21 Business Days Deadline for Developers to Apply for Low-Income Bonus
The allocation portal opened at 9:00am ET on Thursday, October 19th. All applications received within the first 30 days will be treated as received at the same time. The last day, November 17th, is when the federal government will potentially shut down, unless Congress passes a budget or another continuing resolution.
- The low-income community bonus is an allocated – that is, capped – credit, and we believe it will be fully utilized
- Developers must apply for an allocation through the Department of Energy. All applications received within the initial 30 days will be treated as received at the same time
- There are 21 business days in the 30-day window. The last day coincides with the expiration of the federal government’s current continuing resolution
- Allocation amounts can different from applied-for amounts
Overview of the low-income community bonus
The low-income bonus is designed to incentivize investment in communities that have historically been left behind. Specifically, the credit promotes wind, solar, and associated energy storage investments in low-income communities, on Indian land, as part of affordable housing developments, or benefitting low-income households.
The low-income bonus is an allocated credit. For 2023, the bonus is subject to an 1,800 MW annual capacity limitation, which is further allocated across four categories:
- Located in a low-income community: 700 MW
- Located on Indian land: 200 MW
- Qualified Low-Income Residential Project: 200 MW
- Qualified Low-Income Economic Benefit Project: 700 MW
Projects in the first two categories receive a 10% bonus credit value, while projects in the third and fourth categories receive a 20% bonus credit value. All low-income projects must be less than 5 MWac in size.
For 2023, the 700 MW in category one will be further subdivided: 560 MW will be reserved for residential rooftop solar and other “behind-the-meter” (BTM) facilities, and 140 MW will be reserved for “front-of-the-meter” (FTM) facilities.
The bonus is available for §48 and §48E credits
The low-income bonus is only applicable to §48 and §48E investment tax credits. The latter credit, the technology-neutral ITC, is available to projects placed in service in 2025 or later, so it’s possible that many developers will generate §48E ITCs.
How to apply
Since the low-income bonus is an allocated bonus, developers must apply for and receive an allocation from the IRS. (The DOE administers the application process, but the IRS ultimately makes allocation decisions.)
The DOE has published a checklist for applicants in each category.
If any category or sub-category is oversubscribed during the initial 30-day period, the IRS will make awards based on a randomized lottery. Following the initial 30-day period, any leftover capacity will be awarded on a first-come, first-served basis. Applicants may only submit one application per facility, per program year.
The IRS will make allocations with certain ownership and location priorities in mind:
- Ownership: Priority will be given to (1) projects owned directly or indirectly by Indian tribes; (2) consumer or purchasing cooperatives with controlling members who are workers or from low-income households; (3) tax-exempt charities and religious organizations; and (4) state and local governments, and U.S. territories, Indian tribes, and rural electrical cooperatives
- Location: Priority will be given to (1) persistent poverty counties, where 20% of residents have experienced high rates of poverty of the last 30 years; and (2) and census tracts designated as “disadvantaged” in the Climate and Economic Justice Screening Tool (CEJST)
Once a developer has an allocation, they will have four years to complete the project and place it in service.
When to apply
All applications received within the first 30 days will be treated as received at the same time
The allocation portal opened on Thursday, October 19th at 9:00am ET. Applications submitted within 30 days of this date will be treated as submitted on the same date and at the same time.
Submit applications before November 17th, when the federal government’s current continuing resolution expires
The 30th day of the application window falls on Friday, November 17th. Developers should strive to submit their applications before this day because the federal government’s current, 45-day continuing resolution expires at the end of it.
Allocation amounts may differ from application amounts
Developers who receive an allocation will receive an award letter from the IRS with their allocation amount. Notably, the IRS makes it clear that a developer “may receive an allocation less than its [applied for] nameplate capacity.”
The allocation, not the project’s capacity, determines the credit value.
Reunion expects the IRS to fully allocate the credit
The IRS and DOE have stated that they can adjust the category allotments within the low-income bonus credit to ensure full allocation. Therefore, we expect the low-income bonus to be fully utilized every year – likely within the 30-day, all-applications-are-equal window.
The IRS and DOE have released extensive guidance and detailed resources for applicants
- Initial guidance (February 13, 2023): Notice 2023-17, Initial Guidance Establishing Program to Allocate Environmental Justice Solar and Wind Capacity Limitation Under §48(e)
- Proposed regulations (May 31, 2023): Notice of Proposed Rulemaking, Additional Guidance on Low-Income Communities Bonus Credit Program
- Final regulations (August 10, 2023): Final Regulations, Additional Guidance on Low-Income Communities Bonus Credit Program
- Revenue procedure (August 10, 2023): Revenue Procedure 2023-27