How To Leverage GIS Mapping Software For The Inflation Reduction Act (IRA)

As you may have heard, the U.S. Treasury Department, the U.S. Department of Energy, and the Internal Revenue Service issued guidance on Inflation Reduction Act (IRA) provisions to incentivize investment in underserved communities and hard-hit coal communities. We know renewable developers across the U.S. are trying to make sense of these ever-evolving guidelines and how to best target the different “Energy Communities” defined in the various programs set forth under the IRA. 

What follows is a breakdown of what we know so far about two newly established programs, how you can leverage Anderson Optimization and resources to keep you in the loop on this ever-evolving legislation. 

The Latest Guidance

The first notice establishes the expanded Qualifying Advanced Energy Project Credit program under Section 48C of the Internal Revenue Code.  The notice is broad and covers a wide range of projects - from manufacturing fuel cells and components for geothermal electricity to equipment for carbon capture. 

The second notice establishes the Low-Income Communities Bonus Credit program under Section 48(e) of the Internal Revenue Code. This program increases the investment for solar and wind projects in low-income communities by up to 20 percentage points, depending on which of the four categories the project falls under. Depending on demand, the Treasury Department and IRS may reallocate the capacity for each category.

Qualifying Advanced Energy Project Credit Program

• Total of $10 billion in tax credits

• $4 billion of the 30% tax credits must go to projects at closed coal mines or retired coal-fired power plants.

• The 48C credit for any taxable year is an amount equal to a certain percentage of the qualified investment for such taxable year with respect to any qualifying advanced energy project of the taxpayer.

• Allowed in the taxable year that the eligible property is placed in service.

• Credit allocations provide a base credit rate of 6% of the qualified investment.

• If a project satisfies additional requirements (i.e. prevailing wage, apprenticeship, etc.), an alternative rate of 30% is provided.

Application Process

The application process begins May 31, 2023, with an initial $4 billion in credits ($1.6 billion targeted for coal communities) issued. Additional guidance regarding specifics of the application process is forthcoming at a date to be determined.

Leveraging AO

Three new layers have been added to Anderson Optimization’s already robust layer catalog that identifies census tracts with closed mines or retired coal generators & their neighboring census tracts, disadvantaged communities, and the IWG’s Top 25 Priority energy communities. 

Courtesy of the U.S. Department of Energy (DOE) and the National Energy Technology Laboratory (NETL), the first map layer combines the following data sets:

1. Census Tracts with Closed Coal Mine(s) after 12/31/1999

2. Census Tracts with Retired Coal-fired Generator(s) after 12/31/1999

3. Neighboring Census Tracts to those with closed coal mines

4. Neighboring Census Tracts to those with Retired Coal-fired generators

Find the layer in the catalog under U.S. Nationwide Layers > Energy Communities (IRA) > Coal Closures.

The other two layers target disadvantaged communities and the Top 25 IWG Priority Energy Communities and are sourced from the DOE/NETL as well. Those layers are as follows:

1. Disadvantaged Communities (DACs) with overlap to Energy Communities Impacted by coal closure(s)

2. Top 25 IWG Priority Energy Communities

Find these layers in the catalog under U.S. Nationwide Layers > Energy Communities (IRA)

Low-Income Communities Bonus Credit Program

• A "qualified solar and wind facility" is defined to mean any facility that:

1. generates electricity solely from a wind facility, solar energy property, or small wind property;

2. has a max. net output of less than 5 MW; and 

3. is described as one of the four categories listed below

• Provides up to a 20 percentage point boost to the investment tax credit for small-scale (less than five megawatts) solar and wind energy projects across 4 categories:

1. Low-Income Communities (700 MW)

2. Indian Land (200 MW)

3. Qualified low-income residential building projects (200 MW)

4. Qualified low-income economic benefit projects (700 MW)

• The amount of the energy investment credit for a taxable year is generally calculated by multiplying the basis of each energy property placed in service during that taxable year by the energy percentage.

• Depending on the category of facility, the increase is either 10 or 20 percentage points. 

Category 1: 10 percentage points 

Category 2: but NOT a Category 3 or 4: 10 percentage points

Category 3: 20 percentage points

Category 4: 20 percentage points

• Facilities can be described in multiple categories, as noted below:

  • A qualified facility described as a Category 1, 3 or 4 is considered a Category 3 or 4 for the increase (20 percentage points).

