Treasury and IRS Provide Guidance on Energy Program Credits
The U.S. Treasury Department and the IRS recently published guidance following the enactment of the Inflation Reduction Act to establish a program to provide solar and wind power to certain low-income areas and a program to allocate credits for qualified investments in eligible qualifying advanced energy projects.
Low-Income Communities Bonus Credit Program
Notice 2023-17 establishes the Low-Income Communities Bonus Credit Program to provide solar and wind power to certain low-income areas under the Inflation Reduction Act.
The initial guidance provides the general eligibility requirements, a description of the four statutory facility categories for which an eligible facility may request an allocation, amounts of capacity limitation reserved for each facility category, a general description of the program design and goals, the application review process, and the proposed timeline for opening two 60-day application periods in 2023 based on project categories.
The guidance applies to owners of certain solar and wind facilities placed in service in connection with low-income communities that are eligible for the section 48 energy investment credit.
The Treasury Department and the IRS will issue additional program guidance outlining specific application procedures, applicable definitions and other information necessary to submit an application.
Qualifying Advanced Energy Project Credit Allocation Program
Notice 2023-18 establishes a program to allocate credits for qualified investments in eligible qualifying advanced energy projects. The notice allows for the section 48C(e) program to allocate $10 billion in credits, $4 billion of which may only be allocated to projects located in certain energy communities census tracts. It also provides initial program guidance.
The Treasury and the IRS anticipate allocating $4 billion of section 48C credits in the first allocation round, with approximately $1.6 billion of these credits to be allocated to projects located in certain energy communities. The agencies will allocate the remaining credits in future allocation rounds.
The notice also provides the general rules for determining the section 48C credit, definitions of qualifying advanced energy projects and the procedures for allocating the credits.
The Treasury and the IRS will issue additional guidance by May 31, 2023, to provide more details regarding information applicants will be required to submit to request a credit allocation.
More information on both energy program credits can be found on the Inflation Reduction Act of 2022 page on IRS.gov.