On April 4, 2023, the IRS and the Department of Treasury released Notice 2023-29 (the Notice), which provides that proposed regulations are forthcoming regarding the energy community bonus tax credits under IRC sections 45, 45Y, 48, and 48E. The Notice describes certain rules that are intended to be included in the proposed regulations for determining what constitutes an “energy community” and for determining whether a qualified facility and energy property or an energy storage technology is located in an energy community. 

 

The energy community bonus provides an increased investment tax credit (ITC) amount or production tax credit (PTC) rate if certain requirements pertaining to energy communities are satisfied. Under the applicable statute, an “energy community” generally includes: 

 

(i) a brownfield site, (generally defined by reference to the Comprehensive Environmental Response, Compensation, and Liability Act),
 

(ii) a metropolitan or non-metropolitan statistical area with specified minimum levels of direct employment or local tax revenue related to certain fossil fuel activities, and an unemployment rate at or above the national average, and
 

(iii) a census tract (or adjoining census tract) in which a coal mine has closed or a coal-fired electric generating unit has been retired.

 

The Notice provides guidance on identifying locations that qualify under each of these categories. The Notice also provides guidance on how and when a project must be “located in” an energy community or “placed in service” within an energy community, so as to qualify for the applicable bonus credit, including special rules for “beginning construction.”

 

In an April 3, 2023 press call preceding the release of the Notice, Treasury officials announced that they are working on developing a searchable mapping tool that identifies areas that may be eligible for the energy community bonus, in conjunction with the Interagency Working Group on Energy Communities.

 

The Notice states that Treasury and the IRS intend to propose that the regulations will apply to taxable years ending after April 4, 2023. The Notice states that, until the issuance of the proposed regulations, taxpayers may rely on the rules described in the Notice.