Summary

On January 19, 2024, the U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued Notice 2024-20, a notice of forthcoming proposed rulemaking (Notice) regarding the alternative fuel vehicle refueling property credit under Section 30C of the Internal Revenue Code of 1986, as amended (the Code), pursuant to changes authorized by the Inflation Reduction Act of 2022 (IRA). The Notice provides guidance on the requirement that property be located in an eligible census tract and announces the intent by Treasury and the IRS to propose regulations for the Section 30C credit.

Key Takeaways

The Notice:

• Provides taxpayers with a list of eligible census tracts in advance of the 2023 tax filing season, to enable taxpayers to identify the unique 11-digit census tract identifier (GEOID) for the location in which a property is placed in service;
• States the intent by Treasury and the IRS to clarify the interaction between Section 30C and Section 45D with respect to eligible census tracts; and
• Aids taxpayers in determining whether a Section 30C property is located in an eligible census tract, based on such property’s placed-in-service date.

Eligible Census Tracts

Eligible Census Tracts Generally. Forthcoming proposed regulations would define an “eligible census tract” to include “low-income community census tracts” and “non-urban census tracts,” consistent with Section 30C(c)(3). Further, eligible census tracts would include both low-income census tracts and non-urban census tracts located in a U.S. territory, provided the refueling property is owned by a U.S. citizen (other than a citizen who qualifies as a bona fide resident of the territory), a U.S. corporation, or a U.S. territory corporation.

Census Bureau Terminology Defined. The Notice defines relevant Census Bureau terms with respect to census tracts:

• Census Block. A “census block” is the smallest geographic area for which the Census Bureau collects and tabulates decennial census data.
• Population Census Tract. A “population census tract” is defined as a small-area geographic division of a county or statistically equivalent entity defined for the tabulation and presentation of data from the decennial census and certain other programs and is comprised of census blocks. The Census Bureau assigns a unique GEOID to each population census tract.
• Census Tract Boundaries. The Census Bureau differentiates “census tract boundaries” based primarily on population and housing density. These boundaries satisfy specific statistical measurements and generally follow visible and identifiable features, but may also follow nonvisible legal boundaries. Census tract boundaries generally do not change between decennial censuses, but may do so based on legal changes in geographic areas. Consequently, the Census Bureau releases updated census tract boundaries each year and provides mapping files each year to reflect such changes.
• Urban Area. An “urban area” is determined based on densely developed territory encompassing residential, commercial, and other non-residential urban land uses. The Census Bureau delineates urban areas by applying certain specified criteria to decennial census and other data.

Low-Income Community Census Tracts. Treasury and the IRS intend to request comments on whether and how low-income communities for purposes of the new markets tax credit (NMTC) under Section 45D(e) as cross referenced in Section 30C(c)(3)(B)(i) may be identified as eligible census tracts in future guidance. Low-income community population census tracts are determined through five-year estimates made by the Community Development Financial Institutions Fund (CDFI Fund), which jointly administers the NMTC with Treasury and the IRS. In addition, Treasury and the IRS have concluded that areas described under Section 45D(e)(3) (i.e., areas not within census tracts) do not qualify as eligible census tracts, as such areas are not population census tracts within the meaning of Section 30C.

• Intended Proposed Regulations for Low-Income Community Tracts. For purposes of Section 30C(c)(3)(B)(i)(I), Treasury and the IRS intend to propose regulations that will designate population census tracts as low-income community census tracts.
• Intended Proposed Regulations for Property Placed in Service in NMTC Tracts. Treasury and the IRS intend to provide guidance for how census tracts will be designated as low-income community census tracts as data is updated. For NMTC purposes, from September 1, 2023, through August 30, 2024, taxpayers may utilize either the 2011-2015 NMTC tracts or the 2016-2020 NMTC tracts to determine whether their investments are made in a low-income community. This one-year transition period has traditionally been provided so NMTC investors have certainty and can make forward-looking investments.  Solely for purposes of Section 30C, Treasury and the IRS have provided that the transition period to determine whether qualified alternative fuel vehicle refueling property is placed in service in an NMTC tract would be extended to include two extended time periods, from January 1, 2023, to August 31, 2023, and from September 1, 2024, to December 31, 2024, in order to align with calendar years. Thus, this transition period would incorporate property placed in service after December 31, 2022, and before January 1, 2025, and property placed in service during such period may utilize either set of NMTC tracts.

