The Internal Revenue Service (IRS) and the Department of Energy (DOE) released a proposed rule on Additional Guidance on Low-Income Communities Bonus Credit Program and Notice 2023-44 – Additional Guidance for the Qualifying Advanced Energy Project Credit Allocation Program.
The proposed rule supplements earlier guidance by providing definitions of terms, including energy storage technology and financial benefits for low-income residential buildings. Comments on the proposed rule are due by June 30.
“The Treasury Department and the IRS propose that financial benefit can be demonstrated through net energy savings as defined below. At least 50 percent of the financial value of net energy savings would be required to be equitably passed on to building occupants. This requirement would recognize that not all the financial value of the net energy savings can be passed on to building occupants because a certain percentage can be assumed to be dedicated to lowering the operational costs of energy consumption for common areas, which benefits all building occupants. The Treasury Department and the IRS propose to reserve allocations under this category exclusively for applicants that would equitably pass on net energy savings by distributing equal shares among the qualified residential property’s units that are designated as low-income under the covered housing program, or by distributing proportional shares based on each dwelling unit’s electricity usage.”
Notice 2023-44 provides more information on the Qualifying Advanced Energy Project Credit–an Investment Tax Credit (ITC) of up to 30 percent for clean energy manufacturing and recycling, industrial decarbonization and critical materials processing, refining and recycling. Of the $10 billion available from the IRA, initial funding will include $4 billion, with approximately $1.6 billion for projects in communities with closed coal mines or retired coal-fired project plants. Taxpayers can submit concept papers describing their proposed projects during the period June 30-July 31. Those that receive a favorable review will be encouraged to submit a full application.
