– Dept. of Treasury and IRS released guidance on bonus tax credit for clean energy projects in energy communities
– CS Energy solar project built on brownfield in New Jersey
– The Inflation Reduction Act can increase credit amounts for energy communities, with specific qualifications and additional guidance released by the IRS.
The Dept. of the Treasury and IRS have released guidance on the bonus tax credit under the Inflation Reduction Act for clean energy projects in communities with a history of fossil fuel extraction. This guidance expands rules for determining energy communities for tax credits, benefiting projects like CS Energy’s solar project in New Jersey.
President Biden’s Inflation Reduction Act aims to drive investments in clean power for communities involved in energy production. Developers can receive up to a 10% bonus on the Investment Tax Credit (ITC) and Production Tax Credit (PTC) for locating projects in historical energy communities, meeting certain requirements like prevailing wage laws.
Areas can qualify as energy communities through coal closures, Metropolitan Statistical Areas (MSAs) with significant fossil fuel employment, or brownfield sites. Initial guidance on energy community bonuses was issued in April 2023, with the new Notice addressing issues raised by stakeholders and expanding eligibility criteria.
The additional NAICS codes are added to the definition of fossil fuel employment, and appendices identify areas that meet requirements for energy community bonuses. The credit amount available for meeting energy community provisions is generally 10% for the PTC and 2% for the ITC. The Notice also includes updates to the Nameplate Capacity Attribution Rule and FAQ for energy communities.