Owners of Solar and Wind Powered Energy Facilities in Low-income Communities

The Department of the Treasury and the Internal Revenue Service issued final regulations and Revenue Procedure 2023-27 to provide guidance for owners of certain solar or wind powered energy facilities built in connection with low-income communities.

The guidance issued provides definitions, requirements and procedures applicable to the Section 48(e) low-income communities bonus energy investment credit program established under the Inflation Reduction Act. The IRS estimates that applications from individuals, businesses and tax-exempt organizations that own certain energy credit qualifying solar or wind facilities could number in the thousands.

The Inflation Reduction Act provides for an increase in the energy investment credit for solar and wind facilities that apply for and receive an allocation of environmental justice solar and wind capacity limitation. Taxpayers that receive an allocation and properly place the facility in service may then claim the increased energy investment credit in the year that the facility is placed in service.

The final regulations provide definitions and requirements for the program. The regulations state the four project categories under which facilities apply for an allocation, and the increase of either 10% or 20% associated with a project category. Additionally, the regulations:

• Define financial benefits for the two applicable project categories.

• Define energy storage technology installed in connection with the solar or wind facility.

• Define and describe the additional selection criteria for eligible potential applicants.

• Remind potential applicants that facilities placed in service prior to an allocation are not eligible.

• Provide the disqualification and credit recapture rules specific to the program.

Revenue Procedure 2023-27 provides the procedures for potential applicants to apply for an allocation of capacity limitation. Specifically, this guidance provides the information applicants will need to apply and describes the Department of Energy’s application and review process, and the IRS’s allocation award process. The guidance directs applicants to register and apply through the Department of Energy’s portal.

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