The U.S. Department of the Treasury and Internal Revenue Service (IRS) issued final rules and procedural guidance for an initiative that provides up to a 20-percentage point boost to the Investment Tax Credit for solar or wind facilities in low-income communities.
This effort, called the Low-Income Communities Bonus Credit program, was created through the passage of the Inflation Reduction Act. Its objective is to increase clean energy facilities in low-income communities, encourage new market participants, and benefit individuals and communities that have experienced adverse health or environmental effects or lacked economic opportunities.
“One of the goals of Bidenomics is to ensure all Americans benefit from the growth of the clean energy economy,” Deputy Secretary of the Treasury Wally Adeyemo said. “This new bonus incentive through the Inflation Reduction Act will drive investment to underserved communities to ensure they benefit from lower energy costs and reduced pollution and health hazards. Treasury has worked to get this program off the ground as quickly as possible, and in partnership with the Department of Energy (DOE), will be opening the application process and making awards to projects earlier than initially anticipated.”
So, how it works is, the Low-Income Communities Bonus Credit program will allocate 1.8 gigawatts of capacity available for the 2023 program across four categories of solar or wind facilities with maximum output of less than five megawatts.
The IRS intends to allocate up to 700 megawatts (MW) to facilities located in low-income communities; 200 MW to facilities located on Indian land; 200 MW to facilities that are part of federally-subsidized residential buildings; and 700 MW to facilities where at least 50 percent of the financial benefits of the electricity produced go to households with incomes below 200 percent of the poverty line or below 80 percent of area median gross income.
The application process for all four categories will open in the fall and are expected to be accepted through early next year. The first awards are expected to be made by the end of the year.
The DOE launched a landing page for the program on its website that includes additional information about the application opening date and application materials.