Bulletin No. 2024–38

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2024–38

September 16, 2024

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

INCOME TAX

REG-108920-24, page 607.

These are proposed regulations concerning the clean electricity low-income communities bonus credit program (Program)

established pursuant to the Inflation Reduction Act of 2022 as

section 48E(h) of the Internal Revenue Code. Applicants investing in certain non-combustion and gasification clean electricity

generation facilities may apply for an allocation of environmental justice capacity limitation (Capacity Limitation) to increase

the amount of the clean electricity investment credit for the

taxable year in which the facility is placed in service. These

proposed regulations describe proposed definitions and

requirements that would be applicable for the Program. The

proposed regulations would affect applicants seeking allocations of Capacity Limitation to claim the increased clean electricity investment credit under section 48E for the taxable year

in which the facility is placed in service.

Rev. Proc. 2024-34, page 604.

This revenue procedure modifies section 7 of Rev. Proc.

2024-23, 2024-23 I.R.B. 1334, to modify the procedures

Finding Lists begin on page ii.

under section 446 of the Internal Revenue Code and

§ 1.446-1(e) of the Income Tax Regulations for obtaining

automatic consent of the Commissioner to change methods of accounting for research or experimental expenditures paid or incurred in taxable years beginning after

December 31, 2021. Specifically, this revenue procedure

expands the waiver of the eligibility rules in section 5.01(1)

(d) and (f) of Rev. Proc. 2015-13 to accounting method

changes described in section 7.01 of Rev. Proc. 202423 that are made in any taxable year beginning in 2022

or 2023. This revenue procedure also permits a taxpayer

to make changes under section 7.01 of Rev. Proc. 202423 regardless of whether a change under that section has

been filed for any other taxable year beginning in 2022 or

2023. Finally, for any change under section 7.01 of Rev.

Proc. 2024-23 made in a taxable year beginning in 2022

or 2023 (other than the first taxable year beginning after

December 31, 2021), this revenue procedure limits audit

protection for research or experimental expenditures paid

or incurred in the taxpayer’s first taxable year beginning

after December 31, 2021 if the taxpayer failed to make a

change for such expenditures for such taxable year.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

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monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

September 16, 2024 

Bulletin No. 2024–38

Part III

26 CFR 601.204: Changes in accounting periods

and in methods of accounting.

(Also, Part 1, §§ 174, 446; 1.446-1.)

Rev. Proc. 2024-34

SECTION 1. PURPOSE

This revenue procedure modifies section 7 of Rev. Proc. 2024-23, 2024-23

I.R.B. 1334, to modify the procedures

under § 446 of the Internal Revenue Code

(Code)1 and § 1.446-1(e) for obtaining

automatic consent of the Commissioner

of Internal Revenue (Commissioner) to

change methods of accounting for expenditures paid or incurred in taxable years

beginning after December 31, 2021, to

comply with § 174 or to rely on interim

guidance provided in sections 3 through

7 of Notice 2023-63, 2023-39 I.R.B. 919,

as modified by Notice 2024-12, 2024-5

I.R.B. 616. References in this revenue

procedure to “former § 174” refer to that

section as in effect for research or experimental expenditures paid or incurred

in taxable years beginning before January 1, 2022, that is, prior to the effective

date of the amendments made to § 174

by § 13206(a) of Public Law 115-97, 131

Stat. 2054 (Dec. 22, 2017), commonly

referred to as the Tax Cuts and Jobs Act

(TCJA). References to “§ 174” in this revenue procedure refer to § 174 as amended

by the TCJA.

SECTION 2. BACKGROUND

.01 Treatment of research and experimental expenditures under former § 174.

Former § 174 allowed taxpayers to

elect to deduct research or experimental

expenditures paid or incurred in connection with a trade or business as current

expenses, to capitalize and amortize such

expenditures over a period of not less than

60 months, or to charge such expenditures

to capital account.

.02 Treatment of SRE expenditures

under § 174.

(1) Section 13206(a) of the TCJA

amended former § 174. For amounts

1

paid or incurred in taxable years beginning after December 31, 2021, that meet

the definition of specified research or

experimental (SRE) expenditures under

§ 174(b), § 174(a)(1) disallows deductions for such amounts, except as provided

in § 174(a)(2). Section 174(a)(2) requires

taxpayers to charge SRE expenditures to

capital account and allows amortization

deductions of such capitalized expenditures ratably over a 5-year period in the

case of SRE expenditures attributable to

domestic research, or a 15-year period in

the case of SRE expenditures attributable

to foreign research, beginning with the

midpoint of the taxable year in which such

expenditures are paid or incurred. Section

13206(a) of the TCJA also made other

amendments to former § 174, including

amendments to treat any amount paid or

incurred in connection with the development of any software as an SRE expenditure and to prevent the accelerated recovery of unamortized SRE expenditures on

account of the disposition, retirement, or

abandonment of property with respect

to which such expenditures were paid or

incurred. For additional background on

former § 174 and the TCJA amendments

to former § 174, see section 2 of Notice

2023-63.

