A legal alert from Wiley indicates that importing silver silicon wafers for domestic anti-reflective coating may disqualify solar cells from the 10% domestic content bonus credit despite conflicting customs rulings.
Solar wafer manufacturing.
Image: Wikimedia Commons
The U.S. Department of the Treasury and the Internal Revenue Service have issued guidance that creates significant compliance risks for solar project developers seeking the 10% domestic content bonus under the Inflation Reduction Act. According to a legal alert from Wiley, a distinction between where a silicon wafer is coated and where it is originally manufactured determines eligibility for the credit.
To qualify for the bonus, developers must prove a required percentage of the total cost of manufactured products is attributable to U.S.-produced components.
A critical technical issue has emerged regarding “blue wafers.” This refers to silicon wafers that have undergone phosphorus diffusion and the application of an anti-reflective coating.
While some manufacturers perform these specific steps in domestic facilities, they often use imported silver-colored silicon wafers as the base material. Wiley said if the underlying ingot pulling wafer production occurs outside the United States, the domestic “blueing” process may not be sufficient to classify the cell as U.S. manufactured under IRS rules.
The firm warned developers not to rely on recent U.S. Customs and Border Protection (CBP) rulings that suggest a different country-of-origin standard. While CBP HQ H296919 implied that module origin could be tied to where substrates are processed, Wiley clarified that this does not impact domestic content analyses for tax programs like the Section 45Y and 48E credits. The IRS requires that “all manufacturing processes” for a component occur domestically.
This interpretation places the 10% domestic content bonus at risk for projects relying on imported wafers. Because the bonus is a primary driver of the internal rate of return for utility-scale and commercial projects, the loss of this credit can alter project economics.
Many developers have executed supply agreements assuming that domestic blue wafer processing met the requirement. However, current Treasury guidance suggests that every stage of cell production, starting from the wafer, must be domestic. 
U.S. wafer manufacturing capacity remains a bottleneck compared to cell and module assembly. While domestic ingot and wafer capacity is expanding, it is currently constrained. This creates a supply imbalance for developers who must now verify the origin of the base wafer to ensure compliance.
Wiley advised developers to review “Manufacturer Direct” statements and supply chain certifications. Relying on the location of the anti-reflective coating application without verifying the provenance of the silver wafer may lead to successful challenges during federal tax audits.
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