IRS Expands Energy Community Tax Credits, Identifying 466 New Counties for Fossil Fuel Transition Support.

The US Internal Revenue Service (IRS) and Treasury Department have updated guidance on what qualifies as energy communities. Projects in energy communities can qualify for production and investment tax credit bonuses under the Inflation Reduction Act, which are offered for projects within designated communities that are expected to face challenges in the transition away from fossil fuels. The three categories of energy communities include brownfield sites, certain metropolitan statistical areas (MSA) and non-metropolitan statistical areas based on unemployment rates. The new guidance identifies 466 new counties for the period January 2023 through late May 2024. The available tax credit is increased by an additional 10% if prevailing wage and apprenticeship requirements are met or 2% if projects over 1 MW are not met. Private residential projects do not qualify for the energy community bonus, but qualify if part of a commercial portfolio.