Empowering Energy Communities with AO Prospect: New Guidance and Mapping for the 48e Low-Income Communities Bonus Credit Program
As you may have heard, the DOE and NREL have published a mapping tool reflecting the currently available data on three categories of geographic eligibility for the IRA Low-Income Community Bonus Credit, also known as 48e. The Treasury and IRS have also issued additional guidance after reviewing public comments.
You might recall our previous blog post recapping the eligibility categories and details surrounding the IRA program. What follows is a recap of the program, including bonus credit details, targeted geographical areas, and important program dates and details you’ll want to remember.
What is the Low-Income Communities Bonus Credit Program?
The DOE’s Office of Economic Impact and Diversity administers the program with the U.S. Dept. of Treasury and the IRS. The program encourages new market participants by incentivizing the adoption of renewable energy, which benefits underserved and environmental justice communities.
How much is the bonus credit?
The bonus credit applies on top of the investment tax credit (ITC) for certain energy properties with a maximum output of less than five megawatts (AC). The DOE will review applications and make recommendations to the IRS, which will allocate the bonus credit to 1.8 gigawatts (GW) of eligible solar and wind capacity per year.
The initial allocation of Capacity Limitations reserved for each facility category for the program year 2023 is as follows:
| Category | Percentage Points | 2023 Allocation |
|---|---|---|
| Low-Income Communities | 10% | 700 MW |
| Indian Land | 10% | 200 MW |
| Qualified Low-Income Residential Building Project | 20% | 200 MW |
| Qualified Low-Income Economic Benefit Project | 20% | 700 MW |
A 20 percentage point increase also applies to projects that provide at least 50% of a facility’s total output to qualifying low-income households.
For 2023, at least 50% of the capacity for each category will be reserved for projects meeting ownership and/or geographic criteria as outlined in the program regulations.
Mapping Tool Layers
Find this layer nestled under the IRA sub-header in the layer catalog. Here are the areas visualized on the map:
Geographic Eligibility for Category 1 applications determined by New Market Tax Credit thresholds for Low Income
Additional Selection Criteria Geographic Option 1 is determined by the Climate and Economic Justice Screening Tool's Energy Category
Additional Selection Criteria Geographic Option 2 is determined by the USDA's thresholds for Persistent Poverty Counties
Program Details
At a high level, the program will run as follows:
DOE evaluates submitted applications and provides recommendations to IRS on whether or not to award the applicant an amount of Capacity limitation.
IRS then considers DOE’s recommendation and the application and issues a Capacity Limitation allocation award letter or a denial letter for facilities.
An applicant portal and user guide is coming soon according to the energy.gov website. Applicants will need to register with Login.gov to complete an application.
Timing of submissions is critical: applications submitted within the first 30 days will be treated as submitted on the same date, time, and on a rolling basis thereafter. The IRS estimates 70,000 respondents, so get those applications in!
For more, click here for full program guidance and revenue procedure.
FAQ - What to know about the latest guidance
How are low-income communities defined?
Low income communities are generally defined under 45D(e)(1) with some modifications described elsewhere in 45D(e), as:
Any population census tract if the poverty rate for such tract is at least 20%
Tracts NOT in metro areas: the median family income doesn’t exceed 80% of the statewide median family income
Tract IN metro areas: the median family income doesn’t exceed 80% of the statewide median family income OR the metro area median family income
More on poverty rates:
Census tract poverty rates are generally based on the 2011–2015 American Community Survey (ACS) low-income community data for the New Markets Tax Credit (NMTC).
What happens if the low-income community data is updated?
Taxpayers can choose either the 2011–2015 ACS low-income community data OR the updated ACS low-income community data for a period of 1 year following the date of the release of the updated data.
After the 1-year transition period, the updated ACS low-income community data must be used.
Unless the facility's location changes, applicants who satisfy the definition of low-income community at the time of application are considered to continue to meet the definition of low-income community for the duration of the recapture period.
Does ground mount/carport solar count as a facility under Category 3 (Qualified Low-Income Residential Building Project)?
The definition of “facility” has been clarified. Commenters lamented that the prior definition was too narrow and only included the “residential rental building”, thereby excluding carport or ground-mount solar. The final regulations state that a “facility is treated as installed on a residential rental building that participates in a covered housing program or other affordable housing program (Qualified Residential Property) even if that facility is not on the Qualified Residential Property if the facility is installed on the same or adjacent parcel of land as the Qualified Residential Property, and the other requirements to be a Category 3 facility are satisfied.”
Are LIHTC projects eligible as Category 3 projects?
A solar or wind facility installed on a “qualified low-income building” under section 42 is eligible for Category 3.
Regarding covered housing programs, a list of Federal Housing Programs and policies that meet the requirements is available on the Program webpage and in the guidance.
Have there been any changes to the safe harbor provision?
Yes! It remains to apply if the energy storage technology to be charged is at least 50% by the facility if the power rating of the energy storage technology is less than two times the capacity rating of the connected wind facility (in kW AC) or solar facility (in kW direct current (DC)).
The additional guidance clarified that the 50% is based on an annual average.
