Treasury, IRS offer guidance on new energy communities bonus
The U.S. Treasury Department and Internal Revenue Service (IRS) issued guidance this week that provides information about the energy community bonus for clean energy projects under the Inflation Reduction Act.
The energy community bonus for the ITC and PTC is available to developers for locating projects in historical energy communities, including areas with closed coal mines or coal-fired power plants. Specifically, a census tract or directly adjoining census tract where a coal mine closed after 1999 or where a coal-fired electric generating unit was retired after 2009 qualifies as an energy community. Brownfields also qualify for the bonus.
For projects in these areas, developers can receive a bonus of up to 10 percentage points on top of the Investment Tax Credit (ITC) and an increase of 10 percent for the Production Tax Credit (PTC). The credit sets aside at least $4 billion for investments in manufacturing in coal communities.
“The Inflation Reduction Act ensures all Americans benefit from the growth of the clean energy economy by driving investment and creating jobs in coal communities,” Treasury Secretary Janet Yellen said. “Coal communities have the knowledge and resources to play a leading role in the growth of the clean energy economy, and additional public investment will jumpstart the process.”
The Solar Energy Industries Association (SEIA) supports the action by the IRS and Treasury, as it can be utilized to improve access to solar power and energy storage.
“We are pleased to see that the Treasury Department adopted many of SEIA’s recommendations, including clear references to government data for qualifying areas, a 50 percent rule for projects to be located in an energy community, and a commonsense rule for adjoining census tracts. The solar and storage industry has been eagerly awaiting this guidance, and soon we’re going to start seeing projects move forward in these underserved communities, helping us fight climate change and create thousands of high-quality, family-supporting jobs,” SEIA President and CEO Abigail Ross Hopper said.
The bonus is also available to areas with significant employment or local tax revenues from fossil fuels and higher-than-average unemployment. To qualify for it, a metropolitan statistical area or non-metropolitan statistical area must have or have recently had at least 0.17 percent direct employment or at least 25 percent local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas. In addition, it must have an unemployment rate at or above the national average unemployment rate. It also specified that if 50 percent or more of a project’s nameplate capacity or square footage is in an energy community, it will qualify for the bonus credit.
Treasury and IRS, working with the Interagency Working Group on Energy Communities, will provide a searchable mapping tool that helps identify areas that may be eligible for the energy communities bonus.
Applications for the first round of funding are planned to open by May 31.
