Specific to the 2024 program year, the IRS has released Revenue Procedure (Rev Proc) 2024-19 to provide guidance for owners of solar or wind facilities pursuing an allocation under the low-income communities bonus credit program. Following the release of the final regulations last year, this additional information provides “the information an applicant must submit to apply for a Capacity Limitation allocation, the application review process, the manner of obtaining a Capacity Limitation allocation from the IRS, and the procedures and documentation requirements for reporting that a facility was placed in service.”1
Capacity Limitation Available for Allocation
Annually, the IRS allocates 1.8 gigawatts of direct current capacity based on certain categories. The U.S. Department of the Treasury and the IRS may later reallocate capacity limitation across facility categories in the event any category is oversubscribed or has excess capacity. From there, a taxpayer applies for a piece of this allocation. See below for the 2024 program year allocations:
Source: irs.gov
Based upon this information, there will be more opportunity for bonus credits for those facilities located in Categories 1 and 4. Category 1 is further subdivided into subcategories based on specific facility characteristics, providing an even further restricted “pool” of opportunity for certain taxpayers.
The Application
General Requirements
Applicants are limited to one online application per facility, and care should be taken when selecting the category and subcategory for the facility, as the Rev Proc states that “the DOE will not move applicants to a different facility category or Category 1 sub-reservation.” Applicants may only submit one application per facility for the 2024 program year. If an applicant decides after applying that it would rather have a facility considered for an allocation under a different facility category or Category 1 sub-reservation, the applicant must withdraw the first application and submit a second application under the other facility category or Category 1 sub-reservation. Further, Treasury and the IRS will publicly announce the opening and closing dates for the 2024 program year application period on the U.S. Department of Energy (DOE) website. We will continue to alert taxpayers to updates with this availability period as applicable.
Rules similar to those outlined in the Section 48 proposed regulations apply with regard to who the applicant—and possible recipient—of the bonus credit may be. For example, it is the partnership and not its partners that makes the election.
Key Point: To complete an application, users must first create a login.gov account, register as the applicant on the Portal, and then complete the application, which can only be submitted through the Portal. The Applicant User Guide can help in this process.
The person completing the application has to submit the required information under penalties of perjury. The person completing and submitting the application must have knowledge of the facts related to the application and must attest through the Portal that they have the requisite authority to legally bind the applicant with respect to federal income tax matters.
Required Application Information
The following is some of the required information for the application:
- Applicant Information
- Applicant name
- TIN
- Address
- Parent corporation information (if applicable)
- Facility Information
- Maximum net output (in alternating current) and nameplate capacity (in alternating current for wind, in direct current for solar)
- Facility location, including address and coordinates
- Documentation: The Rev Proc includes detailed charts of documentation requirements for the application
- Attestations: Various facility and category attestations are required and are detailed in the Rev Proc
- Ownership Criteria: If “purporting to meet the Additional Selection Criteria for Ownership Criteria,” additional documentation and attestations are required and outlined in the Rev Proc, depending on the type of entity owning the facility, e.g., tribal enterprise, qualified renewable energy company, qualified tax-exempt entity, etc.
- Geographic Criteria Attestation: If the applicant claims that it meets the Additional Selection Criteria for Geographic Criteria described in §1.48((e)-1(h)(3) with respect to categories 1, 3, or 4, it must provide an attestation that the qualifying facility will be located in a Persistent Poverty County or in a census tract that is designated as disadvantaged in the Climate and Economic Justice Screening Tool as defined in §1.48((e)-1(h)(3)
Review & Selection Process
While the DOE will review the application, the IRS will ultimately accept or reject the application based on the DOE’s recommendation. Upon the opening of the 2024 program year, a 30-day period is made available for submitting applications for each facility category. All applications submitted during the first 30 days will be treated as if they were submitted on the same day and at the same time. If there are more applications than capacity limitation for a category in this period, a lottery will be conducted.
After this initial period, additional applications will be accepted to the extent that there is remaining capacity limitation available. Following the first 30-day period, the applications will be reviewed on a first-come, first-served basis.
Fifty percent of the capacity limitation in each facility category will be reserved for qualified solar and wind facilities meeting the ownership criteria under §1.48(e)-1(h)(2) and the geographic criteria under §1.48(e)-1(h)(3). If reserved capacity in one category is oversubscribed but another has excess capacity, the IRS could reallocate the capacity limitation as needed. If the 50% reserve is depleted, applications meeting the Additional Selection Criteria submitted during the initial 30-day period are prioritized over non-Additional Selection Criteria applications within the same facility category lottery process.
Key point: The DOE will contact the applicant through the Portal if it identifies an error in the submission. The taxpayer has 12 business days from this contact to respond and correct this error. If they do not respond in this time frame, the application is treated as having been withdrawn. Accepted applicants will receive a final decision letter in the Portal as well.
Claiming the Energy Percentage Increase
Once the taxpayer receives the final decision letter, they can file their tax return to claim the additional credit or make either the transfer or elective pay election. Note that to transfer a credit with an allocation, there are additional procedures available that must be followed.
It should be noted for any facility receiving an allocation of capacity limitation that the owner of the facility must report to the DOE through the Portal the date the facility was placed in service as well as supporting documentation, including:
- A permission to operate (PTO) letter (or commissioning report for off-grid facilities)
- A final, professional engineer (PE) stamped (if required by applicable state or local law) as-built design plan, PTO letter with nameplate capacity listed, or other documentation from an unrelated party verifying as-built nameplate capacity
- Other support for Category 3 and 4 facilities as outlined in the Rev Proc
With a bonus of 10–20% potentially available under the low-income communities bonus credit program, following the requirements outlined in the Rev Proc is crucial. We are prepared to help you navigate the process and documentation requirements involved with this opportunity. If you have questions or need assistance, please reach out to one of our professionals.