(2) Section 13206(b) of the TCJA

requires taxpayers to treat the amendments made by section 13206(a) of the

TCJA as a change in method of accounting for purposes of § 481 that is (i) initiated by the taxpayer, (ii) made with the

consent of the Secretary of the Treasury

or her delegate, and (iii) applied on a cutoff basis to SRE expenditures paid or

incurred in taxable years beginning after

December 31, 2021. Thus, no adjustments

under § 481(a) are required or permitted

with respect to research or experimental

expenditures paid or incurred in taxable

years beginning before January 1, 2022.

.03 Procedural guidance under Rev.

Proc. 2023-11.

On December 29, 2022, the Department of the Treasury (Treasury Department) and the Internal Revenue Service

(IRS) issued Rev. Proc. 2023-11, 2023-3

I.R.B. 417, modifying and superseding

Rev. Proc. 2023-8, 2023-3 I.R.B. 407, to

provide procedures to obtain automatic

consent to change methods of accounting for SRE expenditures to comply with

§ 174. The change in method of accounting provided by Rev. Proc. 2023-11 was

subsequently included in section 7.02 of

Rev. Proc. 2023-24, 2023-28 I.R.B. 1207.

.04 Interim guidance under Notice

2023-63, as modified by Notice 2024-12.

(1) Notice 2023-63 was issued on

September 8, 2023, to announce that the

Treasury Department and the IRS intend

to issue proposed regulations addressing

(1) the capitalization and amortization

of SRE expenditures under § 174, (2)

the treatment of SRE expenditures under

§ 460, and (3) the application of § 482 to

cost sharing arrangements involving SRE

expenditures. Sections 3 through 9 of

Notice 2023-63 provide interim guidance

regarding issues intended to be addressed

by forthcoming proposed regulations.

(2) Notice 2024-12, 2024-5 I.R.B. 616,

was released on December 22, 2023, and

published on January 19, 2024, to provide

additional interim guidance to clarify and

modify Notice 2023-63 regarding (1) the

treatment of costs paid or incurred by a

research provider for research provided

under contract, (2) the requirement that a

taxpayer that chooses to rely on any of the

rules described in Notice 2023-63 must

rely on all the rules described in Notice

2023-63, and (3) the obsoletion of section

5 of Rev. Proc. 2000-50, 2000-1 C.B. 601.

.05 Procedural guidance under Rev.

Proc. 2024-9.

(1) Revenue Procedure 2024-9, 2024-5

I.R.B. 628, was released on December 22,

2023, and published on January 19, 2024,

to provide procedures for taxpayers to

obtain automatic consent to change methods of accounting for expenditures paid

or incurred in taxable years beginning

after December 31, 2021, to comply with

§ 174 or to rely on interim guidance under

§§ 174 and 460 provided in Notice 202363, as modified by Notice 2024-12. The

change in method of accounting for § 174

provided in section 3 of Rev. Proc. 2024-9

Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

September 16, 2024

604

Bulletin No. 2024–38

modified section 7.02 of Rev. Proc. 202324. Rev. Proc. 2023-24 was subsequently

superseded in part by Rev. Proc. 2024-23.

Rev. Proc. 2024-23 renumbered section

7.02 as section 7.01 and removed former

section 7.01 as obsolete.

(2) Section 7.01(5)(a) of Rev. Proc.

2024-23 waives the eligibility rules in sections 5.01(1)(d) (regarding changes made

in the final year of a trade or business) and

5.01(1)(f) (regarding changes made in the

previous 5 years for the same item) of Rev.

Proc. 2015-13 for a change described in

section 7.01(1)(a) of Rev. Proc. 2024-23

for the taxpayer’s first or second taxable

year beginning after December 31, 2021.

(3) Section 7.01(5)(b) of Rev. Proc.

2024-23 provides that a taxpayer may

make a change described in section 7.01(1)

(a) of Rev. Proc. 2024-23 for its second

taxable year beginning after December 31,

2021, regardless of whether the taxpayer

made a change for the same item for its

first taxable year beginning after December 31, 2021.

(4) Section 7.01(6) of Rev. Proc. 202423 provides that a taxpayer does not

receive audit protection under section 8.01

of Rev. Proc. 2015-13 for a change under

section 7.01(1)(a) of Rev. Proc. 2024-23

in the second taxable year beginning after

December 31, 2021, with respect to expenditures paid or incurred in the first taxable

year beginning after December 31, 2021,

if the taxpayer did not change its method

of accounting under section 7.01(1)(a) in

an effort to comply with § 174 for the first

taxable year beginning after December 31,

2021.

.06 Changing methods of accounting

under section 446(e).

