Guidance on Clean Electricity Low-Income Communities Bonus Credit Amount Program

DEPARTMENT OF THE TREASURY <SUBAGY>Internal Revenue Service</SUBAGY> <CFR>26 CFR Part 1</CFR> <DEPDOC>[REG-108920-24]</DEPDOC> <RIN>RIN 1545-BR26</RIN> <SUBJECT>Guidance on Clean Electricity Low-Income Communities Bonus Credit Amount Program</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Internal Revenue Service (IRS), Treasury. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking and notice of public hearing. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This document contains proposed regulations concerning the program to allocate clean electricity low-income communities bonus credit amounts established pursuant to the Inflation Reduction Act of 2022 for calendar years 2025 and succeeding years. Applicants investing in certain clean electricity generation facilities that produce electricity without combustion and gasification may apply for an allocation of environmental justice capacity limitation to increase the amount of the clean electricity investment credit for the taxable year in which the facility is placed in service. This document describes proposed definitions and requirements that would be applicable for the program. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Written or electronic comments must be received by October 3, 2024. The public hearing on these proposed regulations is scheduled to be held on October 17, 2024, at 10 a.m. EST. Requests to speak and outlines of topics to be discussed at the public hearing must be received by October 3, 2024. If no outlines are received by October 3, 2024, the public hearing will be cancelled. Requests to attend the public hearing must be received by 5 p.m. on October 15, 2024. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at <E T="03">https://www.regulations.gov</E> (indicate IRS and REG-108920-24) by following the online instructions for submitting comments. Requests for the public hearing must be submitted as prescribed in the “Comments and Public Hearing” section. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) will publish for public availability any comments submitted to the IRS's public docket. Send paper submissions to: CC:PA:01:PR (REG-108920-24), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Concerning the proposed rules, Office of Associate Chief Counsel (Passthroughs & Special Industries) at (202) 317-6853 (not a toll-free number); concerning submissions of comments or the public hearing, the Publications and Regulations Section at (202) 317-6901 (not a toll-free number) or by email at <E T="03">publichearings@irs.gov</E> (preferred). </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Authority</HD> This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) under section 48E(h) of the Internal Revenue Code (Code) to provide proposed definitions and rules relating to the allocation of environmental justice capacity limitation (Capacity Limitation) for calendar year 2025 and succeeding years (proposed regulations). Section 48E(h)(4)(A) provides an express delegation of authority for the Secretary of the Treasury or her delegate (Secretary) to establish a program to allocate amounts of Capacity Limitation to applicable facilities not later than January 1, 2025, and to make such allocations. Section 48E(h)(5) provides an express delegation of authority for the Secretary, by regulations or other guidance, to provide rules for recapturing the benefit of any increase in the credit allowed under section 48E(a) that results from an allocation of Capacity Limitation with respect to any property that ceases to be property eligible for such increase (but that does not cease to be investment credit property within the meaning of section 50(a) of the Code). In addition, section 48E(i) provides an express delegation of authority for the Secretary to issue guidance regarding implementation of section 48E not later than January 1, 2025. The proposed regulations are also issued under the express delegation of authority under section 7805 of the Code. <HD SOURCE="HD1">Background</HD> <HD SOURCE="HD2">I. Overview</HD> Section 13702 of Public Law 117-169, 136 Stat. 1818, 1921 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA), added new section 48E(h) to authorize the Secretary to establish a program for calendar years 2025 and succeeding years to award allocations of Capacity Limitation that increase the amount of the new clean electricity investment credit determined under section 48E(a) (section 48E credit) with respect to eligible property that is part of an applicable facility. This document contains proposed definitions and rules relating to the allocation of Capacity Limitation for calendar year 2025 and succeeding years. The amount of section 48E credit for a taxable year