Boost Commercial Solar Returns with the Energy Community Tax Bonus

Unlock extra savings with the Federal ITC 10% tax adder in qualified areas

Based on location, commercial and industrial property owners can easily qualify for a 40% investment tax credit (ITC) on their solar projects.

In 2022, the Inflation Reduction Act (IRA) established the value of the ITC to 30%. The IRA guidelines outline a 10% tax bonus for solar projects in a designated Energy Community. This Energy Community Tax Credit Bonus opportunity gives C&I businesses access to the 40% ITC.

For an area to be qualified as an Energy Community, it must have been affected by traditional energy production methods and be one of three categories:

BROWNFIELD CATEGORY

• A “brownfield site” is generally defined as real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or containment and certain mine-scarred land.

STATISTICAL AREA CATEGORY

• A Metropolitan Statistical Area (MSA) or Non-Metropolitan Statistical Area (non-MSA) can qualify by meeting two thresholds:
  • For at least one year after 2009, 0.17% or more significant direct employment related to the extraction, processing, transport, or storage of coal, oil, or natural gas (the fossil fuel employment (FFE) threshold).
  • Has an unemployment rate at or above the national average for the previous year (the “Unemployment Rate Requirement”). Treasury and the IRS intend to issue, annually in Q2, listings identifying the MSAs and non-MSAs that qualify in the Statistical Area Category based on the Unemployment Rate Requirement.

COAL CLOSURE CATEGORY

• These sites are census tracts where a coal mine closed after December 31, 2009, or a coal-fired electric generating unit closed after December 31, 2009.
• Census tracts that directly adjoin one of these coal closure sites also qualify as an energy community.

Because these categories are in flux, there are different methods to safe harbor the 10% tax credit bonus so you don’t lose out on the 40% tax credit.

Most commercial and industrial property owners in Southern California can claim the energy community tax bonus.

Los Angeles, Kern, Ventura, and Orange Counties are MSAs that meet the FEE threshold and unemployment rate requirements. Some areas in San Bernardino, Riverside, Tulare, and Inyo Counties may have or be near a coal-fired electric generator retirement.

Contact commercial@greenconvergence.com to claim your energy community tax credit bonus.