(a) Coordination with credit for carbon oxide sequestration. In the case of any qualified clean hydrogen produced at a qualified clean hydrogen production facility that includes carbon capture equipment for which a credit is allowed to any taxpayer under section 45Q of the Code (section 45Q credit) for the taxable year or any prior taxable year, no section 45V credit is allowed under section 45V of the Code. However, if the 80/20 Rule provided in § 1.45Q-2(g)(5) is satisfied with respect to such carbon capture equipment, and no new section 45Q credit has been allowed to any taxpayer for such carbon capture equipment, then the unit of carbon capture equipment (as defined in § 1.45Q-2(c)(3)) for which the 80/20 Rule is satisfied will not be treated as carbon capture equipment for which a section 45Q credit was allowed to any taxpayer for any prior taxable year for purposes of section 45V(d)(2) and this paragraph (a).

(b) Anti-abuse rule—(1) In general. The rules of section 45V of the Code (and so much of sections 6417 and 6418 of the Code related to the section 45V credit) and the section 45V regulations (as defined in § 1.45V-1(a)(17)) must be applied in a manner consistent with the purposes of section 45V and the section 45V regulations. A purpose of section 45V is to provide taxpayers an incentive to produce qualified clean hydrogen for a productive use. Accordingly, the section 45V credit is not allowable if the primary purpose of the sale or use of qualified clean hydrogen is to obtain the benefit of the section 45V credit in a manner that is wasteful, such as when a taxpayer claims the section 45V credit for qualified clean hydrogen that the taxpayer knows or has reason to know will, in excess of standard commercial practices, be vented, flared, used to produce heat or power that is then directly used to produce hydrogen, or otherwise used to produce hydrogen. For example, venting or flaring for safety or maintenance reasons in the ordinary course of business is a non-abusive commercial industry practice. While not abusive, such venting or flaring is also not a verifiable use under § 1.45V-5(d)(2)(ii), and therefore any such hydrogen that is vented or flared for safety reasons is not eligible for the section 45V credit. A determination of whether the sale or use of qualified clean hydrogen is inconsistent with the purposes of section 45V is based on all relevant facts and circumstances.

(2) Example. The following example illustrates the application of paragraph (b)(1).

(i) Example 1—(A) Facts. Taxpayer is a C corporation that has a calendar year taxable year. In 2031, Taxpayer places Facility in service in the United States. Facility produces qualified clean hydrogen that qualifies for the highest applicable amount of the section 45V credit at a production cost of $2 per kilogram of hydrogen (assuming Taxpayer also claims the increased credit under section 45V(e), excluding any future inflation adjustment, the amount of the section 45V credit would be $3 per kilogram of qualified clean hydrogen). The cost of producing each kilogram of qualified clean hydrogen is less than the amount of the section 45V credit that would be available if Taxpayer qualified for the section 45V credit. In 2031, Taxpayer sells all the qualified clean hydrogen produced at Facility that year to Customer at a price that is well below the current market price. Taxpayer knows or reasonably expects that Customer will vent or flare the qualified clean hydrogen it purchased from Taxpayer, in excess of standard commercial practices. In addition, Taxpayer intends to obtain the benefit of the section 45V credit by claiming such credit itself or monetizing such credit through an election under section 6417 or 6418 of the Code.

(B) Analysis. Based on all the facts and circumstances, the primary purpose of Taxpayer's sale of qualified clean hydrogen is to obtain the benefit of the section 45V credit in a manner that is wasteful. Taxpayer is not eligible for the section 45V credit with respect to the qualified clean hydrogen that Taxpayer produced and sold in 2031 to Customer that is subsequently vented or flared by Customer.

(c) Recordkeeping. Consistent with section 6001 of the Code, a taxpayer claiming the section 45V credit for qualified clean hydrogen produced at a qualified clean hydrogen production facility must maintain and preserve records sufficient to establish the amount of the section 45V credit claimed by the taxpayer. At a minimum, those records must include records to substantiate the information required to be included in the verification report under § 1.45V-5, records establishing that the facility meets the definition of a qualified clean hydrogen production facility under section 45V(c)(3) and § 1.45V-1(a)(14), records of past credit claims under section 45Q by any taxpayer with respect to carbon capture equipment included at the facility, and records establishing the date the qualified clean hydrogen production facility was placed in service. If the requirements under section 45V(e) and § 1.45V-3(b) for the increased credit amount were satisfied, then the taxpayer must also maintain records in accordance with § 1.45-12. Taxpayers must also retain all raw data used for submission of a request for an emissions value to the DOE for at least six years after the due date (including extensions) for filing the Federal income tax return or information return to which the provisional emissions rate (PER) (as defined in § 1.45V-4(c)(1)) petition is ultimately attached.

(d) Applicability date. This section applies to taxable years beginning after December 26, 2023.