ITC Energy Communities in California

The Energy Communities Adder of the Inflation Reduction Act of 2022 stated that facilities are eligible for a 10%-point increase (30% → 40%) in the value of the Investment Tax Credit (ITC) for projects placed in service in 2023 or later if they’re in:

• A brownfield site
• A metropolitan or non-metropolitan statistical area that:
  • has, or had at any time since 2010, 0.17% or more direct employment or 25% or more local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas, AND
  • had an unemployment rate above the national average in the previous year
• A census tract, or an adjoining census tract, in which a coal mine was closed after 1999 or a coal-fired electric generating unit was retired after 2009

This adder was designed to incentivize developers to locate new projects in communities with historical or current connections to the fossil fuel industry (Energy Communities). At the time, the Inflation Reduction Act did not define the precise scope and definition of an Energy Community, which made it difficult for renewable energy developers to rely on the availability of bonus tax credits.

In the second quarter of 2023, the Treasury Department released guidance clarifying how to determine the location of eligible sites.

Based on this updated guidance, commercial projects in TENCO SOLAR’s California service areas of Kern, Los Angeles, Orange, Solano, Sutter, Ventura, and Yuba counties will qualify for this adder. Some areas in San Bernardino Riverside, Tulare, and Inyo counties can also access the 10% adder, as they may have or be near a coal-fired electric generator retirement.

As part of this release, the Department of the Treasury and IRS have partnered with the Interagency Working Group on Energy Communities to provide a searchable mapping tool that helps identify areas that may be eligible for the energy community bonus.

Contact TENCO SOLAR today at 888-507-6937 to learn more about the Energy Community adder and whether your project is an adder for this and other tax benefits.