Saturday, June 15, 2024

Treasury Releases Additional Guidance to Drive Investment to Energy Communities As Part of President Biden’s Investing in America Agenda

WASHINGTON – Today the U.S. Treasury Department and Internal Revenue Service (IRS) released guidance that provides additional information about the bonus under the Inflation Reduction Act for clean energy projects and facilities located in communities that have historically powered our nation. This bonus is equipping energy communities to harness the economic benefits of the clean energy boom by creating good clean energy jobs and lowering energy costs. 

“President Biden’s Inflation Reduction Act is driving investments in new clean power to communities that have been at the forefront of energy production, helping to create jobs and lower utility bills,” said U.S. Deputy Secretary of the Treasury Wally Adeyemo. “Today’s guidance provides clarity to companies planning investments and should help those investments move forward.” 

Developers can receive a bonus of up to 10 percentage points on top of the Investment Tax Credit (ITC) and an increase of 10% for the Production Tax Credit (PTC). The energy community bonus for the ITC and PTC is available to developers locating projects in historical energy communities. Under the Inflation Reduction Act, there are three ways an area can qualify as an energy community:

  • Coal closures:  A census tract or directly adjoining census tract where a coal mine closed after 1999 or a coal-fired electric generating unit was retired after 2009 qualifies as an energy community. 
  • Statistical Areas: The bonus is also available to areas that have significant employment or local tax revenues from fossil fuels and higher than average unemployment. To qualify for the bonus, a metropolitan statistical area (MSA) or non-metropolitan statistical area (non-MSA) must have or have recently had at least 0.17 percent direct employment, or at least 25 percent local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas, as well as an unemployment rate at or above the national average unemployment rate for the previous year. 
  • Brownfields: Brownfield sites, which are properties contaminated by hazardous materials or other pollutants, also qualify as energy communities.   

Treasury and the IRS issued initial guidance on the bonus for energy communities in April 2023, and today’s guidance addresses several issues raised by stakeholders. The Notice adds two additional North American Industry Classification System (NAICS) codes, 2212 (Natural Gas Distribution) and 23712 (Oil and Gas Pipeline and Related Structures Construction), to the definition of “fossil fuel employment” for purposes of determining eligibility under the Statistical Area Category. The Notice includes appendices listing additional MSAs and non-MSAs that qualify as energy communities for 2023 after including the two additional NAICS codes. It also lists those that would potentially qualify for future years, depending on local unemployment rates, because they meet the historic fossil fuel employment levels after including the two additional NAICS codes.

Today’s guidance also permits offshore wind facilities to attribute their nameplate capacity to additional property—namely, to supervisory control and data acquisition system (SCADA) equipment that are owned by the owner of the offshore wind project and are located in eligible ports. This change reflects the fact that onshore SCADA equipment at ports is critical to offshore wind projects and that offshore wind projects make significant investments and create jobs at these ports over the duration of the projects, which is the goal of the energy communities bonus. In addition, the guidance clarifies that where a project has multiple points of interconnection, under this guidance, those projects may now look to any land-based power conditioning equipment up to those points of interconnection for purposes of determining energy community status.

The IRS is also posting additional frequently asked questions clarifying brownfields eligibility.


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