Proposed rules expand low-income communities bonus credit program eligibility

Proposed regulations for the Low-income communities bonus credit program aim to enhance access to bonus tax credits for clean energy investments benefiting low-income communities, Tribal lands, affordable housing, and low-income households.

These regulations will promote greater investment in sustainable energy solutions by expanding eligibility to include a wider range of clean energy technologies — such as hydropower and geothermal — beyond just wind and solar.

The Treasury and IRS published a Notice of proposed rulemaking (NPRM) on Sept. 3, 2024, that outlines these changes, which will take effect in 2025.

Background

The environmental justice solar and wind capacity limitation, also known as the environmental justice bonus credit or low-income communities bonus credit (LICB), program was established under the Inflation Reduction Act of 2022.

The program allows qualifying clean energy facilities, known as applicable facilities, to receive an increased tax credit between 10 and 20 percentage points on top of the tax credit percentage for projects meeting other bonus credit criteria, such as prevailing wage and apprenticeship requirements under Internal Revenue Code (IRC) Section 48E.

Before, the LICB program has been administered under IRC Section 48 and only applies to certain wind or solar facilities, including certain energy storage facilities installed in connection with such wind and solar facilities. For prior, detailed coverage of the LICB program under IRC Section 48, much of which will continue to be relevant under the IRC Section 48E program, read our article, IRS issues additional guidance on low-income communities bonus credit program.

Under the NPRM, the LICB program that will be administered under IRC Section 48E starting in 2025 will allow applicants investing in any