  • A qualified facility described as a Category 2, 3 or 4 is considered a Category 3 or 4 for the increase (20 percentage points).

• Any unallocated 2023 capacity will rollover to the following calendar year.

Application Process

The application process will run in two phases, with the first beginning on Wednesday, May, 31, 2023. Low-Income residential buildings and those that benefit low-income households will be accepted first with application for other projects to follow.

Leveraging AO

Here’s a breakdown of those categories and how you can leverage AO to target siting in these areas. 

Category & Allocation of Capacity	Definition	AO Layer(s)	Source
1. Low-Income communities 700 MW	Any population census tract if the poverty rate is at least 20%. Non-metro areas: median family income for tract doesn’t exceed 80% of statewide median income. Metro areas: median family income for tract doesn’t exceed 80% of the greater of statewide median income OR the metro area median family income.	Disadvantaged Census Tracts LMI Tracts Distressed Communities Index	§45D(e)(1) with certain modifications described elsewhere in §45D(e)
2. Indian Land 200 MW	The term "Indian land" means: (A) any land located within the boundaries of an Indian reservation, pueblo, or rancheria; (B) any land not located within the boundaries of an Indian reservation, pueblo, or rancheria, the title to which is held- (i) in trust by the United States for the benefit of an Indian tribe or an individual Indian; (ii) by an Indian tribe or an individual Indian, subject to restriction against alienation under laws of the United States; or (iii) by a dependent Indian community; (C) land that is owned by an Indian tribe and was conveyed by the United States to a Native Corporation pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.), or that was conveyed by the United States to a Native Corporation in exchange for such land; (D) any land located in a census tract in which the majority of residents are Natives (as defined in section 3(b) of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(b))); and (E) any land located in a census tract in which the majority of residents are persons who are enrolled members of a federally recognized Tribe or village.	Federal & Tribal Land Federal/State/Native American Owned Land Disadvantaged Census Tracts	§ 2601(2) Energy Policy Act of 1992(25 U.S.C. 3501(2)
3. Qualified low-income residential building projects 200 MW	Residential rental building which participates in an affordable housing program and the financial benefits of the electricity produced are allocated equitably among the occupants of the dwelling units of the building. Electricity acquired at a below market rate will be considered a financial benefit. Forthcoming guidance will further clarify those parameters.	Affordable Housing Locator (HUD)	1.Covered Housing Programs (§41411(a) of the Violence Against Women Act of 1994) 2.Housing Assistance Programs administered by the Dept. of Agriculture under title V of the Housing Act of 1949 3.Tribally designated housing entity (§4(22) of the Native American Housing Assistance & SelfDetermination Act of 1996)
4. Qualified low-income economic benefit projects 700 MW	At least 50% of the financial benefits of the electricity produced are provided to households with income of less than 200% of the poverty line applicable to a family of the size involved, OR less than 80% of area median gross income. Electricity acquired at a below market rate will be considered a financial benefit. Forthcoming guidance will further clarify those parameters.	Disadvantaged Census Tracts LMI Tracts Distressed Communities Index	Poverty Line (§36B(d)(3)(A) Area Median Gross Income (§142(d)(2)(B)

Caveats:

While the federal government’s guidance provides definitions for the areas the IRA seeks to target, the government has not specified the exact data sources they will use to accept/deny applications. Given that, AO uses the best publicly available data from government agencies and other reputable sources for the layers in our layer catalog based on our current understanding of the law’s intent. To find the source for any layer in the catalog, click on the blue link to the right of the layer name and it will bring you to the source data used for the layer.

Have a different data source you want to use instead? Please reach out to support@andersonopt.com and we can integrate additional public or private layers your team would like to reference.

What’s Next: 

The DOE and IRS will issue further guidance by May 31, 2023, outlining the specific application procedures, additional criteria, applicable definitions, and other information necessary to submit applications for both programs. 

Stay in the Loop

Bookmark these pages to get the latest information and stay up to date on this groundbreaking legislation. 

Funding Clearinghouse

Latest Updates from the IRS

Energy Communities.gov Newsroom 

Resources

New federal programs announced for energy communities (energycommunities.gov)

Priority Energy Communities

H.R.5376 - Inflation Reduction Act of 2022

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