Updates to the Low-Income Communities Bonus Credit Program for 2024

The application submissions for the 2024 program year of the Low-Income Communities Bonus Credit Program opened at 9 a.m. EDT on May 28, 2024. The initial 30-day application window concluded on June 27, 2024, at 11:59 p.m. EDT. Following this 30-day period, the Department of Energy (DOE) will generally accept applications on a rolling basis and review applications in the order they are received, providing recommendations to the IRS accordingly. This marks the beginning of the new 2024 program updates, building on the substantial interest and participation we saw in the previous year.

In the prior year, the DOE began accepting applications across all four categories of the Low-Income Communities Bonus Credit Program on Oct. 19, 2023. This initiative aimed to increase clean energy access and economic benefits in underserved areas, receiving a significant number of applications that underscored the high demand for such incentives.

The program's annual capacity limitation of 1.8 gigawatts (GW) is divided into four distinct categories to ensure that various types of projects and communities benefit equitably:

• Category 1: Located in a low-income community. Allocated capacity: 700 MW
• Category 2: Located on Indian land. Allocated capacity: 200 MW
• Category 3: Qualified low-income residential building project. Allocated capacity: 200 MW
• Category 4: Qualified low-income economic benefit projects. Allocated capacity: 700 MW

For the 2024 program year, the application process has been streamlined with clearer guidelines on categorization and required documentation. This includes specific sub-categories for Category 1 facilities and a more defined process for the review and allocation of capacity.

Additionally, it is important to note the concept of "oversubscribed" categories, which refers to situations where the number of applications exceeds the available capacity in a particular category. In such cases, a lottery system will be employed to determine which applications will be awarded the capacity limitations.

Notable changes

One of the notable updates for the 2024 program year is the rollover of approximately 325 megawatts (MW) of available capacity from the previous year. This addition brings the total capacity available for 2024 to over 2.1 GW, which is a significant increase from the annual 1.8 GW. This expanded capacity will allow more projects to benefit from the bonus credit, further promoting clean energy development in low-income areas. Additionally, if one facility category has excess capacity, it can be reallocated among other categories that have higher demand to ensure efficient utilization of the program’s capacity limits​.

Furthermore, a significant change from 2023 to 2024 involves the sub-categories for Category 1 facilities, which are those located in low-income communities. If a facility is applying as a Category 1, it must now specify whether it is a residential Behind-the-Meter (BTM) facility (including rooftop solar), a Front-of-the-Meter (FTM) facility, or a nonresidential BTM facility. The largest allocation appears to be set aside for residential BTM facilities, reflecting a strong focus on residential clean energy solutions.

We are still reviewing the changes to the 2024 program and will provide information on any additional important updates or issues that may arise. If you have any questions about how navigating these changes may impact you, please reach out to your Baker Tilly advisor.

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.