IRS Unveils Energy Community Guidelines, Bonus Credit Program Rules

TL/DR –

The Internal Revenue Service (IRS) has issued Notice 2024-30, which expands certain rules for determining energy communities for production and investment tax credits. The IRS has also identified additional Metropolitan Statistical Areas (MSAs) and non-MSAs that meet the Fossil Fuel Employment threshold and qualify as energy communities in 2023. Additionally, the IRS has updated its frequently asked questions for energy communities and added more information to the Inflation Reduction Act of 2022 page on its website.

The IRS announces changes in energy community rules

Today, the Internal Revenue Service (IRS) has issued Notice 2024-30, expanding certain rules for determining energy community status relating to production and investment tax credits.

Alongside this, Appendix 1 and Appendix 2 have been released, identifying additional areas that meet the Fossil Fuel Employment threshold and thus qualify as energy communities in 2023.

The Inflation Reduction Act permits increased credit amounts or rates if specific requirements concerning energy communities are met. These communities can fall into three categories: Brownfield sites, certain areas based on unemployment rates (MSA/non-MSA), and census tracts impacted by coal mine closures or retirements since 1999.

Increased credit amount or rate for meeting energy community provisions is generally 10 percent for the production tax credit and 2 percentage points for the investment tax credit. These rates can increase up to 10 percentage points if certain wage and apprenticeship requirements are met.

The IRS expanded the Nameplate Capacity Attribution Rule in Notice 2023-29 to include additional properties and added two industry codes to determine the Fossil Fuel Employment rate.

For more details, check frequently asked questions for energy communities or the Inflation Reduction Act of 2022 page on IRS.gov.

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