New IRS Guidance for Energy Tax Credits: Energy Communities, Low-Income Communities, and Section 48C

Description

The Inflation Reduction Act of 2022 (IRA) created several new tax incentives to enhance the development of clean energy projects. Noteworthy changes include bonus tax credits for projects located in energy communities or low-income communities and a significant expansion of Section 48C tax credit allocations.

The most recent development on these incentives happened just a few weeks ago, when on April 4 Treasury the IRS issued Notice 2023-29, providing long-awaited guidance on the up to 10 percent additional investment tax credit (ITC) or production tax credit (PTC) for a qualifying facility, project or storage technology located in an energy community (Energy Community Bonus Credit). It is crucial to understand what constitutes an energy community under each of the three possible categories: (i) the brownfield site category; (ii) the statistical area category; or (iii) the coal mine or coal generating unit closure category. Our panelists will explain the rules that Treasury and the IRS intend to include in proposed regulations for determining whether a project is located in an energy community, describe safe harbors that taxpayers can rely on now and discuss some of the market implications of Notice 2023-29 and remaining unanswered questions.

Another recent development is related to the significant low-income community bonus credits of a 10 or 20 percent additional Section 48 ITC for qualified solar and wind facilities located within specified low-income communities or residential developments or on Indian land (Low-Income Bonus Credit). Importantly, the Low-Income Bonus Credit is only available to a qualified wind or solar project located in a specified low-income community or development or on Indian land if the project owner applied for and received an allocation of an environmental justice solar and wind capacity limitation. Treasury and the IRS recently released Notice 2023-17, establishing the Allocation Program and providing some initial guidance regarding the application process, determinations regarding which projects receive Capacity Allocations, rules on placed in service timing and other requirements to be eligible to claim the increased ITC. Our panel will describe the guidance and requirements under Section 48(e) to assist with navigating the complex process to obtain the Low-Income Bonus Credit.

The IRA expanded the 30 percent tax credit for investments in a “qualified advanced energy project” under Section 48C. The panel will discuss what projects are potentially eligible for the Section 48C tax credit, recently issued guidance under Notice 2023-18, applying for an allocation of the Section 48C tax credit, and other key items.

Listen as our panel discusses what projects are eligible under Section 48C, applying for an allocation of the credit, recent IRS guidance for low-income communities, new green energy tax incentives and requirements under the IRA, and other key items regarding energy tax credits.