Navigating the IRA energy community tax credit bonus

IRS Notice 2024-48 provides essential information for taxpayers to determine their eligibility for the IRA energy community tax credit bonus under sections 45, 45Y, 48 and 48E of the Internal Revenue Code (IRC). This notice, which includes updated lists of U.S. counties and U.S. census tracts eligible for the energy community bonus credit in Appendix 1 and 2, is crucial in assisting clients in understanding eligibility to effectively claim these credits. 

The Inflation Reduction Act of 2022 (IRA) amended sections 45 and 48 of the IRC to increase credit amounts or rates for projects meeting energy community requirements. Additionally, new sections 45Y and 48E were introduced, offering similar benefits for projects placed in service after Dec. 31, 2024. To qualify for these increased credits, projects must satisfy specific location-based criteria under the Statistical Area Category or the Coal Closure Category. 

There are three ways to qualify for the energy community bonus credit. The project must be in:  

• a brownfield site, or 
• metropolitan statistical area or nonmetropolitan statistical area that meet employment, tax revenue or unemployment rate criteria, or  
• a community in proximity to a coal mine that closed after Dec. 31, 1999, or near a coal-fired electric generating unit that was retired after Dec. 31, 2009.