On March 22, 2024, the Internal Revenue Service (IRS) announced an expansion of certain clean energy tax credits under the Inflation Reduction Act through Notice 2024-30, a move that aims to incentivize investment in renewable energy and other energy-saving measures.

The Inflation Reduction Act of 2022 included provisions to broaden the reach of clean energy tax credits. Notice 2024-30 focuses specifically on expanding the definition of “energy communities” and the ability to include certain land-based equipment for offshore wind facilities, which can qualify for bonus credits.

What are Energy Communities?

The IRS defines “energy communities” as geographic areas that have been economically impacted by job losses in the fossil fuel industry – these communities can qualify for increased tax credits for certain clean energy projects. Specifically, an energy community can be one of three scenarios:

  • Census tract, or directly adjoining census track, where either a coal mine closed post-1999, or a coal-fired electric-generating unit was retired post-2009.
  • Areas with significant employment or local tax revenues from fossil fuels and above average unemployment. Specifically, these areas must have recently had at least 0.17 percent direct employment or at least 25 percent local tax revenues related to extracting, processing, transporting, or storing of coal, oil or natural gas, along with unemployment rates at or above the national average unemployment rate for the previous year.
  • Brownfield sites contaminated by hazardous materials or pollutants. Updated FAQs from the IRS specify that a property cannot be considered a Brownfield site if it is currently subject to a Superfund removal action or listed on the National Priorities List (Superfund). Certain landfills are also excluded from being considered a Brownfield site. However, certain mine-scarred land may qualify as long as it meets certain requirements.

Increased Credit Amounts

Meeting the requirements of the energy community provisions can increase the credit amount or rate available. The exact increase depends on the specific credit, but generally it’s an increase of 10 percent for the production tax credit and two percentage points for the investment tax credit. In the event that prevailing wage and apprenticeship requirements, among other requirements, are met, then the increase is 10 percentage points.

Next Steps for Businesses

This announcement is a positive step for businesses and project developers looking to take advantage of clean energy tax credits. The expansion of clean energy tax credits is expected to be particularly beneficial for businesses located in qualifying energy communities, with increased credit amounts making clean energy projects appear more financially attractive.

Businesses interested in learning more about the expanded tax credits and how they might apply should consult with their tax advisor to see how the credit expansion may apply to their tax situation. For more information, contact your Windham Brannon advisor today, or reach out to Gary Gruner.