Energy Communities

Disclaimer: This website may not be relied upon by taxpayers to substantiate a tax return position or for determining whether certain penalties apply and will not be used by the IRS for examination purposes.

The Energy Community Bonus Credit applies an increase in the tax credit amount under sections 45, 48, 45Y, and 48E of the Internal Revenue Code (IRC) of up to 10% (for certain production tax credits) or 10 percentage points (for certain investment tax credits) for qualified facilities, energy property, or qualified investments located in energy communities. Certain types of energy communities are determined by Treasury through statistical analysis. This page provides documentation on the data methodology used by Treasury to determine eligibility for certain portions of energy community eligibility, as well as other materials related to energy community determinations. Click on the links below to learn more.

Tax credits Types of energy communities Eligible census tracts Data documentation Relevant links

Tax credits with energy community bonus

Tax credits that include an energy community bonus credit amount

IRC section

Title

IRC sub-section on energy community bonus

Increase in credit amount or credit rate
45Electricity produced from certain renewable resources, etc. 45(b)(11)10 percent
48Energy credit48(a)(14)Either 2 or 10 percentage points based on satisfying prevailing wage and apprenticeship requirements
45YClean electricity production tax credit 45Y(g)(7)10 percent
48EClean electricity investment credit48E(a)(3)Either 2 or 10 percentage points based on satisfying prevailing wage and apprenticeship requirements

Types of energy communities

Generally, for purposes of the credits in IRC sections 45, 48, 45Y, and 48E, an energy community is one of the following types of locations:

Brownfield site (as defined in 42 U.S.C. 9601(39) (A), (B), and (D)(ii)(III))

or

Statistical area eligibility criteria including fossil fuel employment or revenue measures and unemployment thresholds.
Statistical Area category:
Metropolitan statistical area or non-metropolitan statistical area (MSA or non-MSA) with…
0.17% or greater direct employment related to the extraction, processing, transport, or storage of coal, oil, or natural gas at any time after Dec. 31, 2009 (“Fossil Fuel Employment” or FFE)
or
25% or greater local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas at any time after Dec. 31, 2009		and

 

 

Unemployment rate at or above the national average unemployment for the previous year

or

Coal closure category criteria based on mine closure or electric generating unit retirement.
Coal Closure category:
Census tract in which…
A coal mine closed after Dec. 31, 1999, or a census tract which is directly adjoining a census tract in which a coal mine closed after December. 31, 1999;orA coal-fired electric generating unit has been retired after Dec. 31, 2009, or a census tract which is directly adjoining a census tract in which a coal-fired electric generating unit has been retired after December 31, 2009 

Treasury and IRS listings of counties and census tracts eligible for the Coal Closure and Statistical Area Energy Communities categories

Treasury and the IRS have released Notices with appendices that list eligible census tracts and counties/county-equivalents. 

Eligibility determinations are generally based on location of a project when it is placed in service. However, Notice 2023-29 provides a special rule for projects to base their eligibility for the energy community bonus credit on when construction begins.

If the taxpayer placed their energy community project in service…

*Abbreviations: Fossil Fuel Employment (FFE)

*Annual Statistical Area category and Coal Closure category Updates generally are released by the IRS in approximately May of each year.

Data documentation, assistance with location eligibility determination, and brownfields information

Treasury performs the data analysis to determine certain aspects of eligibility for the Energy Community Bonus Credit. This documentation describes Treasury’s methodology for determining eligibility under the Statistical Area category and the Coal Closure category. Additionally, it provides information on how to determine whether a location is in an energy community, and information on brownfields status for purposes of the energy community bonus credit.