The U.S. Department of Energy (DOE) has begun accepting applications across all four categories of the Low-Income Communities Bonus Credit Program under section 48(e). This program was created by the Inflation Reduction Act to promote cost-saving clean energy investments in low-income communities by providing an additional 10% or 20% investment tax credit for qualified solar and wind facilities on top of the 30% base credit.

Application Process:

• Applications are reviewed by the DOE who provides an allocation recommendation to the IRS. The IRS will then decide whether the facility should retain its allocation.
• Revenue Procedure 2003-27 and the more recently released Applicant User Guide and FAQ document provide the procedures of the application process.
• If a facility is placed in service prior to submission of an application, it will be rejected.
• If a facility is placed in service after an application is submitted, but prior to the allocation of capacity limitation, an awarded allocation will be rescinded.

Category 1: Low-Income Communities (+10% Bonus)

• Any population census tract with a poverty rate of at least 20% based on the 2012-2015 American Community Survey data;
• A non-metropolitan area with a median family income less than or equal to 80% of the statewide median family income; or
• A metropolitan area with a median family income less than or equal to 80% of the greater of: (a) the statewide median family income or (b) the metropolitan area median family income.

Category 2: Indian Land (+10% Bonus)

• As defined by section 2601(2) of the Energy Policy Act of 1992.

Category 3: Qualified low-income residential building project (+20% Bonus)

Facility installed on the same or adjacent parcel of land as a qualified low-income residential building project. A qualified low-income residential building project is:

• A residential rental building that participates in a covered housing program or other affordable housing program (“Qualified Residential Property”); and
• At least 50% of the financial benefits of the electricity produced (financial value) by such facility are allocated equitably among occupants.

The gross financial value of the annual energy produced is calculated as the sum of:

• The total self-consumed kilowatt hours produced by the qualified solar or wind facility multiplied by the applicable building's metered price of electricity; and
• The total exported kilowatt-hours produced by the qualified solar or wind facility multiplied by the applicable building's volumetric export compensation rate for solar or wind kilowatt-hours.

The final regulations provide that financial value can be distributed to building occupants via utility bill savings or through different means, and depending on the method selected, the final regulations prescribe the requirements that must be met.

• If financial value is not distributed via utility bill savings, financial benefits will be considered to be equitably allocated if at least 50 % of the financial value of the energy produced by the facility is distributed to occupants using one of the methods described in HUD guidance, or other guidance or notices from the Federal agency that oversees the applicable housing program identified in section 48(e)(2)(B).

Category 4: Qualified low-income economic benefit project (+20% Bonus)

• The Facility must serve multiple qualifying low-income households (“Qualifying Household”);
• At least 50% of the facility’s total output in kW must be assigned to Qualifying Households; and
• Each Qualifying Household must be provided a bill credit discount rate of at least 20%.