1(a)(2), 88 Fed. Reg. 89220, 89244 (Dec. 26, 2023). 5Id. §1.45V-1(b)(1), 88 Fed. Reg. 89246.6 Id. §1.45V-1(a)(3), 88 Fed. Reg. 89245.7 Id. §1.45V-1(b)(3), 88 Fed. Reg. 89246.8 Id. §1.45V-1(a)(8)(ii), 88 Fed. Reg. 89245. 9 Id.10Id. §1.45V-4(c)(3), 88 Fed. Reg. 89247-48.11 Id. §1.45V-4(d)(3)(i), 88 Fed. Reg. 89249. 12Id. §1.45V-4(d)(3)(iii), 88 Fed. Reg. 89249.13Id. §1.45V-4(d)(3)(ii)(A), 88 Fed. Reg. 89249.14Id. §1.45V-4(d)(3)(ii)(B), 88 Fed. Reg. 89249.15Id. §1.45V-6(a), 88 Fed. Reg. 89251. 16Id. §1.45V-6(b), 88 Fed. Reg. 89251.