Sen. Capito urges course reversal on hydrogen tax credit guidance

U.S. Sen. Shelley Moore Capito (R-WV) is urging the U.S. Treasury Department to reconsider guidance on the 45V tax credits for hydrogen.

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In a letter to Treasury Secretary Janet Yellen, Capito, the ranking member of the Senate Environment and Public Works (EPW) Committee, said guidance from the IRS about the tax credits would impose burdensome requirements which could put into jeopardy future energy projects nationwide.

“By contrast, your agency’s guidance that substitutes wishful thinking for a balanced approach that will grow multiple types of hydrogen production will choke off nascent technologies and ensure that a hydrogen based economy does not happen,” Capito said.

Capito said the current proposed guidance would stifle the investments necessary to develop the hydrogen sector, regardless of the method used to produce it. Additionally, Capito said, the guidance establishes “three pillars” that are not established in statute and will undermine efforts to spur the hydrogen economy.

“These three pillars include deliverability, temporal matching, and incrementality requirements,” she wrote. “The IRS’s implementation of the 45V credit will have outsized influence on the success or failure of the nascent hydrogen industry. The significant additional investments necessary for compliance and resulting uncertainty in securing tax equity – particularly for projects already announced – that would be created by these extra-statutory factors undermine the potential of 45V to incentivize hydrogen production, especially in light of other economic pressures like inflation.”

Capito said the new requirement would preclude “blue” hydrogen being produced from natural gas and jeopardize the Biden administration’s hydrogen hub program. She asked Yellen to reverse course and to work with Congress to support the development of a U.S. hydrogen economy.