The U.S. Department of Energy (DOE), alongside the Internal Revenue Service (IRS) and Department of the Treasury, has announced plans to implement programs funded by the Inflation Reduction Act and the Bipartisan Infrastructure Law: the Low-Income Communities Bonus Credit Program (48(e)), the Qualifying Advanced Energy Project Credit (48C)), and the Advanced Energy Manufacturing and Recycling Grant Program. Together, these programs will make available more than $4 billion in federal tax credits and grants for energy transition projects in an effort to “accelerate domestic clean energy manufacturing and ensure traditionally underserved communities benefit from clean energy technologies.”
The DOE describes the Low-Income Communities Bonus Credit Program as the most significant tax incentive in U.S. history to promote clean energy investments in communities that might otherwise suffer economically due to transition away from fossil fuels. The bonus tax credit is allocated to 1.8 gigawatts (GW) of eligible solar and wind capacity per year across four categories, including 700 megawatts (MW) for projects located in low-income communities, 200 MW for projects located on tribal lands, 200 MW for qualified low-income residential building projects, and 700 MW for qualified low-income economic benefit projects (each as further described in the Initial Guidance). The program prioritizes certain equity goals described in the announcement (e.g., increasing access to renewable facilities in underserved communities, encouraging new market participants, and providing benefits to communities overburdened by environmental impacts), and the DOE and Treasury have committed to continue to engage with clean energy, environmental justice, and community-based organizations to further the program’s equity goals.
The goal of the Qualifying Advanced Energy Project Credit is to expand domestic manufacturing capacity and quality jobs for clean energy technologies, reduce greenhouse gas emissions in the industrial sector, and secure domestic supply chains for critical materials for clean energy technology production. Bolstered by $10 billion of investments into the credit from the Inflation Reduction Act, the Treasury and IRS (in partnership with the DOE) announced their intent to release approximately $4 billion in this first round of tax credits — with $1.6 billion of the allocation set aside for projects in coal communities and an investment tax credit of up to 30% of qualified investments for projects meeting the prevailing wage and apprenticeship requirements.
Last, the Advanced Energy Manufacturing and Recycling Grant Program opened applications for its first round of grants, consisting of $350 million of the overall $750 million available under the program. The program provides grants to small- and medium-size manufacturers that have annual sales of less than $100 million, fewer than 500 employees, and annual energy bills between $100,000 and $2.5 million for projects to build new or retrofit existing facilities to produce or recycle advanced energy products in former coal communities. The DOE provided a mapping tool showing eligible communities for the projects, which must be located in census tracts where (a) coal mines have closed since December 31, 1999, (b) coal-fired power plant units have closed since December 31, 2009, or (c) census tracts are immediately adjacent to (a) or (b). Further, the program will prioritize applications from minority-owned firms, and applicants are required to submit a Community Benefits Plan with its application to demonstrate the project’s impact and benefits to the host community and region.
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