Domestic Content Requirements — IIJA, IRA, and CHIPS Acts

The 2021–2022 legislative wave produced the most significant expansion of U.S. domestic content requirements since World War II — and did so with bipartisan support. The Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS and Science Act collectively extend "Made in America" requirements far beyond what the old Buy American Act covered, reaching into federal grants and tax credits — not just government contracts — and touching hundreds of billions of dollars in private infrastructure investment. The most consequential shift: the Build America Buy America Act (BABA) applies to all federal financial assistance for infrastructure, meaning a state DOT receiving a federal highway grant, a utility getting a grid resilience grant, and a water authority receiving EPA funding are all now subject to domestic content requirements that they never faced before 2022. Industry compliance is still catching up, waiver requests are backlogged at every agency, and the legal definition of "substantial transformation" is being litigated in new contexts daily.

Legal Authority

41 U.S.C. §§ 8301–8305 — Buy American Act (1933): the foundational domestic content statute for direct federal contracts; requires that articles, materials, and supplies purchased for public use be mined, produced, or manufactured in the United States
23 U.S.C. § 313 — Federal Highway Administration Buy America requirements: applies domestic steel and iron requirements to FHWA-funded highway projects; the predecessor to BABA for transportation grants
IIJA §§ 70901–70927 (Pub. L. 117-58, 2021) — Build America Buy America Act: extends domestic content requirements to all federal financial assistance for infrastructure projects, not just direct contracts
IRA §§ 13101–13501 (Pub. L. 117-169, 2022) — Domestic content bonus credits: provides a 10 percentage point bonus on ITC and PTC for clean energy projects meeting domestic content requirements for steel/iron and manufactured components

Key Mechanics

BABA's key distinction from the Buy American Act is its application to grants, not just contracts. When a federal agency awards infrastructure assistance (a highway grant, broadband grant, water infrastructure grant), the recipient must use iron, steel, manufactured products, and construction materials that meet domestic content thresholds — or obtain a waiver from the awarding agency. Waivers are granted for non-availability (domestic supply doesn't exist), unreasonable cost (domestic product costs more than 25% more), or public interest. The OMB Made in America Office (EO 14005) reviews waiver requests from agencies for consistency. The IRA domestic content bonus creates a tax credit incentive rather than a mandate: clean energy developers who voluntarily source domestically get a 10-point bump in their ITC (from 30% to 40%) or PTC rate.

Framework Overview

Law	Domestic Content Provision	Applies To	Key Requirement
Build America Buy America Act (BABA)	IIJA §§ 70901–70927	All federal financial assistance for infrastructure	Iron/steel 100% domestic; manufactured products 55% domestic cost; construction materials 100% domestic
IRA Domestic Content Bonus	IRA §§ 13101–13501 (IRC §§ 45, 48)	Clean energy tax credits (ITC, PTC)	10% bonus credit for projects meeting steel/iron + manufactured products requirements
CHIPS Domestic Content	CHIPS Act §§ 102–103	CHIPS grants and incentives	Semiconductor manufacturing equipment and facilities must meet domestic sourcing conditions
Buy American Act (original)	41 U.S.C. §§ 8301–8305	Federal direct contracts	≥55% domestic component cost for manufactured products; 100% domestic for iron/steel
Executive Order 14005	Biden EO (Jan. 2021)	Federal contracts	Raised BAA thresholds; created Made in America Office at OMB

Build America Buy America Act (BABA)

What It Covers

BABA applies to federal financial assistance — grants, cooperative agreements, loans, loan guarantees — for infrastructure projects. This is fundamentally different from the old Buy American Act, which applied only to direct federal contracts. If a federal agency provides financial assistance to a state, city, utility, transit authority, water district, or nonprofit for an infrastructure project, BABA applies to the iron, steel, manufactured products, and construction materials used in that project.

"Infrastructure" is defined broadly in BABA: transportation, broadband, water, energy, cybersecurity, environmental remediation, and beyond. The definition effectively covers the vast majority of IIJA-funded programs.