Non-Urban Census Tracts. For purposes of Section 30C(c)(3)(B)(i)(II), Treasury and the IRS intend to propose regulations providing that any population census tract in which at least 10 percent of the census blocks are not designated as urban areas would be a “non-urban census tract.” Treasury and the IRS intend to use the 2020 census tract boundaries and the Census Bureau’s determination of urban areas using the 2020 census, thus qualifying “2020 non-urban census tracts” as eligible for Section 30C.

Anticipated Update for Low-Income Community Census Tracts. Treasury and the IRS anticipate that an updated set of NMTC tracts will be released by the CDFI Fund in late 2028. The 2016-2020 NMTC tracts are anticipated to remain eligible for the Section 30C credit through 2029. After the NMTC tracts are updated and released, Treasury and the IRS anticipate providing guidance to taxpayers to reflect these updated low-income census tracts.

Anticipated Update for Non-Urban Census Tracts. Treasury and the IRS anticipate that the Census Bureau will not release its 2030 determination of urban areas until 2033. In the event that the Census Bureau releases its determinations of the 2030 urban areas earlier than January 1, 2033, Treasury and the IRS anticipate providing guidance reflecting the updated set of non-urban census tracts. In the meantime, taxpayers should use 2020 non-urban census tracts to determine eligibility for the Section 30C credit.

Determining Whether a Property Is Located in an Eligible Census Tract

Eligible Census Tracts. The IRS website provides two appendices that identify eligible low-income community census tracts. Appendix A lists eligible low-income community census tracts using the 2011-2015 NMTC tracts with the 2015 census tract boundaries.¹ Appendix B lists eligible low-income community census tracts using the 2016-2020 NMTC tracts and the 2020 non-urban census tracts, both containing the 2020 census tract boundaries.²

Placed-in-Service Requirements. The forthcoming proposed regulations would clarify applicable placed-in-service requirements depending on both the placed-in-service date and the NMTC tracts utilized by the taxpayer.

• Appendix A or Appendix B. Qualified alternative fuel refueling property placed in service after December 31, 2022, and before January 1, 2025, will be considered placed in service in an eligible census tract, and thus eligible for the Section 30C credit, if the GEOID for the population census tract in which it is placed in service is listed in either Appendix A or Appendix B.
• Appendix B. Qualified alternative fuel refueling property placed in service after December 31, 2024, and before January 1, 2030, will be considered placed in service in an eligible census tract, and thus eligible for the Section 30C credit, if the GEOID for the population census tract in which it is placed in service is listed in Appendix B.
• Latitude and Longitude. The latitude and longitude of an eligible property may provide a different GEOID under the 2015 and 2020 census tract boundaries. In that case, a location is only in an eligible census tract if the relevant GEOID is listed in the appendix specific to the relevant census tract boundary year.

Determining GEOID for Properties Placed in Service Before January 1, 2030. For property placed in service after December 31, 2022, and before January 1, 2025, both the 2015 census tract boundaries and the 2020 census tract boundaries are relevant. For property placed in service on or after January 1, 2025, and before January 1, 2030, only the 2020 census tract boundaries are relevant. A taxpayer may determine the GEOID of a location under the 2015 census tract boundaries by using the CDFI mapping tool available online.³ In addition, taxpayers may find the GEOID of a location under the 2020 census using the Census Geocoder available online.

[1] See https://www.irs.gov/pub/irs-drop/appendix-a-list-of-2015-census-tract-boundary-30c-eligible-tracts-v2-1-4-2024.pdf.

[2] See https://www.irs.gov/pub/irs-drop/appendix-b-list-of-2020-census-tract-boundary-30c-eligible-tracts-v2-1-4-2024.pdf.

[3] https://www.cdfifund.gov/cims.