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IRS, Treasury Guidance Updates Low-Income Communities Bonus Credit Capacity Limitations for 2024 Round

Published by Dirk Wallace on Monday, April 8, 2024 - 9:58AM

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) March 29 issued Revenue Procedure 2024-19 to provide guidance for the Low-Income Communities Bonus Credit program. 

More specifically, the guidance provides clarifying changes to the application and documentation requirements for the 2024 program year and identifies how the capacity limitations will be divided across the four project categories: 

  1. located in a low-income community, 
  2. located on Indian land, 
  3. qualified low-income residential building project, and 
  4. qualified low-income economic benefit project. 

Background

The Low-Income Communities Bonus Credit program provides “adder” investment tax credit (ITC) percentages for solar or wind facilities built in low-income communities or in connection with federally subsidized residential buildings, including low-income housing tax credit properties, as well as facilities that benefit households with lower incomes (at least 50% of the energy produced by these facilities must serve households with incomes below 80% of the area median income). 

Learn more about the Low-Income Communities Bonus Credit program in a previous Notes from Novogradac blog

2024 Program Year 

The amount of capacity limitation available for allocation for the 2024 program year is 1.8 gigawatts of direct current capacity plus any unallocated capacity limitation carried over from the 2023 program year. Treasury and the IRS will announce the distribution of 2023 program year allocation that is carried over to the 2024 program year, if any is available.

Here is a look at the capacity limitation changes for 2024 compared to 2023:

Blog Graphic: Comparing Low-Income Communities Bonus Credit Capacity Limitations Between 2023 and 2024

The difference in category allocations between the 2024 and 2023 program years is simple: In 2024, 100 megawatts is being re-allocated from Category 1 to Category 4. The allocation amounts for Categories 2 and 3 were unchanged. 

For the 2024 program year, at least 50% of the capacity of each category is reserved for projects meeting certain ownership and/or geographic selection criteria. It’s important to note that Treasury and the IRS may later reallocate capacity limitation across project categories if any category is oversubscribed or has excess capacity.

Applicants should also consider the additional selection criteria, as those applicants applying under the additional section criteria will be prioritized over other applications. 

Applying for the 2024 Program Year

Applications for the 2024 round will open in the second quarter of 2024.Treasury and the IRS will announce the opening and closing dates for the 2024 program year application period on the Department of Energy’s website. 

A previous Notes from Novogradac blog details how to apply for the credit. More specifically, to better understand how to qualify under Category 3 and 4 of the Low-Income Communities Bonus Credit program, read this Notes from Novogradac blog.

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