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The Treasury and IRS released Revenue Procedure 2024-19 (Revenue Procedure) on the Low-Income Communities Bonus Credit Program (program) for upcoming applications for the 2024 program year. The program increases the investment tax credits (ITCs) under IRC Section 48(e) for certain solar and wind facilities placed in service in low-income communities. This is the second year of the program and clarifies the application, documentation and lottery procedures that apply to the 2024 program year.

Background

The IRS established the program in Notice 2023-17, specifying that a total annual capacity limitation of 1.8 gigawatts of direct current capacity will be allocated for calendar years 2023 and 2024. To qualify, an individual project cannot exceed five megawatts. In determining how to allocate capacity limitation within certain categories of facilities, the program may also consider criteria such as whether the facility is owned or developed by a community-based organization, provides substantial benefits to a low-income community and has a higher degree of commercial readiness (see Tax Alert 2023-0333).

In June 2023, the Treasury and IRS proposed regulations with more details on the program and the selection process (see Tax Alert 2023-1018). In August 2023, they finalized the regulations (TD 9979) and issued Revenue Procedure 2023-27, which provided guidance on implementing the 2023 program. The IRS application window for the 2023 program was open from October 19, 2023 until February 29, 2024 (see Tax Alert 2023-1647).

2024 program guidance

Revenue Procedure 2024-19 supersedes Revenue Procedure 2023-27 and provides guidance for implementing the 2024 program. Any unused capacity limitation from the 2023 program year will be carried over to the 2024 program. According to the Department of Energy's website, applications are still being processed and reviewed.

Annual capacity limitation

The Revenue Procedure specifies that the annual capacity limitation for 2024 will be divided among four categories, with two categories having different capacity limitations from 2023:

• Category 1: Facilities located in a low-income community as defined in IRC Section 45D(e)(1) (600 megawatts for 2024, 700 megawatts in 2023)
• Category 2: Facilities located on Indian land (200 megawatts)
• Category 3: Facilities that are part of a qualified low-income residential building project (200 megawatts)
• Category 4: Facilities that are part of a qualified low-income economic benefit project (800 megawatts for 2024, 700 megawatts in 2023)

Sub-reservations

The 600-megawatt capacity limitation for Category 1 is subdivided as follows:

• Four hundred megawatts (490 megawatts in 2023) for eligible residential behind-the-meter (BTM) facilities, which includes rooftop residential solar facilities
• Two hundred megawatts (210 megawatts in 2023) for applicants with front-of-the-meter (FTM) facilities and non-residential BTM facilities

Applications

Applications must be submitted through DOE's online Program portal system with all the required information, documentation and attestations. The Revenue Procedure lists the different documents and attestations that are required for each type of facility as well as the documentation necessary to demonstrate that a taxpayer meets the ownership requirements.

Applicants may only submit one application per facility for the 2024 program year. The Treasury and IRS will announce the opening and closing dates of the 2024 program application period on DOE's website at https://www.energy.gov/justice/low-income-communities-bonus-credit-program. After the program is open, the DOE will accept applications for 30 days. The DOE will then continue to accept applications until the close of the 2024 program application period and consider those applications for any remaining capacity limitation.

At the end of the initial 30-day period, DOE will conduct a lottery for applications for oversubscribed facility categories and Category 1 sub-reservations. The lottery will be conducted before the applications are reviewed and the lottery scores will be used to determine which qualified facilities are eligible to be recommended for a capacity limitation allocation.

Applications that claim to meet "Additional Selection Criteria" for ownership or geographical purposes will be prioritized for an allocation over non-Additional Selection Criteria applications within the same facility category or Category 1 sub-reservation.

Implications

Despite the 2023 round awards not being announced yet, the IRS has released the rules for the 2024 round. Taxpayers that are considering applying to the program should keep in mind that:

• The application window is only 30 days, so potential applicants will need to check the DOE website for when the program opens
• The allocation for Category 1 (facilities located in a low-income community as defined in IRC Section 45D(e)(1)) has decreased, while the allocation for Category 4 (facilities that are part of a qualified low-income economic benefit project) has increased
• Category 1 has been subdivided so that BTM and FTM projects will be considered separately

Taxpayers that are considering applying should also begin pulling together the information necessary to apply, as the 30-day window can be tight once it is announced and resources may be stretched.