IRS Issues New Guidance for Energy Facilities in Low-Income Communities

The IRS has issued new application and documentation procedures for the low-income communities bonus credit program (Program) for the 2024 Program year. Under the bonus credit program, applicants investing in certain solar and wind-powered electricity generation facilities may apply for an allocation of environmental justice solar and wind capacity limitation to increase the amount of their energy investment credit for the year in which the facility is placed in service. (IR 2024-86, 3/29/2024; Rev Proc 2024-19, 2024-16 IRB)

The IRS has also issued guidance on how the capacity limitation for the 2024 Program year will be divided across facility categories.

Code Sec. 48(e), which was added by the Inflation Reduction Act, provides 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.

In August 2023, the IRS released final regs that provide definitions and requirements for the increased energy credit for certain clean energy facilities built in low-income communities. The regs list the four project categories that facilities can use to apply for an allocation, and the increased credit (either 10% or 20%) associated with the project category.

New guidance.

The new guidance provides, among other things, that:

• The IRS will publicly announce the opening and closing dates for the 2024 Program year application period on the Program’s Homepage (available at https://www.energy.gov/justice/low-income-communities-bonus-credit-program).
• The Department of Energy (DOE) will not accept new application submissions for the 2024 Program year after 11:59 PM ET on the date the application period closes.
• Applicants must register in the DOE’s Portal before they can begin the application process and applications can be submitted only through the Portal.
• The applicant must submit their application, including any required information, documentation, and attestations under penalties of perjury. The person completing and submitting the application must have personal knowledge of the facts related to the application and be a person who is legally authorized to bind the applicant entity for federal income tax purposes.
• Applicants may only submit one application per facility for the 2024 Program year. If, the applicant decides that it would rather have the facility considered for an allocation under a different facility category or Category 1 sub-reservation, the applicant must withdraw the first application and submit a second application under the other facility category or Category 1 sub-reservation.
• The new guidance also provides special procedures for tax-exempt, Tribal and other government entities.

Solely with respect to the 2024 program year, Rev Proc 2024-19 supersedes Rev Proc 2023-27, which provided procedures for the 2023 Program year.

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.