IRS Announces Release of Low-Income Communities Bonus Credit Guidance

IRS and Treasury issue guidance for solar and wind powered energy facilities in low-income communities under the Inflation Reduction Act

March 29, 2024

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued Revenue Procedure 2024-19 to provide guidance for owners of certain solar or wind facilities built in connection with low-income communities.

The guidance issued today provides important clarifying changes to the application and documentation requirements for the 2024 program year. In addition, this revenue procedure provides how the Capacity Limitation for the 2024 program year will be divided across facility categories described and the additional selection criteria application options.

The Inflation Reduction Act added section 48(e) to the federal tax law to provide for 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.

The final regulations provide definitions and requirements for the program. The regulations state the four project categories under which facilities apply for an allocation, and the increase of either 10% or 20% associated with a project category. Additionally, the regulations:

• Define financial benefits for the two applicable project categories.

• Define energy storage technology installed in connection with the solar or wind facility.

• Define and describe the additional selection criteria for eligible potential applicants.

• Remind potential applicants that facilities placed in service prior to an allocation are not eligible.

• Provide the disqualification and credit recapture rules specific to the program.

Revenue Procedure 2023-27 provided procedures for applicants for the 2023 program year. Soley with respect to the 2024 program year, today’s guidance supersedes Revenue Procedure 2023-27. The Treasury Department and IRS also released Notice 2023-17 on Feb. 13, 2023, to establish the Low-Income Communities Bonus Credit Program. Notice 2023-17 provided initial guidance for potential applicants seeking allocations of calendar year 2023 environmental justice solar and wind capacity limitation.