Three Product Categories

BABA establishes three separate domestic content standards:

1. Iron and Steel — 100% domestic production required. All manufacturing processes from initial melting or mixing through the application of coatings must occur in the U.S. This is the most demanding standard — identical to the existing standard for highway and transit programs. A single non-domestic manufacturing step (e.g., galvanizing in Mexico) makes the product non-compliant.

2. Manufactured Products — ≥55% domestic component cost. The cost of domestic components must be at least 55% of the total component cost of the manufactured product. This mirrors the Buy American Act's manufactured products standard. Determination requires a component-by-component cost analysis.

3. Construction Materials — 100% domestic production required (added by OMB M-22-11 implementation). Applies to materials used in the construction, alteration, maintenance, or repair of infrastructure, including glass, lumber, drywall, fiber optic cable, wood products. This category has generated the most waiver requests, as global supply chains for construction materials were not built around domestic content assumptions.

Waiver Process

Agencies may grant waivers when:

Nonavailability: The iron, steel, manufactured product, or construction material is not produced in the U.S. in sufficient and reasonably available quantities of satisfactory quality
Unreasonable cost: The cost of using domestic products would increase the cost of the overall project by more than 25%
Public interest: Applying BABA would be inconsistent with the public interest (e.g., emergency response, national security, treaty obligations)

Waiver requests are published in the Federal Register for public comment before approval. OMB coordinates agency waiver policies through the Made in America Office. As of 2025, waiver backlogs at transportation, energy, and water agencies have delayed project starts by 6–18 months in some cases.

Phased Implementation

OMB M-22-11 (April 2022) established a phased compliance approach:

May 2022: BABA applies to all new federal financial assistance for infrastructure
Legacy awards: Existing awards and supplements to existing awards that were obligated before BABA's effective date are generally grandfathered
Reporting: Agencies must track and publicly report on BABA compliance and waivers

IRA Domestic Content Bonus Credits

The Inflation Reduction Act (IRA) uses tax credits to incentivize private clean energy investment, and it includes a domestic content bonus that can increase credit rates by 10 percentage points:

Investment Tax Credit (ITC, IRC § 48) and Production Tax Credit (PTC, IRC § 45)

The base ITC for solar and wind projects is 30% of qualified investment (meeting prevailing wage and apprenticeship requirements). Projects that also satisfy domestic content requirements earn a 10-percentage-point bonus — pushing the effective credit to 40%.

IRA Domestic Content Requirements (for the bonus)

To qualify for the bonus, a project must satisfy two separate tests:

Steel/Iron Test: All steel and iron components must be manufactured in the U.S. (same standard as BABA iron/steel — 100% domestic manufacturing process).

Manufactured Products Test: The total cost of manufactured products and components that are mined, produced, or manufactured in the U.S. must be at least 40% of the total cost of all manufactured products used in the project (rising to 55% by 2027 under IRS phase-in schedule).

Offshore wind exception: For offshore wind facilities, the manufactured products domestic content threshold is lower during the phase-in period, reflecting that the domestic supply chain for offshore wind components (monopiles, nacelles, towers) does not yet exist at scale.

IRS Guidance (Notice 2023-29, Notice 2023-38)

IRS issued preliminary guidance in 2023 establishing safe harbors and calculation methods. Key issues:

Phased threshold schedule: 40% (2023–2024) → 45% (2025) → 50% (2026) → 55% (2027+)
Classification disputes: Whether a component is a "manufactured product" vs. a "component" of a manufactured product affects which threshold applies
Chinese-origin solar panels: The dominant global solar supply chain runs through China, and most U.S. utility-scale solar projects cannot currently meet the IRA domestic content bonus without using domestically produced panels — a market that is rapidly developing but not yet at sufficient scale

Economic Impact

Treasury estimated that achieving the IRA domestic content bonus on large solar and wind projects could increase domestic manufacturing employment by 250,000+ jobs over the decade. The bonus has created substantial demand for domestic steel, aluminum, electrical components, and solar panel manufacturing — contributing to a wave of factory announcements in the 2022–2025 period.

