48(e), 48E(h): Low-Income Communities Bonus Credit
Federal Agency

Sub-Department
Internal Revenue Service (IRS)
Purpose
To add a credit to the Investment Tax Credit (ITC) for clean-energy projects in low-income communities, on Indian land, as part of affordable housing developments that financially benefit low-income communities.
Applicant and/or Project Eligibility Requirements
The bonus credit applies on top of the ITC for certain energy property with a max output of 5 MW AC under section 48 of the Internal Revenue Code. DOE will review applications and make recommendations to the IRS, which will allocate the bonus credit to 1.8 GW of eligible solar and wind capacity per year.
Decarbonization Considerations
The program prioritizes the following goals: increasing adoption of and access to renewable energy facilities in underserved and environmental justice communities, encouraging new market participants, and providing substantial benefits to underserved communities and individuals who have been historically marginalized from economic opportunities and overburdened by environmental impacts. A 10% increase is available to eligible solar and wind facilities that are installed in low-income communities or on Indian land. A 20% credit increase is available to eligible solar and wind facilities that are part of a qualified low-income residential building or provide at least 50% of a facility’s total output to qualifying low-income households.
Equity Considerations
The program includes specific annual carve-outs for Tribal communities as well. Low income communities can be identified using the DOE's CEJST Map: https://www.energy.gov/diversity/justice40-initiative#:~:text=The%20CEJST%20tool%20was%20designed,United%20States%20as%20disadvantaged%20communities.
Helpful Tips
Tax-exempt entities can leverage these credits through a new mechanism known as "elective" or "direct" pay. To learn more about how these tax credits work for entities with and without tax liability, check out our Funding Guidance here: https://cityrenewables.org/funding-guidance/understanding-available-incentives/tax-credits-for-renewable-energy/
Other Notes
The allocation is broken up into four categories: 1. 800 MW - Located in a low-income community (10% bonus); 2. 200 MW - Located on Indian Land (10% bonus); 3. 224.8 MW - Low-income residential building project (20% bonus); 4. 900 MW - Low-income economic benefit project (20% bonus). At least 50% of the capacity of each category will be reserved for projects meeting certain ownership and/or geographic selection criteria as outlined in the Program Regulations and Revenue Procedure.