IRS Updates Energy Community Bonus Tax Credit Guidance

The IRS released additional guidance on June 7, 2024, in the form of Notice 2024-48 (Notice) regarding the energy community bonus credit under Sections 45, 48, 45Y and 48E of the Internal Revenue Code. The Notice follows prior guidance issued in Notice 2023-29 (clarified by Notice 2023-45), Notice 2023-47 and Notice 2024-30 and provides two new appendices, Appendix 1 and Appendix 2.

3 Categories of Energy Communities

The energy community bonus, made available under the Inflation Reduction Act, generally increases the value of credits found in Sections 45, 48, 45Y and 48E by 10 percent – the bonus amount is reduced if the prevailing wage and apprenticeship requirements are not satisfied – for projects located in an energy community. There are three location-based categories of energy communities for purposes of the energy community bonus credit: the Brownfield Category, the Statistical Area Category and the Coal Closure Category. (See Holland & Knight's previous alert, "IRS Energy Community Bonus Guidance Provides Welcome Clarity," April 7, 2023).

The Notice provides guidance on the Statistical Area Category and the Coal Closure Category.

Statistical Area Category

These energy communities are metropolitan statistical area (MSA) or non-MSA, which 1) has (or, at any time during the period beginning after Dec. 31, 2009, had) 0.17 percent or greater direct employment or 25 percent or greater local tax revenues related to the extraction, processing, transport or storage of coal, oil or natural gas, and 2) had an unemployment rate at or above the national average unemployment rate for the previous year.

Appendix 1 of Notice 2024-48 provides an updated list of MSAs and non-MSAs that qualify as energy communities based on calendar year 2023 information. The energy community status listed in Appendix 1 is applicable as of June 7, 2024, and that status will continue until the U.S. Department of the Treasury and IRS issue an updated list based on unemployment rates for 2024.

Coal Closure Category

These energy communities are census tracts (or adjoining census tracts) where 1) a coal mine has closed after 1999 or 2) a coal-fired electric generating unit was retired after 2009.

Appendix 2 of Notice 2024-48 adds newly identified census tracts that are in the coal closure category and were not included in Appendix C of Notice 2023-29 or Appendix 3 of Notice 2023-47. Appendix 2 should be combined with Appendix C to Notice 2023-29 and Appendix 3 to Notice 2023-47 to provide the full list of coal closure census tracts.

Questions and More Information

For more information, see Holland & Knight's previous alerts, "IRS Issues Updated Energy Community Bonus Guidance," June 20, 2023, and "IRS Updates and Expands Energy Community Bonus Tax Credit Guidance," March 27, 2024.

The Holland & Knight Energy Tax Team is available for questions regarding the guidance. To be sure you receive additional analysis from the team, please subscribe to our alerts.

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