Today, the Department of Treasury and the IRS released guidance that provides detailed information about how clean energy projects located in energy communities can claim additional bonus credits on top of the base Investment and Production Tax Credits in the Inflation Reduction Act.
Since day one, the Biden-Harris Administration has been committed to building a clean energy future from the bottom up and middle out. Under the Investing in America agenda, President Biden is driving investment towards the economic revitalization of communities where coal, oil, and gas workers powered our nation for generations and ensuring that these communities continue to play a role in building American energy security.
As detailed in today’s guidance, developers can receive a bonus of up to 10 percentage points on top of the existing Investment Tax Credit and an increase of 10 percent for the Production Tax Credit – that will help increase clean energy production, including wind and solar, and create good-paying jobs in communities nationwide that have historically relied on fossil fuel extraction, processing, transport, or storage, as well as in communities that have been disproportionately harmed by pollution and left out of clean energy development.
Under the definitions included in the Inflation Reduction Act and clarified by today’s guidance, an energy community is:
- A census tract containing coal-fired electric generating units that have retired since December 31, 2009, or coal mines that have closed since December 31, 1999, or census tracts directly adjoining such census tracts;
- A metropolitan statistical area (MSA) and non-metropolitan statistical area (non-MSA) that meet a certain threshold of employment or tax revenue dependence on fossil fuels, as well as having an unemployment rate higher than the national average; or
- A brownfield under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
As part of this release, Treasury and IRS have partnered with the Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization to provide a searchable mapping tool that helps identify areas that may be eligible for the energy community bonus. The IRS notice includes a list of census tracts that are eligible as Energy Communities, as well as MSAs and non-MSAs that satisfy the fossil fuel employment threshold. These MSAs and non-MSAs may qualify as energy communities under the IRA depending on their 2022 unemployment rates; this information will be released once the 2022 unemployment rate data is available.
Today’s announcement catalyzing investments in our country’s energy communities builds on the guidance Treasury released in February for the Qualifying Advanced Energy Project Credit under Section 48C of the Internal Revenue Code. Forty percent of the total funding for that $10 billion program will be set aside for investments in energy communities that have seen closures of coal mines or retirements of coal-fired power plants. Applications for the first round of funding for the Qualifying Advanced Energy Project Credit are expected to open on May 31, 2023.