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Federal Tax

IRS Issues Final Regs and Guidance Regarding Increased Energy Credit

Thomson Reuters Tax & Accounting  

· 5 minute read

Thomson Reuters Tax & Accounting  

· 5 minute read

The IRS issued final regs and Rev Proc 2023-27 to provide guidance for owners of certain solar or wind facilities built in connection with low-income communities. (TD 9979Rev Proc 2023-27, 2023-35 IRBIR 2023-145)

The guidance provides definitions, requirements, and procedures applicable to the Code Sec. 48(e) low-income communities bonus energy investment credit program established under the Inflation Reduction Act.

The Inflation Reduction Act provides for an increase in the energy investment credit for solar and wind facilities that apply for and receive an allocation of environmental justice solar and wind capacity limitation. Taxpayers that receive an allocation and properly place the facility in service may then claim the increased energy investment credit in the year that the facility is placed in service.

The final regs provide definitions and requirements for the program. The regs state the four project categories under which facilities apply for an allocation, and the increase of either 10% or 20% associated with a project category. Additionally, the regs:

  • Define financial benefits for the two applicable project categories.
  • Define energy storage technology installed in connection with the solar or wind facility.
  • Define and describe the additional selection criteria for eligible potential applicants.
  • Remind potential applicants that facilities placed in service prior to an allocation are not eligible.
  • Provide the disqualification and credit recapture rules specific to the program.

Rev Proc 2023-27 provides the procedures for potential applicants to apply for an allocation of capacity limitation. Specifically, the guidance provides the information applicants will need to apply and describes the Department of Energy’s application and review process, and the IRS’s allocation award process.

For more information about the changes made by the Inflation Reduction Act to the Sec. 48 energy investment credit, see Checkpoint’s Federal Tax Coordinator ¶L-16439.


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