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October 10, 2023

Inflation Reduction Act: Energy Communities Under the Investment Tax Credit

Our IRA video series dives into the details of the recent legislation to help you understand your options.

The Inflation Reduction Act creates significant opportunities for building owners to ready their operations for long-term resiliency and eliminate deferred maintenance, realize cost savings, accelerate decarbonization and reach equitable outcomes for generations to come.

Noor Awad, McKinstry’s Federal Funding Strategist, explains Energy Communities under the Investment Tax Credit (ITC):

Inflation Reduction Act: Energy Communities Under the Investment Tax Credit
Learn more about the IRA’s impact
Inflation Reduction Act: Energy Communities Under the Investment Tax Credit
Learn more about the IRA’s impact

Under the ITC, there are three types of energy communities that a project may qualify for:

  1. Brownfields: A federally designated area that contains the presence of a hazardous substance, pollutant, or contaminant.
  1. High Unemployment Rates: An area where 0.17% of direct employment or 25% of local tax revenue comes from fossil fuels. In addition, unemployment rates must be at or above the national average of the previous year. 
  1. Coal Dependency: A census tract in which after December 31, 1999 a coal mine has closed or after December 31, 2009, a coal fired electric generating unit has retired. A census tract adjacent to a census tract that meets one of the two previous requirements also qualifies as a Coal Dependency energy community.

Projects that are under one megawatt or projects that are larger and meet labor requirements can qualify for this 10% bonus credit. This bonus credit does not need to be applied for – a project either does or does not qualify for it. To understand If your project falls in an energy community, use the DOE’s mapping tool. This tool does not show brownfields, but most states have their own maps that show brownfields.

To be eligible for this bonus credit, a project must qualifyby the beginning of construction or when the project is placed in service.

McKinstry is ready to be your partner and support you in determining if your project qualifies as an energy community.

For more information and resources, please visit our IRA blog or contact us below.

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Financial Disclaimer: McKinstry is not engaged in providing legal, tax or financial advice. The information provided herein is intended only to assist you in your decision-making and is broad in scope. Accordingly, before making any final decisions you should consider obtaining additional information and advice from your accountant or other financial advisers who are fully aware of your specific circumstances.

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