Your tribe could soon see even more tax benefits from your energy projects.
The Low-Income Communities Bonus Credit Program, established under Section 48(e) of the Internal Revenue Code, presents a unique opportunity for tribes to receive additional tax credits for solar and wind energy projects.
Applications for the program open on October 19, 2023. Here are the basics your tribe should know to take advantage of this credit opportunity:
The Low-Income Communities Bonus Credit Program
Under the program, tribes can receive additional tax credits for qualified solar and wind facilities located on tribal land, in low-income communities, as part of affordable housing developments, or benefitting low-income households.
The program offers a 10 or 20-percentage point boost to the investment tax credit. When added to the 30% credit from the IRC Section 48 energy investment credit, your tribe could see an increase to a 40% credit, assuming you meet certain wage and apprenticeship requirements.
The program has a cap of 1.8 gigawatts of capacity available for allocation. Each facility category has a designated portion of this capacity, including 700 megawatts for low-income communities, 200 megawatts for tribal land, 200 megawatts for qualified affordable housing developments, and 700 megawatts for projects benefitting low-income households.
Your tribe should consider these capacity limitations when planning your projects.
Another notable aspect of the program is the potential for tribes to receive a refund for the credit. This presents a valuable opportunity for your tribe to reinvest in your community and expand your clean energy initiatives.
Eligibility
To be eligible for the Low-Income Communities Bonus Credit Program, tribes must meet specific criteria outlined by the program guidelines. These criteria include:
- Location: Solar and wind facilities must be located on tribal land or in low-income communities.
- Facility size: Qualified solar and wind facilities must have a maximum net output of less than five megawatts, alternate current. This size limitation ensures that the program supports a diverse range of projects, including smaller-scale installations that can have a significant impact on local communities.
- Project type: Tribes can participate in the program through solar and wind projects that are part of affordable housing developments or directly benefit low-income households.
Timeline
Applications for the program open at 9:00 a.m. ET on October 19, 2023.
Applications submitted within the first 30 days of the application portal’s opening will be treated as if submitted on the same date and time. If there is still an allocation of the 1.8GW left after the initial round, there will be subsequent rolling 30-day periods for the remainder of the allocations.
Maximizing your benefits
Before applying for the Low-Income Communities Bonus Credit Program, your tribe should develop a comprehensive plan that outlines your project goals, timelines and budget. A well-defined plan will not only facilitate the application process but also ensure that the project remains on track and meets the program’s requirements.
It’s also important to consider the long-term sustainability of your solar and wind energy projects. Factors such as maintenance, operations and the integration of renewable energy into existing infrastructure should be considered to ensure the project remains successful beyond the initial stages.
How Wipfli can help
Interested in going green?
Wipfli’s energy credit team can help you identify the potential tax benefits of sustainability. We help you navigate the application process, understand the required submissions for applications and determine whether your projects qualify. Contact us today for comprehensive tax support for your clean energy initiatives.
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