5. Government Grants (Notes)

9 Months Ended

Sep. 30, 2024

5. Government Grants

Government grants represent benefits provided by federal, state, or local governments that are not subject to the scope of Accounting Standards Codification (“ASC”) 740. We recognize a grant when we have reasonable assurance that we will comply with the grant’s conditions and that the grant will be received. Government grants whose primary condition is the purchase, construction, or acquisition of a long-lived asset are considered asset-based grants and are recognized as a reduction to such asset’s cost basis, which reduces future depreciation. Other government grants not related to long-lived assets are considered income-based grants, which are recognized as a reduction to the related cost of activities that generated the benefit.

The following table presents the benefits recognized from asset-based government grants in our condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023 (in thousands):


Balance Sheet Line Item	September 30, 2024		December 31, 2023
Property, plant and equipment, net	$	153,668	$	146,348
Other assets	5,822		5,860

In February 2021, the state government of Tamil Nadu, India granted First Solar certain incentives associated with the construction of our first manufacturing facility in the country. Among other things, such incentives provide a 24% subsidy for eligible capital investments, contingent upon meeting certain minimum investment and employment commitments. The capital subsidy funding application process begins in the fiscal year following the initial period of module production and is expected to be paid in six annual installments thereafter. The timing of cash receipts is subject to the completion of audit certifications, funding applications by First Solar, and review by state government authorities. Module production in India began during the year ended December 31, 2023. We expect to submit initial funding applications by the end of 2024. Such credit is reflected on our condensed consolidated balance sheets within “Government grants receivable.”

The following table presents the benefits recognized from income-based government grants in our condensed consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
Income Statement Line Item	2024		2023		2024		2023
Cost of sales	$	266,501	$	204,623	$	719,508	$	429,744
Research and development	—		—		4,000		—
Production start-up	484		—		484		—

In August 2022, the U.S. President signed into law the Inflation Reduction Act of 2022 (“IRA”). Among other things, the IRA offers a tax credit, pursuant to Section 45X of the Internal Revenue Code (“IRC”), for solar modules and solar module components manufactured in the United States and sold to third parties. Such credit may be refundable by the Internal Revenue Service (“IRS”) or transferable to a third party and is available from 2023 to 2032, subject to phase down beginning in 2030. For eligible components, the credit is equal to (i) $12 per square meter for a PV wafer, (ii) 4 cents multiplied by the capacity of a PV cell, and (iii) 7 cents multiplied by the capacity of a PV module. Based on the current form factor of our modules, we expect to qualify for a credit of approximately 17 cents per watt for each module produced in the United States and sold to a third party. We recognize such credit as a reduction to “Cost of sales” in the period the modules are sold to customers. Such credit is also reflected on our condensed consolidated balance sheets within “Government grants receivable.”

In December 2023, we entered into an agreement with Fiserv, Inc. (“Fiserv”) for the sale of $687.2 million of Section 45X tax credits we generated during 2023 for aggregate cash proceeds of $659.7 million. We received the full cash proceeds during the nine months ended September 30, 2024.