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IRS Issues Initial Guidance on ITCs for Low-Income Communities; Qualifying Advanced Energy Projects

Monday, February 13, 2023 - 11:45AM

The Internal Revenue Service (IRS) today published initial guidance on how it will allocate 1.8 gigawatts of capacity in bonus renewable energy investment tax credits (ITCs) to low-income communities as provided in the Inflation Reduction Act (IRA) as well as guidance on the qualifying advanced energy project credit program. In Notice 2023-17, the IRS announced it will in 2023 allocate 200 MW for facilities serving federally subsidized residential buildings (including those supported by the low-income housing tax credit [LIHTC]), 700 MW for facilities in low-income communities, 200 MW for facilities on Tribal land and 700 MW for facilities where at least 50% of the financial benefits of the electricity produced goes to households with incomes below 200% of the poverty line or below 80% of area gross median income. The application process will be in two phases, starting with low-income residential buildings and projects that benefit low-income households.

In Notice 2023-18, the IRS establishes the qualifying advanced energy project credit program, which provides incentives for clean energy property manufacturing and recycling, industrial decarbonization, and critical materials processing, refining and recycling. The notice provides examples of projects eligible for an ITC of up to 30%, including manufacturing of fuel cells and components for geothermal electricity and hydropower. The IRA provides $10 billion in funding for the program, with at least $4 billion reserved for projects in communities with closed coal mines or retired coal-fired power plants. The applications will begin May 31.

The incentives provided by the IRA will be a key topic at the Novogradac 2023 Spring Renewable Energy and Environmental Tax Credits Conference, May 18-19 in San Diego.

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