The Inflation Reduction Act of 2022 allows for increased credit amounts if certain requirements pertaining to energy communities are satisfied. These frequently asked questions provide detail on how areas may qualify as an energy community, how to determine whether a project is located in an energy community and Brownfield sites for purposes of the Energy Community Bonus Credit. General Timing and location Determining Brownfield status General Q1. IRS Notice 2023-29 specifies North American Industry Classification System (NAICS) codes used to characterize direct employment related to the extraction, processing, transport, or storage of coal, oil, or natural gas. These specific NAICS codes arose from the 2017 NAICS codes listing. Would it change the map to use a NAICS code listing from different years? (added June 15, 2023) A1. The 2017 NAICS codes used to describe direct employment related to the extraction, processing, transport, or storage of coal, oil, or natural gas are the same as the 2012 and 2007 NAICS codes. As such, any of the 2007, 2012, or 2017 NAICS codes listings could have been used for these specific NAICS codes. Q2. How is data suppression in the County Business Pattern (CBP) data addressed? (added June 15, 2023) A2. For the 2010-2017 CBP data, the Census Bureau provided a range of employment values when the point value of the cell was not provided out of confidentiality or data quality concerns. A cell in this case is the employment level for a county and industry sector pairing. Treasury used a value for the suppressed cell within the range of values provided in the CBP documentation. Generally, this value was chosen to be the midpoint between the lower bound and the midpoint of the lower and upper bounds of employment values for a cell for which a point value is not available. The midpoint between the lower and upper bounds was not used because that generally led to aggregated industry employment in the county file to be above the employment reported for those same industries in the national CBP file. An adjustment for the total level of employment for the county is only made when the total employment level provided in the CBP data (as indicated by a null NAICS code) was suppressed for a particular county and a range of values was provided. The same adjustment procedure of using the midpoint between the lower bound and the midpoint of the lower and upper bound was used for these cases as well. Q3. If a coal-fired electric generating unit switches to a different source for its fuel without being listed as "retired," is it considered a retired coal-fired electric generating unit? (added June 15, 2023) A3. No. An electric generating unit must be coal-fired when it is retired to be considered a retired coal-fired electric generating unit. An electric generating unit is a retired coal-fired electric generating unit if it: appears in the retirements listing of any monthly release of the dataset from Form-860M since December 31, 2009, or any annual release of the dataset from Form-860 since December 31, 2009, the month and year of retirement occur after December 31, 2009, and for years 2014 through the most recent monthly listing, it is listed as having a "Technology" of "Conventional Steam Coal" or "Coal Integrated Gasification Combined Cycle" in the retirement listing, or for years 2010 through 2013, it is listed as having a primary fuel of one of the following in the retirement listing: anthracite coal, bituminous coal, lignite coal, coal-derived synthesis gas, subbituminous coal, waste/other coal (including anthracite culm, bituminous gob, fine coal, lignite waste, and waste coal), or refined coal. Q4. Where does the 0.17% come from? (added June 15, 2023) A4. The 0.17% direct employment threshold for metropolitan statistical areas (MSAs) and non-metropolitan statistical areas (non-MSAs) is set by statute. See, e.g., section 45(b)(11)(B)(ii) of the Internal Revenue Code. Timing and location Q1. If the construction of my project began before 2023, does the special rule in IRS Notice 2023-29 that permits a project's location to continue to be considered an energy community if such location is an energy community when construction began apply to my project? (added June 15, 2023) A1. No, the special rule in IRS Notice 2023-29 applies only to projects that begin construction on or after January 1, 2023. Q2. If my project is located in an area that qualifies as an energy community under one of the three energy-community categories, do I also have to establish that such area also qualifies as an energy community under one of the other energy-community categories? (added June 15, 2023) A2. No. If your project is located in an area that meet the definition of an energy community under any of three energy-community categories, the project qualifies for the Energy Community Bonus Credit. The amount of the bonus credit does not change if an area qualifies under more than one energy-community category. For example, if a project is located in a census tract that qualifies