Article
Navigating the IRA energy community tax credit bonus
A guide to IRS Notice 2024-48 and its implications for sections 45, 45Y, 48 and 48E
IRS Notice 2024-48 provides essential information for taxpayers to determine their eligibility for the IRA energy community tax credit bonus under sections 45, 45Y, 48 and 48E of the Internal Revenue Code (IRC). This notice, which includes updated lists of U.S. counties and U.S. census tracts eligible for the energy community bonus credit in Appendix 1 and 2, is crucial in assisting clients in understanding eligibility to effectively claim these credits.
The Inflation Reduction Act of 2022 (IRA) amended sections 45 and 48 of the IRC to increase credit amounts or rates for projects meeting energy community requirements. Additionally, new sections 45Y and 48E were introduced, offering similar benefits for projects placed in service after Dec. 31, 2024. To qualify for these increased credits, projects must satisfy specific location-based criteria under the Statistical Area Category or the Coal Closure Category.
There are three ways to qualify for the energy community bonus credit. The project must be in:
- a brownfield site, or
- metropolitan statistical area or nonmetropolitan statistical area that meet employment, tax revenue or unemployment rate criteria, or
- a community in proximity to a coal mine that closed after Dec. 31, 1999, or near a coal-fired electric generating unit that was retired after Dec. 31, 2009.
What is an “EC project”?
The term "EC project" (energy community project) refers to:
- a qualified facility eligible for a credit under IRC sections 45 or 45Y,
- an energy project eligible for a credit under section 48, or
- a qualified investment with respect to a qualified facility or energy storage technology eligible for a credit under section 48E, provided these are placed in service within an energy community.
The requirements to qualify an EC project for the increased credit amounts or rates are detailed in sections 45(b)(11), 48(a)(14), 45Y(g)(7) and 48E(a)(3)(A).
Further, Appendix 1 of Notice 2024-48 lists Metropolitan Statistical Areas (MSAs) and non-MSAs that qualify as energy communities based on meeting the Fossil Fuel Employment threshold and having an unemployment rate at or above the national average for 2023. The status of these areas as energy communities is effective from June 7, 2024, and will remain until updated unemployment rates for 2024 are released.
Appendix 2 of Notice 2024-48 identifies new census tracts with coal mine closures, coal-fired electric generating unit retirements and adjoining tracts. For reference, IRS Notice 2023-29 Appendix C provides a list of census tracts that have ever had, since December 31, 1999, a closed coal mine or have ever had, since December 31, 2009, a retired coal-fired electric generating unit, and directly adjoining census tracts. IRS Notice 2023-47 Appendix 3, and IRS Notice 2024-48 Appendix 2 augments the list of eligible census tracts and provides a list of additional census tracts that meet the Coal Closure Site Category criteria.
In summary, Notice 2024-48 is pivotal for taxpayers seeking the energy community bonus credit. It provides updated criteria and lists for determining eligibility under the Statistical Area and Coal Closure Categories, reflecting recent changes and additions under the IRA.
Your organization can maximize potential IRA credits by verifying your project's location-based eligibility. Use our interactive mapping tool to determine if your project might be in an energy community. Connect with a specialist today to confirm that your project is in a qualified energy community or to learn more about the IRA.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
Resources
(1) Energy Community Bonus Credit Amounts under the Inflation Reduction Act of 2022, IRS, 2024
