Final regulations and Rev. Proc. 2023-27: Guidance on bonus environmental justice solar and wind credits
Guidance on the program under section 48(e)
Guidance on environmental justice solar and wind capacity limitation
The U.S. Treasury Department and IRS released for publication in the Federal Register final regulations (T.D. 9979) providing guidance with respect to certain solar or wind facilities built in low-income communities.
The final regulations [PDF 429 KB] (43 pages) specifically provide guidance on the program under section 48(e) established under H.R. 5376 (commonly called the “Inflation Reduction Act of 2022” (IRA)) regarding allocations of the environmental justice and solar wind capacity limitation.
As described in a related IRS release—IR-2023-145 (August 10, 2023)—the final regulations provide definitions and requirements for the program under section 48(e) which 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. The regulations state the four project categories under which facilities apply for an allocation, and whether an increase of either 10% or 20% is 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
The final regulations apply to tax years ending on or after October 16, 2023.
The Treasury and Department and IRS also released an advance version of Rev. Proc. 2023-27 [PDF 159 KB], providing procedural and clarifying guidance applicable to the program. These procedural rules provide guidance necessary to implement the program, including information an applicant must submit, the application review process, and the manner of obtaining an allocation.
Rev. Proc. 2023-27 directs applicants to register and apply through a portal hosted by the Department of Energy (DOE). The DOE today launched a Low-Income Communities Bonus Credit Program page, which will be updated in the coming weeks to provide additional information about the application opening date and application materials. The application process for all four categories in the Low-Income Communities Bonus Credit program will open in the fall, and awards will start to be made by the end of the year.
Background
The Treasury Department and IRS on February 13, 2023, launched the program under Notice 2023-17, which provided initial program guidance for potential applicants for allocations of calendar year 2023 capacity limitation. Read TaxNewsFlash
The Treasury and Department on June 1, 2023, then published proposed regulations supplementing the guidance provided in Notice 2023-17, to outline the specific application procedures, additional allocation criteria, and applicable definitions, among other information, necessary to submit an application to request an allocation of the capacity limitation for calendar year 2023 under the program. Read TaxNewsFlash
Read a related Treasury release (August 10, 2023)
For more information, contact a tax professional in KPMG Washington National Tax:
Hannah Hawkins | hhawkins@kpmg.com
Ruth Madrigal | ruthmadrigal@kpmg.com
Preston Quesenberry | pquesenberry@kpmg.com
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.