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Treasury/DOE Begin Accepting Applications for Section 48(e) Low-Income Communities Bonus Credits

Client Updates

On October 19, 2023, the U.S. government began accepting taxpayer applications for supplemental investment tax credits pursuant to the Low-Income Communities Bonus Credit Program under Section 48(e) of the Internal Revenue Code.  The application process and related rules are set forth in Revenue Procedure 2023-27, the final regulations relating to the Low-Income Communities Bonus Credit Program (RIN 1545-BQ81) (the “Final Regulations”) and other guidance.  For our previous alerts relating to the Low-Income Communities Bonus Credit Program, see here and here.


Under the Inflation Reduction Act (“IRA”), taxpayers who place wind and solar facilities in service after 2022 are generally entitled to an investment tax credit equal to 30% of the tax basis of the “energy property” comprising the facility, provided that they satisfy certain “prevailing wage and apprenticeship requirements” or qualify for an exception.  Section 48(e) provides an additional “bonus” tax credit of 10% or 20% of the relevant tax basis for qualified solar and wind facilities that apply for and are awarded an allocation of environmental justice solar and wind capacity limitation (“Capacity Limitation”).   The aggregate Capacity Limitation for all taxpayers is 1.8 gigawatts for each of 2023 and 2024.

A qualified solar and wind facility is a facility that produces electricity from wind or solar power, has a maximum net output of less than 5 megawatts (measured in alternating current), and is:

  1. Located in a low-income community;

  2. Located on Indian land;

  3. Built as part of a qualified low-income residential building project; or

  4. Built as part of a qualified low-income economic benefit project.

The 10% bonus credit is for facilities located in low-income communities or on Indian land, while the 20% bonus credit is for facilities built as part of a qualified low-income residential building project or as part of a qualified low-income economic benefit project.

For the first round of applications, 700 megawatts of Capacity Limitation will be allocated among facilities located in a low-income community, 200 megawatts of Capacity Limitation will be allocated among facilities located on Indian land, 200 megawatts of Capacity Limitation will be allocated among facilities built as part of a qualified low-income residential building project, and 700 megawatts of Capacity Limitation will be allocated among facilities built as part of a qualified low-income economic benefit project.

The Capacity Limitation reserved for facilities located in low-income communities will be further subdivided between “behind the meter” facilities such as rooftop solar and “front of meter” facilities.

In addition, the IRS will prioritize awards to facilities that meet one or both of the ownership criterion and geographic criterion.  To satisfy the ownership criterion, the solar or wind facility must be owned by one of the following: (i) a Tribal Enterprise (majority owned or controlled by an Indian Tribal government), (ii) an Alaska Native Corporation, (iii) a renewable energy cooperative, (iv) a qualified renewable energy company (that is, a small entity that serves low-income communities and provides pathways for the adoption of clean energy by low-income households), or (v) a qualified tax-exempt entity.

A facility satisfies the geographic criterion if it is located in either a Persistent Poverty County or a census tract designated in the Climate and Economic Justice Screening Tool as disadvantaged. A facility located in one of these geographic locations at the time of the application would be considered to continue to meet the geographic criterion for the duration of the tax credit recapture period (generally, 5 years from when placed in service), unless the facility location is moved.

Application Process

Applicants submitting an application on behalf of their organization will need to create a account in order to register on the portal and complete an application.  The Department of Energy’s Office of Economic Impact and Diversity, which is administering the Low-Income Communities Bonus Credit Program in partnership with the U.S. Department of the Treasury and the Internal Revenue Service (“IRS”), will evaluate the applications.  Applications will be reviewed and Capacity Limitations will be awarded on a rolling basis, however all applications received between October 19, 2023 and November 18, 2023 will be treated as if they were received on the same date and at the same time.    

Each application will need to be submitted under penalties of perjury and dated by the applicant.  The person submitting the application must have personal knowledge of the facts and must be authorized under state law to bind the applicant.  Revenue Procedure 2023-27 and the Final Regulations describe the contents of the application and required attestations in greater detail, but generally, applicants should be prepared to:

  • Provide the latitude and longitude of the facility;

  • Provide an executed interconnection agreement, or a signed conditional approval letter from the jurisdictional utility and/or an affidavit stating that an interconnection agreement cannot be executed until after construction of the facility (unless the facility is “behind the meter” and has a maximum capacity of less than or equal to 1 megawatt);

  • Provide an executed contract to purchase or lease the facility or an executed power purchase agreement for the facility (unless the facility is “in front of the meter”);

  • Provide documents relating to the facility’s category of qualified solar or wind facility;

  • Provide documentation relating to the ownership criterion or geographic criterion, if applicable;

  • Attest that all applicable permits have been obtained;

  • Attest that the applicant is in compliance with applicable laws and safety obligations, including consumer protection provisions, and that the applicant has not and will not engage in any unfair or deceptive practices;

  • Attest that the proposed location is suitable and eligible; and

  • Attest that consumer disclosures have been provided prior to their execution of a contract to lease or to subscribe or purchase power from the facility.

Each facility that receives a Capacity Limitation allocation must be placed in service within 4 years of the receipt of the allocation.  Applicants will be required to submit information such as the placed-in-service date and updated facility capacity at that time.

For additional information, including further detail on the categories of qualified facility described above, see our previous alerts here and here.  Given the first-come, first-served nature of this program that will apply after the initial 30-day submission period, it is recommended that interested applicants review their facilities’ eligibility as soon as possible.

Baker Botts will continue to monitor IRA guidance and will provide further updates as guidance is released.  In the meantime, we would be pleased to assist you in your analysis of the IRA and other clean energy tax incentive matters.

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