(1) Except as otherwise expressly

provided in the Code and the regulations

thereunder, § 446(e) and § 1.446-1(e)(2)

require a taxpayer to secure the consent

of the Commissioner before changing a

method of accounting for Federal income

tax purposes. Section 1.446-1(e)(3)(i)

states, in part, that except as otherwise

provided under the authority of § 1.4461(e)(3)(ii), to secure the Commissioner’s

consent to a taxpayer’s change in method

of accounting the taxpayer generally must

file a Form 3115, Application for Change

in Accounting Method, with the Commissioner during the taxable year in which

the taxpayer desires to make the change

Bulletin No. 2024–38

in method of accounting. Section 1.4461(e)(3)(ii) authorizes the Commissioner

to prescribe administrative procedures

under which taxpayers will be permitted

to change their method of accounting. The

administrative procedures will prescribe

those terms and conditions necessary to

obtain the Commissioner’s consent to

effect the change and to prevent amounts

from being duplicated or omitted.

(2) Rev. Proc. 2015-13, 2015-5 I.R.B.

419, as clarified and modified by Rev.

Proc. 2015-33, 2015-24 I.R.B. 1067, and

as modified by Rev. Proc. 2021-34, 202135 I.R.B. 337, Rev. Proc. 2021-26, 202122 I.R.B. 1163, Rev. Proc. 2017-59, 201748 I.R.B. 543, and section 17.02(b) and (c)

of Rev. Proc. 2016-1, 2016-1 I.R.B. 1, sets

forth the general administrative procedures by which a taxpayer may obtain the

automatic consent of the Commissioner to

change a method of accounting described

in the List of Automatic Changes. Rev.

Proc. 2024-23 contains the current List of

Automatic Changes.

(3) A change in a taxpayer’s treatment

of expenditures paid or incurred in taxable

years beginning after December 31, 2021,

to comply with § 174 or to rely on the

interim guidance in sections 3 through 7

of Notice 2023-63 is generally a change in

method of accounting to which §§ 446(e)

and 481, and the corresponding regulations, apply. A taxpayer that changes its

method of accounting to comply with

§ 174 or to rely on the interim guidance

in sections 3 through 7 of Notice 2023-63

must use the accounting method change

procedures in Rev. Proc. 2015-13 or its

successor. Section 3 of this revenue procedure modifies the eligibility rules and limited audit protection rules in section 7.01

of Rev. Proc. 2024-23 to allow taxpayers

to obtain automatic consent to change

their method of accounting to comply with

§ 174 or to rely on the interim guidance

provided in sections 3 through 7 of Notice

2023-63 for taxable years beginning after

December 31, 2021.

(4) Specifically, the Treasury Department and the IRS are aware that certain

taxpayers may not be eligible to file automatic changes in methods of accounting

under section 7.01 of Rev. Proc. 2024-23

for a taxable year beginning in 2022 or a

taxable year beginning in 2023 if the taxpayer had one or multiple short taxable

605

years during 2022 or 2023. This is because

the waiver of the eligibility rules in section

5.01(1)(d) and (f) of Rev. Proc. 2015-13

apply only to a taxpayer’s first or second

taxable year beginning after December

31, 2021. Therefore, the procedures in

section 3 of this revenue procedure modify the eligibility rules in section 7.01(5)

(a) of Rev. Proc. 2024-23 to provide that

the eligibility rules in section 5.01(1)(d)

and (f) of Rev. Proc. 2015-13 do not apply

to a change described in section 7.01(1)

(a) of Rev. Proc. 2024-23 made by a taxpayer for any taxable year beginning in

2022 or 2023. The procedures in section

3 of this revenue procedure also modify

the rules for changes made in successive

taxable years in section 7.01(5)(b) of Rev.

Proc. 2024-23 to provide that a taxpayer

may make a change described in section

7.01(1)(a) of Rev. Proc. 2024-23 for a

taxable year beginning in 2022 or 2023,

regardless of whether the taxpayer made

a change for the same item for any previous taxable year beginning in 2022 or

2023. Finally, the procedures in section 3

of this revenue procedure also modify the

limited audit protection rules in section

7.01(6) of Rev. Proc. 2024-23 to provide

that a taxpayer does not receive audit protection for a change under section 7.01(1)

(a) of this revenue procedure made for any

taxable year beginning in 2022 or 2023

(other than the first taxable year beginning

after December 31, 2021) with respect to

expenditures paid or incurred in the first

taxable year beginning after December

31, 2021, if the taxpayer did not change

its method of accounting under section

7.01(1)(a) in an effort to comply with

§ 174 for the first taxable year beginning

after December 31, 2021.

SECTION 3. MODIFICATIONS TO

REV. PROC. 2024-23

.01 Modification of section 7.01(5) and

(6) of Rev. Proc. 2024-23. Section 7.01(5)

and (6) of Rev. Proc. 2024-23, are modified to read as follows:

(5) Certain eligibility rules inapplicable.

