Modifications Expand the Energy Community Bonus Tax Credit
The Internal Revenue Service (IRS) released new guidance on March 22, 2024, providing additional information regarding the Inflation Reduction Act of 2022.
Notice 2024-30 offers significant opportunities as it modifies the Energy Community Tax Credit Bonus by expanding the criteria for determining an energy community for the federal production and investment tax credits.
Updates to Fossil Fuel Employment Rate Determination
The IRS uses the North American Industry Classification System (NAICS) codes to help determine whether Metropolitan Statistical Areas (MSAs) or non-MSAs meet the minimum fossil fuel employment threshold.
The notice adds two additional NAICS codes for “Natural Gas Distribution” and “Oil and Gas Pipeline and Related Structures Construction.”
Including these industries provides new potential for the Energy Community tax adder. The notice also included two appendices.
- Appendix 1: Identifies new MSAs and non-MSAs from the two additional NAICS codes that meet the Fossil Fuel Employment threshold.
- Appendix 2: Lists the added MSAs and non-MSAs that also have the unemployment rate requirement for 2022.
The new guidance gives 22 additional California counties, including San Diego, San Bernardino, and Riverside, access to the 10 percent Energy Community Tax Bonus for a 40 percent ITC.
Thoughts from Green Convergence
Since unemployment rates and Statistical Area Category requirements can change year over year, Green Convergence recommends that construction for renewable energy projects begin before May 2024 to help ensure that it remains in an energy community if the unemployment rate for an MSA or non-MSA changes.
Our experts can help develop creative strategies and solutions to safe harbor your investment in renewable energies, including solar and energy storage systems (ESS).
Contact us today to utilize the Energy Community Tax Bonus and secure 40 percent ITC.
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