IRS proposes rules for 2025 bonus energy credits for low-income projects

 

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

 
 

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