CHIPS Act Domestic Content

The CHIPS and Science Act (P.L. 117-167) provides ~$52 billion in grants and incentives to support domestic semiconductor manufacturing. Domestic content requirements attach to CHIPS funding through grant conditions rather than a uniform statutory standard:

Clawback provisions: Recipients who build facilities in China or other foreign countries of concern within 10 years face clawback of CHIPS grant funding
Technology transfer restrictions: Facilities receiving CHIPS grants may not transfer advanced semiconductor technology to foreign countries of concern
Supply chain documentation: Recipients must document sourcing of manufacturing equipment and key materials
FABS Act interaction: The semiconductor investment tax credit (FABS Act provisions in IRA) creates additional domestic production incentives

Comparison: BAA vs. BABA vs. TAA vs. IRA Bonus

Rule	Applies To	Iron/Steel	Manufactured Products	Waiver Available?
BAA (contracts)	Direct federal contracts	100% U.S. melt & manufacture	≥55% domestic cost	Yes (price diff, nonavail, public interest)
BABA (grants)	Federal financial assistance for infrastructure	100% U.S. melt & manufacture	≥55% domestic cost	Yes (same 3 grounds)
TAA	Contracts above WTO GPA threshold (~$174K supplies, 2026)	Substantial transformation in U.S. or designated country	Same	Waives BAA; no separate waiver needed
IRA Bonus (tax credit)	Clean energy projects	100% U.S. manufacture	≥40–55% domestic cost of manufactured products	No — voluntary; just lose the bonus

How It Affects You

If you are a contractor, manufacturer, or supplier: BABA is your largest near-term compliance exposure. If you supply iron, steel, manufactured products, or construction materials to projects receiving federal infrastructure grants, you need to establish traceability documentation proving domestic content — and you need to understand which of your products fall in which category. The 100% standard for iron/steel is unforgiving; the 55% manufactured products standard requires component-by-component cost accounting. Build a compliance program now rather than discovering exposure mid-project.

If you are a clean energy developer (solar, wind, storage): The IRA domestic content bonus is worth 10 percentage points of your total project cost — on a $500M solar project, that's $50M in additional tax credits. The barrier is domestic supply chain access: domestically produced solar modules, steel towers, and electrical components are often in short supply with long lead times. Plan your supply chain 18–24 months ahead if you're targeting the bonus.

If you are a state/local government or infrastructure grant recipient: BABA compliance is now a condition of your federal infrastructure grants. Non-compliance can result in disallowance — the federal agency can recover the federal share of costs spent on non-compliant materials. Designate a BABA compliance officer, document waiver applications early, and build BABA compliance costs into your project budgets.

If you are a citizen, taxpayer, or journalist: The Made in America Office at OMB publishes all BABA waiver approvals. This is one of the most transparent windows into the gap between domestic content policy intent and industrial reality — the waivers reveal which materials simply cannot be sourced domestically at any reasonable price, and which industries have successfully lobbied for more lenient treatment.

Recent Developments

2025 — Trump administration issued EO directing review of BABA waiver policies and suspension of certain Biden-era domestic content guidance; legal challenges followed over whether executive action can waive statutory BABA requirements.
2025 — IRS issued final regulations on IRA domestic content bonus calculation (building on 2023 notices); solar panel manufacturers from allied countries (South Korea, Germany, France) lobbied for more favorable treatment under the manufactured products test.
2024 — First major BABA enforcement actions: DOT disallowed federal-share costs on two state highway projects that used non-compliant steel fabricated overseas; states appealed on waiver grounds.
2024 — CHIPS Act first-round grants finalized: Intel $7.86B final (down from $8.5B preliminary, Nov 2024), Samsung $4.745B final (down from $6.4B preliminary, Dec 2024), TSMC (Arizona), Micron (New York, Idaho); all conditioned on domestic content and technology transfer restrictions.
2023 — OMB M-23-10 issued updated BABA implementation guidance extending compliance deadlines for construction materials category and clarifying "manufactured product" definition disputes.
2022 — OMB M-22-11 (April) launched BABA implementation across all federal agencies; Created the Made in America Office to coordinate waivers and track compliance.