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On February 14, 2023, the IRS released Notice 2023-17, Initial Guidance Establishing Program to Allocate Environmental Justice Solar and Wind Capacity Limitation Under Section 48(e).
The Notice provides guidance on the Inflation Reduction Act of 2022 (IRA), which allocated solar and wind facilities an additional 10% of energy tax credits if located in low-income communities or on Indian Land, and an additional 20% for facilities in qualified low-income residential building projects and economic benefit projects.
The Notice establishes the allocated amounts and provides the initial guidance regarding the program’s design, application process, and criteria that will be considered in determining which applications will receive allocations.
The credits are allocated by megawatts, and the total capacity of 1.8 gigawatts for the 2023 calendar year will be divided among the categories as follows:
- Category 1: Located in a Low-Income Community – 700 Megawatts
- Category 2: Located on Indian Land – 200 Megawatts
- Category 3: Qualified Low-Income Residential Building Project – 200 Megawatts
- Category 4: Qualified Low-Income Economic benefit Project – 700 Megawatts
The Notice also explains that the following additional criteria will be used to determine how Capacity Limitation is allocated:
- Owned or developed by community-based organizations and mission-driven entities
- Have an impact on encouraging new market participants
- Provide substantial benefits to low-income communities and individuals marginalized from economic opportunities
- Have a higher degree of commercial readiness
Additionally, the Notice specifies that if more applicants are selected than the total megawatts capacity for each category, then a lotto system will be used.
For more information, please contact attorney Christy Vouri-Misso.
Christy focuses her practice on all aspects of federal and state tax controversies and planning. She has also helped clients understand the requirements and benefits of the new Opportunity Zone program and enjoys helping her clients invest in designated low-income communities.