IRS updates guidance on the low-income communities bonus credit program

Executive summary: Additional guidance on low-income communities bonus credit program issued

Taxpayers investing in certain solar and wind facilities may apply for an allocation of environmental justice solar and wind capacity limitation (Capacity Limitation) as part of the low-income communities bonus credit program for 2024. Rev. Proc. 2024-19 clarifies the application, documentation and selection process for the 2024 program year and describes how the Capacity Limitation will be divided across facilities. Any unused Capacity Limitation from the 2023 program year will be carried over to the 2024 program year.

Background

The Inflation Reduction Act of 2022 added new section 48(e), which increases the section 48 investment tax for eligible property part of a qualified solar or wind facility that is awarded an allocation of Capacity Limitation. See RSM US’s previous alert covering the establishment of the section 48(e) program through Notice 2023-17.

In August 2023, the Department of Treasury and the Internal Revenue Service issued Rev. Proc. 2023-27, which provided guidance on implementing the 2023 program. See RSM US’s previous article.

Rev. Proc. 2024-19 for the 2024 program year

In general, the 2024 program year will follow the same procedures as the 2023 program year. However, there are some clarifying changes to the application and documentation requirements between the 2023 and 2024 program years which include, but are not limited to:

• Categories 1 and 4 have different Capacity Limitations from 2023
• Sub-reservations of Category 1 have different Capacity Limitations from 2023
• Key instructions for unincorporated entities that have made or will make an election under § 761(a) to be excluded from subchapter K
• Additional requirement for applicants to establish ownership

Rev. Proc. 2024-19 supersedes Rev. Proc. 2023-27 solely with respect to the 2024 program year.

Washington National Tax takeaways

With the issuance of the Rev. Proc. 2024-19, taxpayers pursuing wind and solar projects in an eligible low-income community for the 2024 program year should carefully consider the updated procedural and clarifying guidance in efforts to qualify for the program. They should remain mindful that the application window is only 30 days, which will require them to check the Department of Energy webpage for updates on when the program will open.

For more information, please consult with your tax advisor.