In Notice 2026-39 (Notice), the IRS modifies earlier guidance on defining "energy communities" for purposes of the increased production tax credits (PTCs) under IRC Sections 45 and 45Y and investment tax credits (ITCs) under IRC Sections 48 and 48E. The guidelines are used to determine if project areas qualify as statistical areas or "coal closure" census tracts.

Background

In 2023, the IRS outlined in Notice 2023-29 what it intends to include in proposed rules on energy communities and how taxpayers with qualifying projects located in these communities could get up to a 10% increase in bonus credits (see Tax Alert 2023-0675). Notice 2023-29 defined the energy communities to include brownfields, statistical areas, and "coal closure" tracts and gave specific requirements for each. Notices 2023-45, 2023-47, Notice 2024-30 and Notice 2025-31 clarified these requirements (see Tax Alerts 2023-0675, 2023-1083, 2024-0691 and 2025-1355). For more information on energy communities, see the IRS webpage).

Updates

Notice 2026-39 updates the IRS guidelines on how to determine if project areas qualify as statistical areas (Appendix 1) or "coal closure" census tracts (Appendices 2 and 3).

The new appendices:

• List counties that satisfy both the Fossil Fuel Employment and the unemployment-rate criteria for energy community eligibility
• List additional census tracts that satisfy the "Coal Closure" Category for energy community eligibility

Taxpayers can rely on this notice until proposed rules are issued or the credit is repealed

Implications

Projects that begin construction in an energy community and meet the beginning-of-construction requirements will keep the bonus tax credits no matter what changes occur in the future. Projects not initially located in an energy community may still qualify for the bonus credit if their location is later designated while the project is still generating tax credits. The updated list clarifies which projects are currently in energy communities.