as an energy community, the eligibility for or amount of the Energy Community Bonus Credit for that project does not change if the taxpayer establishes that the area in which the project is located is also a Brownfield site. Q3. How much of my clean energy project needs to be located in an energy community for it to qualify for the Energy Community Bonus Credit? (added June 15, 2023) A3. A project is treated as "located in" or "placed in service within" an energy community if 50% or more of the project's nameplate capacity is located in an area that qualifies as an energy community (Nameplate Capacity Test). This determination is made by dividing the nameplate capacity of the project's energy-generating units located in an energy community by the total nameplate capacity of all the energy-generating units of the project. For projects with offshore energy generation units, if none of the project's energy-generating units are in a census tract, MSA, or non-MSA, then the Nameplate Capacity Attribution Rule is applied by attributing all the nameplate capacity of such project to the land-based power conditioning equipment that conditions energy generated by the project for transmission, distribution, or use and that is closest to the point of interconnection. For a project that does not have a nameplate capacity, if 50% or more of its square footage is in an area that qualifies as an energy community, the project is located in or placed in service within an energy community (Footprint Test). This determination is made by dividing the square footage of the project that is located in an energy community by the total square footage of the project. Q4. When does my project need to be located in an energy community to qualify for the energy community bonus? (added June 15, 2023) A4. For the production tax credits under sections 45 or 45Y, whether the project is "located in" an energy community is determined separately for each taxable year of the project's 10-year credit period. A project is treated as located in an energy community during a taxable year if it is located in an energy community during any part of the taxable year. For the investment tax credits under sections 48 or 48E, whether the project is placed in service within an energy community is determined on the placed-in-service date. If a taxpayer begins construction of the project on or after January 1, 2023, in a location that qualifies as an energy community as of the beginning of construction date, with respect to that project, such location will continue to be considered an energy community for the duration of the ten-year credit period for sections 45 and 45Y or on the placed-in-service date for sections 48 and 48E. Q5. What qualifies as "beginning of construction"? (added June 15, 2023) A5. In general, a taxpayer may establish the beginning of construction of a project by starting physical work of a significant nature or by paying or incurring five percent or more of the total cost of the facility. The IRS has issued notices that provide guidance for determining the beginning of construction. Notice 2013-29 Notice 2013-60 Notice 2014-46 Notice 2015-25 Notice 2016-31 Notice 2017-04 Notice 2018-59 Notice 2020-41 Notice 2021-5 Notice 2021-41 Notice 2022-61 Q6. What qualifies as "placed in service"? (added June 15, 2023) A6. In general, you place property in service when it is ready and available for a specific use. The IRS has provided general guidance for taxpayers to determine when a property is placed in service in Publication 946 (How to Depreciate Property). Q7. Can an MSA or non-MSA that was qualified as an energy community lose its qualified status? (added June 15, 2023) A7. Yes. An MSA or non-MSA that has had 0.17 percent or greater direct employment at any time after December 31, 2009, or 25 percent or greater local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas may qualify as an energy community if its unemployment rate for the previous year is at or above the national average. Because an MSA's or non-MSA's status as an energy community depends on its unemployment rate for the previous year, an MSA or non-MSA that qualifies as an energy community in one period might not qualify as an energy community in a later period if its unemployment rate for the previous year falls below the national average. The list of MSAs and non-MSAs that qualify as an energy community for the period beginning on January 1, 2023, may be found in Appendix 2 to Notice 2023-47 PDF. Q8. Can the qualification of the MSAs and non-MSAs listed in Notice 2023-29 Appendix B (MSAs and non-MSAs that meet the Fossil Fuel Employment threshold) as an energy community change over time? (updated June 15, 2023) A8. The MSAs and non-MSAs listed in Appendix B to Notice 2023-29 PDF have met the 0.17% or greater direct fossil fuel employment requirement in one or more years after 2009. MSAs and non-MSAs that meet this criterion will remain on this list. New MSAs and non-MSAs that meet this criterion in later years will be added to this