WASHINGTON, D.C. – Today the U.S. Treasury Department, the U.S. Department of Energy, and the Internal Revenue Service (IRS) released information on key provisions of the Inflation Reduction Act to incentivize investment in underserved communities and hard-hit coal communities.
“Thanks to President Biden’s leadership, the Inflation Reduction Act ensures all Americans benefit from the growth of the clean energy economy by driving investment in communities that have often been overlooked and left behind. These investments will create good-paying jobs in vital fields like clean energy manufacturing, critical minerals processing, and solar installation,” said Deputy Secretary Wally Adeyemo. “These investments will also allow for existing energy infrastructure to be retooled for the clean energy economy and lower energy costs for families who have struggled to pay their utility bills. The guidance released today gets these programs off the ground, as we continue to work toward allocating incentives to these critical projects.”
“These Inflation Reduction Act credits will help revitalize and strengthen the nation’s energy economy and infrastructure while ensuring underserved and historic energy communities are not left behind,” said Deputy Secretary of Energy David M. Turk. “The Qualifying Advanced Energy Project Credit will reinvigorate our clean energy supply chains, while the Low-Income Communities Bonus Credit for the Investment Tax Credit encourages clean energy businesses to make targeted investments that will deliver on a more equitable energy transition.”
“President Biden is committed to building a clean energy economy that works for all Americans and expands good-paying jobs, especially to those communities that have been left out and left behind,” said White House Senior Advisor to the President for Clean Energy Innovation and Implementation John Podesta. “These two important Inflation Reduction Act programs will help lower energy costs for low-income families, expand access to clean energy solutions, and accelerate investments in manufacturing, particularly in traditional energy communities, that are crucial to advancing U.S. energy security.”
The Treasury Department and IRS will administer the programs, working in close collaboration with the Department of Energy.
Qualifying Advanced Energy Project Credit
The first notice establishes the expanded Qualifying Advanced Energy Project Credit program under Section 48C of the Internal Revenue Code. This program renews and expands an investment tax credit initially included in the American Recovery and Reinvestment Act of 2009.
The program provides incentives for clean energy property manufacturing and recycling, industrial decarbonization, and critical materials processing, refining, and recycling. The notice provides a broad range of examples of projects eligible to apply for an investment tax credit of up to 30 percent, including manufacturing of fuel cells and components for geothermal electricity and hydropower, equipment for carbon capture, and critical minerals processing facilities.
The Inflation Reduction Act provided $10 billion in new funding for the Qualifying Advanced Energy Project Credit program. In the Inflation Reduction Act, Congress required that at least $4 billion be reserved for projects in communities with closed coal mines or retired coal-fired power plants.
The initial funding round outlined today will include $4 billion, with about $1.6 billion reserved for projects in coal communities.
The application process for the Qualifying Advanced Energy Project Credit program will begin on May 31, 2023.
Low-Income Communities Bonus Credit Program
The second notice establishes the Low-Income Communities Bonus Credit program under Section 48(e) of the Internal Revenue Code. This groundbreaking program in the Inflation Reduction Act provides a boost of up to 20 percentage points to the investment tax credit for solar and wind energy projects in low-income communities. The notice outlines the program goals, including increasing clean energy facilities in low-income communities, encouraging new market participants, and benefitting individuals and communities that have experienced adverse environmental impacts or lacked economic opportunities.
The Low-Income Communities Bonus Credit program will allocate 1.8 gigawatts of capacity available in 2023 across four categories for solar and wind projects with maximum output of less than five megawatts (MW). The notice announces allocations for 2023: 700 MW for facilities located in low-income communities; 200 MW for facilities located on Tribal land; 200 MW for facilities serving federally-subsidized residential buildings, including housing supported by the Low-Income Housing Tax Credit and Section 8 of the Housing Act; and 700 MW for 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 the Low-Income Communities Bonus Credit program will open in 2023 in two phases. Applications for facilities that are part of low-income residential buildings and those that benefit low-income households will be accepted first, with applications for other projects to follow. The guidance maintains Treasury and IRS discretion to reallocate excess capacity to oversubscribed categories, and any unallocated 2023 capacity will rollover to the following calendar year. Future guidance will provide additional information about the application process and eligibility.
For more information on Treasury’s implementation work around the Inflation Reduction Act, see below.
August 16, 2022: Treasury Releases Initial Information on Electric Vehicle Tax Credit Under Newly Enacted Inflation Reduction Act
October 5, 2022: Treasury Seeks Public Input on Implementing the Inflation Reduction Act’s Clean Energy Tax Incentives
FACT SHEET: Treasury, IRS Open Public Comment on Implementing the Inflation Reduction Act’s Clean Energy Tax Incentives
October 26, 2022: READOUT: Stakeholder Roundtable on Clean Power Generation and the Inflation Reduction Act
October 27, 2022: READOUT: Stakeholder Roundtable on Climate Impact, Equity, and the Inflation Reduction Act
FACT SHEET: Four ways the Inflation Reduction Act’s Tax Incentives Will Support Building an Equitable Clean Energy Economy
October 31, 2022: READOUT: Stakeholder Roundtable on Investor Perspectives on Climate Change, Clean Energy, and the Inflation Reduction Act
November 3, 2022: Treasury Seeks Public Input on Additional Clean Energy Tax Provisions of the Inflation Reduction Act
November 4, 2022: READOUT: Stakeholder Roundtable on Clean Vehicles and the Inflation Reduction Act
November 29, 2022: Treasury Announces Guidance on Inflation Reduction Act’s Strong Labor Protections
December 12, 2022: Treasury and IRS set out procedures for manufacturers, sellers of clean vehicles
December 19, 2022: Treasury, IRS issue guidance on new Sustainable Aviation Fuel Credit
December 22, 2022: IRS releases frequently asked questions about energy efficient home improvements and residential clean energy property credits
December 29, 2022: Treasury Releases Additional Information on Clean Vehicle Provisions of Inflation Reduction Act
January 26, 2023: READOUT: Deputy Secretary Adeyemo Convenes Roundtable Discussion on How IRS Modernization Will Ensure a More Accessible IRS
January 29, 2023: Statement from Deputy Secretary of the Treasury Wally Adeyemo on Implementation of Strong Inflation Reduction Act Worker Protections
February 3, 2023: Treasury Updates Vehicle Classification Standard for Clean Vehicle Tax Credits Under Inflation Reduction Act