IRS Publishes Initial Guidance on Energy Projects for Low-Income Communities and Energy Project Credits from Inflation Reduction Act

Earlier this week, the Internal Revenue Service (IRS) released Notice 2023-17: Initial Guidance Establishing Program to Allocate Environmental Justice Solar and Wind Capacity Limitation Under Section 48(e) and Notice 2023-18: Initial Guidance Establishing Qualifying Advanced Energy Project Credit Allocation Program Under Section 48C(e).

Notice 2023-17 establishes the 2023 allocation of the 1.8 gigawatts of capacity in bonus renewal energy investment tax credits (ITCs) to low-income communities. 700 megawatts (MW) will be allocated for facilities in low-income communities, 200 MW for facilities on Tribal land, 200 MW for facilities serving federally subsidized residential buildings and 700 MW for facilities where at least 50 percent of the financial benefits of the electricity produced goes to households with incomes below 200 percent of the poverty line or below 80 percent of area gross median income. The application process will be in two phases, starting with low-income residential buildings and projects that benefit low-income households.

Notice 2023-18 establishes the section 48C(e) program to allocate $10 billion in credits ($4 billion of which may only be allocated to projects located in certain energy communities census tracts) to incentivize clean energy property manufacturing and recycling, industrial decarbonization, and critical materials processing, refining and recycling.

The Treasury Department and the IRS anticipate allocating $4 billion of section 48C credits in the first allocation round, with approximately $1.6 billion of these credits to be allocated to projects located in certain energy communities (census tracts with no award prior to Aug. 16, 2022, a coal mine that closed after Dec. 31, 1999, a coal-fired electric generating unit retired after Dec. 31, 1999, or directly adjoining a coal mine or coal-fired electric generating unit).

NH&RA members are invited to participate in our Green Affordable Housing Working Group by emailing info@housingonline.com. These notices, as well as other incentives, will be discussed in the Leveraging Green Incentives in Affordable Housing at NH&RA’s Annual Meeting.