list, for example, see Appendix 1 to Notice 2023-47 PDF. To qualify as an energy community, the MSAs and non-MSAs listed in Appendix B to Notice 2023-29 and Appendix 1 to Notice 2023-47 must also have an unemployment rate that is at or above the national average unemployment rate for the previous year (see Can an MSA or non-MSA that was qualified as an energy community lose its qualified status?). Q9. If an MSA or non-MSA qualifies as an energy community by satisfying both the fossil-fuel employment threshold and the unemployment rate threshold, how long does that qualification last? (added June 15, 2023) A9. MSAs and non-MSAs must meet two thresholds to qualify as energy communities starting on January 1, 2023. The MSAs and non-MSAs must have had: for at least one year after 2009, 0.17% or greater direct employment related to extraction, processing, transport, or storage of coal, oil, or natural gas (the fossil fuel employment (FFE) threshold), and an unemployment rate for 2022 that is equal to or greater than the national average unemployment rate for 2022. These MSAs and non-MSAs that meet the 2022 unemployment rate requirement are energy communities as of January 1, 2023, and will maintain that status until the unemployment rates for 2023 become available and a new list of MSAs and non-MSAs that qualify as energy communities is provided. The guidance that determines the MSAs and non-MSAs that are energy communities based on 2023 unemployment rates will likely be released in May 2024. New annual unemployment rates are released in approximately May of each year. Therefore, the listing of MSAs and non-MSAs that qualify as energy communities will be updated each year. Generally, an MSA's or non-MSA's energy community status in future years will last from May of the initial year through April of the following year. Q10. For purposes of eligibility for the Energy Community Bonus Credit under the Coal Closure Category, what happens if MSHA or EIA revises or corrects the dataset, and the revision or correction is not yet reflected in an IRS appendix? (added June 7, 2024) A10. As provided in IRS Notice 2023-29, a census tract qualifies as an energy community if the census tract (or a census tract directly adjoining such census tract) is a tract: (i) in which a coal mine has closed after December 31, 1999, or (ii) in which a coal-fired electric generating unit has been retired after December 31, 2009. As further provided in IRS Notice 2023-29, whether a census tract qualifies as an energy community is generally determined based on the date and location of the relevant closure in MSHA’s Mines dataset or the relevant retirement in the EIA data from Forms EIA-860 and EIA-860M. For example, if MSHA corrects location data for a mine closure that occurred in 2012 and adds it to their dataset between the release of IRS Notice 2023-47 and IRS Notice 2024-48, the census tract that had the mine closure would be an energy community from January 1, 2023, rather than after the release of IRS Notice 2024-48. This update would be reflected in the IRS’s annual update of the list of census tracts that qualify as energy communities under the Coal Closure Category. Mine closures and generating unit retirements added to the list of eligible census tracts in Appendix 2 to IRS Notice 2024-48 confer eligibility to EC Projects that are placed in service after Dec. 31, 2022. Coal Closure census tracts that were not listed in IRS Notice 2023-29 Appendix C or IRS Notice 2023-47 Appendix 3 and are newly listed in IRS Notice 2024-48 Appendix 2 are not distinguished according to whether the additions are the result of mines closing or generating units retiring since Dec. 31, 2022, or if they are the result of updates to location information since the release of IRS Notice 2023-47. Determining brownfield status Q1. What is a brownfield site for purposes of the Energy Community Bonus Credit? (added June 15, 2023) A1. For purposes of the Energy Community Bonus Credit, a Brownfield site is defined in 42 U.S.C. § 9601(39)(A) as real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant (as defined under 42 U.S.C. § 9601), and includes certain mine-scarred land (as defined in 42 U.S.C. § 9601(39)(D)(ii)(III)). A Brownfield site does not include the categories of property described in 42 U.S.C. § 9601(39)(B). Q2. What are the geographic boundaries of a brownfield site? (added June 15, 2023) A2. For purposes of the Energy Community Bonus Credit, including the Brownfield site safe harbor described in section 5 of IRS Notice 2023-29 PDF, a Brownfield site is delineated according to the boundaries of the entire parcel of real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant. A Brownfield site is not limited to only the portion of a parcel of real property that has or may have a hazardous substance, pollutant, or contaminant that complicates redevelopment. Q3. What is the main difference between how a brownfield site is defined for the Energy Community Bonus Credit and for federal brownfield funding