The IRS has issued guidance (Notice 2024-30) expanding eligibility criteria to determine whether an energy project qualifies as being located in an “energy community” and thus eligible for a 10% bonus credit under the investment and production tax credits.
Under the Inflation Reduction Act, 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, which involve prior pollution or contaminants
- "Statistical areas” meeting energy activity thresholds with unemployment above national averages
- Census tracts (and adjoining census tracts) where a coal mine or coal-fired electrical plant has closed
Notice 2024-30 expands eligibility for energy communities with two changes to previous guidance:
- Offshore wind projects with generation equipment outside a census tract or statistical area can use the location of supervisory control and data acquisition equipment to determine whether they qualify, rather than solely the location of conditioning equipment.
- The IRS added two new industry classifications to its definition of energy employment, expanding the number of statistical areas meeting the requisite employment thresholds to qualify.
The IRS offers a mapping tool to determine whether a project is in a qualifying energy community, but it does not cover brownfield sites. For more information on energy communities, see our prior alert.
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