The IRS has issued proposed rules (REG-108920-24) for taxpayer to apply for enhanced credit rates for 2025 energy projects that are built in certain geographic locations or benefit specific low-income populations.
The Inflation Reduction Act created the Low-Income Communities Bonus Credit to offers a 10% to 20% additional credit for certain energy projects of less than 5 megawatts (MW) connected with low-income communities. The program was previously available solar and wind projects under Section 48. The new version is available under Section 48E, which is set to replace Section 48 for projects beginning construction after 2024. The Section 48E version will apply more broadly to any Section 48E facility with a net output of less than 5 MW and deemed to have a zero or net negative greenhouse gas emissions, including solar, wind, hydropower, geothermal, nuclear, and certain types of waste-energy recovery. Combustion and gasification facilities remain ineligible.
Unlike other bonus credit amounts created by the IRA, taxpayers must apply to receive an allocation of this bonus credit and funding is capped at 1.8 gigawatts worth of projects annually.
Aside from the substantial expansion in eligible types of electrical generation now eligible for the increased credit, contours of the program remain similar to what they were under previous guidance with the credit allocated to four specific categories.
The IRS will issue additional guidance on the application process before it opens.
For more information on previous iterations of the program, see our prior article.
Contacts:
Content disclaimer
This content provides information and comments on current issues and developments from Grant Thornton Advisors LLC and Grant Thornton LLP. It is not a comprehensive analysis of the subject matter covered. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC and Grant Thornton LLP. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this content.
For additional information on topics covered in this content, contact a Grant Thornton professional.
Grant Thornton LLP and Grant Thornton Advisors LLC (and their respective subsidiary entities) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. Grant Thornton LLP is a licensed independent CPA firm that provides attest services to its clients, and Grant Thornton Advisors LLC and its subsidiary entities provide tax and business consulting services to their clients. Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.
Tax professional standards statement
This content supports Grant Thornton Advisors LLC’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. If you are interested in the topics presented herein, we encourage you to contact a Grant Thornton Advisors LLC tax professional. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact a Grant Thornton Advisors LLC tax professional prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton Advisors LLC assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.
More tax hot topics
No Results Found. Please search again using different keywords and/or filters.
Share with your network
Share