The IRS has issued guidance (Notice 2023-45 and Notice 2023-47) updating the rules and the mapping tool for determining whether an energy project is located in an “energy community” and will qualify for a 10% bonus energy credit under Sections 45 and 48.
Projects located in energy communities are generally eligible for an additional 10% investment tax credit (ITC) under Section 48 or a 10% increase in the rate for the production tax credit (PTC) under Section 45. There are three separate categories of qualifying energy communities:
- “Brownfield” sites
- “Statistical areas” meeting energy activity thresholds with unemployment above national averages
- Census tracts (and adjoining census tracts) where a coal mine or coal-fired elective plant has closed
The IRS in Notice 2023-29 only identified the qualified statistical areas that satisfy the first prong of the requirements because it was waiting on new unemployment numbers. Notice 2023-47 includes an appendix specifying the actual list of qualifying areas that meet the full test, and the mapping tool has been updated to reflect them.
Notice 2023-45 updates a safe harbor for determining whether a Brownfield site qualifies as an energy community. A Brownfield site will qualify if it meets any of the following conditions:
- The site was previously assessed by federal, state, territory or Indian tribal Brownfield resources as a Brownfield (the IRS notes that a list of these sites can be accessed from an EPA website and similar government webpages)
- An “ASTM E1903 Phase II Environmental Site Assessment” has been completed and has confirmed the presence of an applicable hazardous substance, pollutant or contaminant
- An “ASTM E1527 Phase I Environmental Site Assessment” has been completed and the project has a nameplate capacity of 5 megawatts or less
Under the new guidance, the phase I assessment in prong three must identify the presences or potential presence of a hazardous substance, pollutant, or contaminant in order for a Brownfield site to qualify.
A full discussion of the energy communities is available in our prior alert.
Contact:
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
More tax hot topics
No Results Found. Please search again using different keywords and/or filters.