IRS Issues Guidance on Energy Communities for Bonus Credit Program
The IRS recently issued Notice 2023-29, describing certain rules the IRS intends to include in forthcoming proposed regulations for determining what constitutes an energy community for the production and investment tax credits provided under the Inflation Reduction Act (IRA).
The IRA allows for increased credit amounts if certain requirements pertaining to energy communities are satisfied. There are three categories of energy communities: brownfield sites, certain metropolitan statistical areas based on unemployment rates (MSA/non-MSA), and areas where a coal mine or plant have recently closed.
The increased credit amount available for meeting the requirements of the energy community provisions is generally 10% for the production tax credit and 2% for meeting the requirements for the investment tax credit (10% if prevailing wage and apprenticeship requirements or certain other requirements are also met).