purposes? (added June 15, 2023) A3. The main difference between the definition of a Brownfield site for purposes of the Energy Community Bonus Credit and for determining eligibility for federal Brownfield funding is that the Energy Community Bonus Credit applies a more limited definition. For purposes of the Energy Community Bonus Credit, a Brownfield site is limited to sites that are described in 42 U.S.C. 9601(39)(A), (B), and (D)(ii)(III), which is a subset of the sites that may qualify for federal Brownfield funding. Section 9601(39)(C) and (D) of Title 42 of the United States Code includes categories of sites that are eligible for federal Brownfield funding but do not meet the definition of a Brownfield site for purposes of the Energy Community Bonus Credit. See Brownfields and Information on Sites Eligible for Brownfields Funding under CERCLA § 104(k) PDF for more information. Brownfields Site Definition Comparison between IRS Energy Communities Brownfield versus EPA Brownfield Program Site IRS Energy Communities Brownfield Category Site Eligibility EPA Brownfield Program Site Eligibility Hazardous Substances contamination Examples: Arsenic, Asbestos, Lead, Polycyclic Aromatic Hydrocarbons, Polychlorinated Biphenyls, Volatile Organic Compounds, Chromium, Dioxin, Mercury Yes Hazardous Substances contamination Examples: Arsenic, Asbestos, Lead, Polycyclic Aromatic Hydrocarbons, Polychlorinated Biphenyls, Volatile Organic Compounds, Chromium, Dioxin, Mercury Yes National Priorities List (Superfund) No National Priorities List (Superfund) No Removal action or enforcement order No Removal action or enforcement order No Controlled Substance contamination No Controlled Substance contamination Yes Petroleum contamination No Petroleum contamination Yes Mine Scarred Lands Yes Mine Scarred Lands Yes Q4. I conducted an environmental assessment on my site and identified only potential petroleum contamination. Does that type of contamination qualify as a "brownfield" for purposes of the Energy Community Bonus Credit? (added June 15, 2023) A4. No, the Brownfield definition for purposes of the Energy Community Bonus Credit does not include sites with only petroleum contamination. Q5. Where can I find a map of sites identified as brownfields for federal brownfield funding purposes? (added June 15, 2023) A5. There is not a single registry, website, or map of all Brownfield sites. Potential site lists may be found under the category of Brownfields Properties on EPA's Cleanups in My Community, which lists the locations of sites assessed with federal Brownfield funding. Similar webpages may be maintained by states, territories, or for federally recognized Indian tribes. However, not all properties that qualify as Brownfield sites eligible for federal Brownfield funding are included in the definition of Brownfield site for purposes of the Energy Community Bonus Credit. Q6. Is there a map of sites that meet the definition of a brownfield for purposes of the Energy Community Bonus Credit? (added June 15, 2023) A6. No, a comprehensive map of sites that meet the definition of a Brownfield for purposes of the Energy Community Bonus Credit is not available. Q7. Where can I find information on federal brownfield funding? (added June 15, 2023) A7. EPA's Brownfields Program provides direct funding for Brownfields site assessment, cleanup, revolving loans, environmental job training, technical assistance, training, and research. Additional information is available online at the Types of EPA Brownfield Grant Funding. Brownfield site stakeholders may contact EPA regional Brownfield representatives who are available to assist with cleanup and redevelopment efforts at brownfield sites. These representatives serve as a valuable resource for Brownfield stakeholders by providing support and guidance on applicable laws, regulations, and policies, and technical assistance associated with the selection of technologies. An EPA contact list is available online on Brownfields Contacts in EPA Regional Offices. Q8. Where can I find information on renewable energy development on Brownfield sites or contaminated lands? (updated June 7, 2024) A8. EPA's RE-Powering America's Land Initiative ("RE-Powering") provides information about existing renewable energy projects, future site locations, and state-based programs to encourage renewable energy projects on landfills, Brownfields, mines, and other contaminated lands. Subscribe to the RE-Powering listserv. Q9. How does the brownfield site safe harbor in IRS Notice 2023-29 work? (added June 15, 2023) A9. The Brownfield site safe harbor provided in section 5 of IRS Notice 2023-29 PDF offers taxpayers certainty in determining whether a site meets the definition of a Brownfield site for purposes of the Energy Community Bonus Credit. Under this safe harbor, the IRS will accept that a site meets the definition of a Brownfield site under 42 U.S.C. § 9601(39)(A) if it satisfies at least one of the conditions described in section 5.02 of IRS Notice 2023-29 and the site is not