The IRS on June 15, 2023, updated its energy community bonus guidance by issuing Notice 2023-45 and Notice 2023-47. The IRS also recently issued energy community bonus guidance in Notice 2023-29. (For a summary of Notice 2023-29, see Holland & Knight's previous alert, "IRS Energy Community Bonus Guidance Provides Welcome Clarity," April 7, 2023.) The additional notices provide the following:

  • Clarification of the safe harbor rule for projects with a nameplate capacity of not greater than 5 megawatts (MW) of alternating current (AC), which treats such projects as brownfield sites if an ASTM E1527 Phase I Environmental Site Assessment (Phase I Assessment) has been completed with respect to the site. The clarification increases the stringency of the requirements for the safe harbor to apply, requiring the Phase I Assessment to identify the presence or potential presence of a hazardous substance as defined under 42 U.S.C. Section 9601(14) (hazardous substance) or a pollutant or contaminant as defined under 42 U.S.C. Section 9601(33) (pollutant or contaminant).
  • Acknowledgement that the initial version of Notice 2023-29 was amended after issuance to provide that the rule allowing a taxpayer to be treated as being in an energy community if on the placed-in-service date (for an investment tax credit) or during the tax credit period (for a production tax credit) if it is in an energy community on the date when construction begins. The change made by the IRS after issuance of the notice provided that this rule applies only if construction of which begins "on or after January 1, 2023."
  • Additional statistical information to determine whether a project falls within the Coal Closure category or Statistical Area category. The corresponding map has been updated.

Also on June 15, the IRS issued frequently asked questions (FAQ) that may continue to be updated. Answers to some are summarized below:

  • A coal-fired electric generation until is not treated as retired if it switches to a different source for its fuel without being listed as retired in a Form EIA 860-M, Monthly Update to Annual Elect Generator Report.
  • The definition of "brownfield site" for purposes of the energy community bonus is more limited than the term as used for determining eligibility for federal brownfield funding.
  • Clarification is provided on the fact that there is not a single registry, website or map of all brownfield sites. The determination of whether a project is in a brownfield site requires a deeper analysis.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

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