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Under the Inflation Reduction Act, a variety of methods exist to boost the tax credit your company receives.
This blog post, focusing on the energy community bonus, is the second in a series of articles covering all of the major tax credit bonuses available under the IRA. While we hope this post is informative, we encourage you to consult a tax advisor when determining how the energy community bonus can apply to you.
The energy community bonus awards a 10% tax credit boost for renewable energy projects sited in energy communities. A project located in an “energy community,” as defined by the IRA, is a development in:
1. A brownfield site
2. A metropolitan or non-metropolitan statistical area which has
a. had, at any time since 2010, greater than or equal to 0.17% or greater direct employment or 25% or greater local tax revenue from fossil fuels
b. an unemployment rate greater than or equal to the previous year’s national average
3. A census tract that is or adjoins a census tract in which a
a. coal mine has closed since 2000
b. coal-fired electricity generation unit has been shut down
Let’s take a closer look at what each of these means.
In (1), a “brownfield site” is a property containing certain types of mine-scarred land, or containing a hazardous substance, pollutant, or contaminant that limits development, expansion, or reuse. This definition excludes facilities that are planned for cleanup, or those that are under the custody of the United States government.
In (2), the fossil fuel requirement applies to employment or revenue generated from the extraction, processing, transport, or storage of either coal, oil, or natural gas. This determination is subject to the ultimate authority of the Secretary of the Treasury.
In (3), census tracts in which coal mines or electricity units have been closed are subject to the discount, and contiguous, adjacent census tracts also qualify.
If any of the above criteria are met, the project is sited in an “energy community,” and the 10% bonus is awarded. While 10% is a significant reduction in tax burden for any company, there are still more ways to earn tax credit bonuses for your company. If you missed the first article in our series, check out how the domestic content bonus can save your company money. Otherwise, keep reading to explore how your company can get up to a 20% tax credit boost by using the low-income development bonus.
Atheva does not provide tax or legal advice and you are encouraged to consult with your own tax or legal advisor regarding any legal or tax matter discussed herein.