generally is calculated by multiplying the qualified investment for such taxable year with respect to any qualified facility placed in service during that taxable year by the applicable percentage (as defined in section 48E(a)(2)). If an applicable facility is awarded an allocation of Capacity Limitation, section 48E(h) increases the amount of the section 48E credit with respect to the applicable facility by increasing the applicable percentage used to calculate the amount of the section 48E credit (section 48E(h) Increase). The term “applicable facility” is defined in section 48E(h)(2) to mean any qualified facility that (i) is not described in section 45Y(b)(2)(B) of the Code (relating to combustion and gasification facilities); (ii) has a maximum net output of less than 5 megawatts (MW) (as measured in alternating current (AC)); and (iii) is described in at least one of four categories in section 48E(h)(2)(A)(iii) (as further described in part II of this Background). Section 48E(h)(4)(A) directs the Secretary, not later than January 1, 2025, to establish a program to allocate amounts of Capacity Limitation to applicable facilities and to “provide procedures to allow for an efficient allocation” of Capacity Limitation to applicable facilities. Accordingly, the Treasury Department and the IRS are establishing the Clean Electricity Low-Income Communities Bonus Credit Amount Program (Program). As described in the Explanation of Provisions, this notice of proposed rulemaking provides proposed threshold definitions and requirements for the Program to make allocations of Capacity Limitation efficiently and effectively. After finalizing these rules, the Treasury Department and the IRS will provide the procedures for the 2025 Program in a revenue procedure published in the Internal Revenue Bulletin. <E T="03">See</E> § 601.601 of the Statement of Procedural Rules (26 CFR part 601). Procedures for future Program years also will be provided in guidance published in the Internal Revenue Bulletin. The Treasury Department and the IRS expect that many of the procedural aspects of the Program will be similar to the Low-Income Communities Bonus Credit Program established under section 48(e) of the Code  <SU>1</SU> <FTREF/> available for calendar years 2023 and 2024. <FTNT> <SU>1</SU>  For the most recent procedures applicable to the Low-Income Communities Bonus Credit Program established under section 48(e), refer to Revenue Procedure 2024-19, 2024-16 I.R.B 899. </FTNT> <HD SOURCE="HD2">II. Four Categories of Applicable Facilities</HD> Depending on the category of the facility, an allocation of Capacity Limitation may result in a section 48E(h) Increase equal to either 10 percentage points or 20 percentage points. Section 48E(h)(1)(A)(i) provides for a section 48E(h) Increase of 10 percentage points for eligible property that is located in a low-income community, as defined in section 45D(e) of the Code (Category 1 facility), or on Indian land, as defined in section 2601(2) of the Energy Policy Act of 1992 (25 U.S.C. 3501(2)) (Category 2 facility). Section 48E(h)(1)(A)(ii) provides for a section 48E(h) Increase of 20 percentage points for eligible property that is part of a qualified low-income residential building project (Category 3 facility) or a qualified low-income economic benefit project (Category 4 facility). Section 48E(h)(2)(B) provides that a facility will be treated as part of a “qualified low-income residential building project” if the facility is installed on a residential rental building that participates in a covered housing program (as defined in section 41411(a) of the Violence Against Women Act of 1994 (34 U.S.C. 12491(a)(3)) (VAWA)), a housing assistance program administered by the Department of Agriculture under title V of the Housing Act of 1949, a housing program administered by a tribally designated housing entity (as defined in section 4(22) of the Native American Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4103(22))), or such other affordable housing programs as the Secretary may provide, and the financial benefits of the electricity produced by the facility are allocated equitably among the occupants of the dwelling units of such building. Section 48E(h)(2)(C) provides that a facility will be treated as part of a “qualified low-income economic benefit project” if at least 50 percent of the financial benefits of the electricity produced by such facility are provided to households with income of less than 200 percent of the poverty line (as defined in section 36B(d)(3)(A) of the Code) applicable to a family of the size involved, or less than 80 percent of area median gross income (as determined under section 142(d)(2)(B) of t ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 165k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━