described in 42 U.S.C. § 9601(39)(B). Q10. What conditions must a site meet to be covered under the brownfield site safe harbor in IRS Notice 2023-29? (added June 15, 2023) A10. A site qualifies for the Brownfield site safe harbor if it meets any one of the following three conditions and it is not described in one of the exclusions provided in 42 U.S.C. § 9601(39)(B): The site was previously assessed through federal, state, territory, or federally recognized Indian tribal Brownfield resources as meeting the definition of a Brownfield site under 42 U.S.C. § 9601(39)(A); A Phase II Assessment has been completed with respect to the site and such Phase II Assessment confirms the presence on the site of a hazardous substance as defined under 42 U.S.C. § 9601(14), or a pollutant or contaminant as defined under 42 U.S.C. § 9601(33); or For projects with a nameplate capacity of not greater than 5MW (AC), a Phase I Assessment has been completed with respect to the site and such Phase I Assessment identifies the presence or potential presence on the site of a hazardous substance, or a pollutant or contaminant. Q11. For purposes of the Brownfield site safe harbor in IRS Notice 2023-29, what sites count as "previously assessed through federal, state, territory, or federally recognized Indian tribal Brownfield resources as meeting the definition of a Brownfield site under 42 U.S.C. § 9601(39)(A)"? (updated June 7, 2024) A11. A site qualifies for this safe harbor provision if a federal, state, territory, or federally recognized Indian tribal program that supports the evaluation of potential contamination at sites by collecting and reviewing existing information has determined that the site qualifies as a brownfield site under the definition in 42 U.S.C. § 9601(39)(A) and is not excluded under 42 U.S.C. § 9601(39)(B). A previously assessed site may include a site that has planned or ongoing remediation activities, engineering or institutional controls, or long-term operations and maintenance monitoring, or a site where a determination of “no further action” has been made. Q12. Can a property on a site subject to a Superfund removal action be a brownfield site for purposes of the Energy Community Bonus Credit? (added March 22, 2024) A12. No. For purposes of the Energy Community Bonus Credit, a Brownfield site does not include the categories of property described in 42 U.S.C. § 9601(39)(B), the first of which excludes a facility that is the subject of a planned or ongoing removal action under 42 U.S.C. subchapter I. When the site is no longer subject to the Superfund removal action, the property may be considered a Brownfield site, provided that it meets all of the other requirements for a Brownfield site under § 45(b)(11)(B)(i). Q13. Can a property on the National Priorities List (Superfund) be a brownfield site for purposes of the Energy Community Bonus Credit? (added March 22, 2024) A13. No. For purposes of the Energy Community Bonus Credit, a Brownfield site does not include the categories of property described in 42 U.S.C. § 9601(39)(B), the second of which excludes a facility that is listed on the National Priorities List (Superfund) or is proposed for listing. If the property is delisted from the National Priorities List, it is no longer subject to this exclusion and may be considered a Brownfield site, provided that it meets all of the other requirements for a Brownfield site under § 45(b)(11)(B)(i). Q14. Can a landfill with respect to which a closure notification under subtitle C of the Solid Waste Disposal Act, commonly referred to as the Resource Conservation and Recovery Act of 1976 (RCRA), has been submitted and closure requirements have been specified in a closure plan or permit be a Brownfield site for purposes of the Energy Community Bonus Credit? (added March 22, 2024) A14. Generally no; a landfill subject to such closure requirements generally would be considered a “land disposal unit” excluded from the definition of a Brownfield site under 42 U.S.C. § 9601(39)(B)(vi). Q15. Can a landfill that is undertaking a Resource Conservation and Recovery Act (RCRA) Corrective Action cleanup be a brownfield site for purposes of the Energy Community Bonus Credit? (added March 22, 2024) A15. Generally no; a landfill that is undertaking an RCRA Corrective Action cleanup generally would be excluded from the definition of a Brownfield site under 42 U.S.C. § 9601(39)(B)(v). Q16. Can mine-scarred land qualify as a brownfield site for purposes of the Energy Community Bonus Credit? (added March 22, 2024) A16. Yes. Mine-scarred land may qualify as a Brownfield site for purposes of the Energy Community Bonus Credit. In order to qualify, such land must be real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant. 42 U.S.C. § 9601(39)(A). However, mine-scarred land that falls under any of the exceptions found in 42 U.S.C. § 9601(39)(B) does not qualify as a Brownfield site for purposes of the Energy Community Bonus Credit, even if it otherwise meets the definition in 42 U.S.C. § 9601(39)(A).