(a) In general. The eligibility rules in

section 5.01(1)(d) and (f) of Rev. Proc.

2015-13, 2015-5 I.R.B. 419, do not apply

to a change described in section 7.01(1)

(a) of this revenue procedure made by a

September 16, 2024

taxpayer for any taxable year beginning in

2022 or 2023.

(b) Changes made in successive taxable years. A taxpayer may make a

change described in section 7.01(1)(a) of

this revenue procedure for a taxable year

beginning in 2022 or 2023, regardless of

whether the taxpayer made a change for

the same item for any previous taxable

year beginning in 2022 or 2023.

(6) Limited audit protection. A taxpayer does not receive audit protection

under section 8.01 of Rev. Proc. 2015-13

for the change under section 7.01(1)(a)

of this revenue procedure with respect to

expenditures paid or incurred in taxable

years beginning on or before December

31, 2021. Additionally, a taxpayer does

not receive audit protection under section

8.01 of Rev. Proc. 2015-13 for a change

under section 7.01(1)(a) of this revenue

procedure made for any taxable year

beginning in 2022 or 2023 (other than the

first taxable year beginning after December 31, 2021), with respect to expenditures paid or incurred in the first taxable

year beginning after December 31, 2021,

September 16, 2024

if the taxpayer did not change its method

of accounting under section 7.01(1)(a)

in an effort to comply with § 174 for the

first taxable year beginning after December 31, 2021. See section 8.02(2) of Rev.

Proc. 2015-13.

SECTION 4. EFFECT ON OTHER

DOCUMENTS

This revenue procedure modifies section 7.01 of Rev. Proc. 2024-23.

SECTION 5. EFFECTIVE DATE

This revenue procedure is effective for

Forms 3115 filed on or after August 29,

2024.

SECTION 6. PAPERWORK

REDUCTION ACT

The Paperwork Reduction Act of 1995

(44 U.S.C. §§ 3501-3520) (PRA) generally requires that a Federal agency obtain

the approval of the Office of Management

and Budget (OMB) before collecting

606

information from the public, whether such

collection of information is mandatory,

voluntary, or required to obtain or retain a

benefit. A Federal agency may not conduct

or sponsor, and a person is not required to

respond to, a collection of information

unless it displays a valid control number

assigned by the OMB. The collection of

information in this revenue procedure is

in section 3 and is performed using Form

3115. This form is approved under OMB

control numbers 1545-0074 for individual

filers and 1545-0123 for business filers.

This revenue procedure is not changing or

creating new collection requirements not

already approved by OMB.

SECTION 7. DRAFTING

INFORMATION

The principal author of this revenue

procedure is Bruce Chang of the Office

of Associate Chief Counsel (Income Tax

& Accounting). For further information

regarding this revenue procedure, please

contact Mr. Chang at (202) 317-4870 (not

a toll-free number).

Bulletin No. 2024–38

Part IV

Notice of Proposed

Rulemaking

Guidance on Clean

Electricity Low-Income

Communities Bonus Credit

Amount Program

REG-108920-24

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

SUMMARY: This document contains

proposed regulations concerning the program to allocate clean electricity low-income communities bonus credit amounts

established pursuant to the Inflation

Reduction Act of 2022 for calendar years

2025 and succeeding years. Applicants

investing in certain clean electricity generation facilities that produce electricity

without combustion and gasification may

apply for an allocation of environmental

justice capacity limitation to increase the

amount of the clean electricity investment

credit for the taxable year in which the

facility is placed in service. This document describes proposed definitions and

requirements that would be applicable for

the program.

DATES: Written or electronic comments

must be received by October 3, 2024. The

public hearing on these proposed regulations is scheduled to be held on October 17, 2024, at 10 a.m. EST. Requests

to speak and outlines of topics to be

discussed at the public hearing must be

received by October 3, 2024. If no outlines

are received by October 3, 2024, the public hearing will be cancelled. Requests to

attend the public hearing must be received

by 5 p.m. on October 15, 2024.

ADDRESSES: Commenters are strongly

encouraged to submit public comments

electronically via the Federal eRulemaking Portal at https://www.regulations.gov

Bulletin No. 2024–38

(indicate IRS and REG-108920-24) by

following the online instructions for submitting comments. Requests for the public

hearing must be submitted as prescribed

in the “Comments and Public Hearing”

section. Once submitted to the Federal

eRulemaking Portal, comments cannot

be edited or withdrawn. The Department

of the Treasury (Treasury Department)

and the Internal Revenue Service (IRS)

will publish for public availability any

comments submitted to the IRS’s public docket. Send paper submissions to:

CC:PA:01:PR (REG-108920-24), Room

5203, Internal Revenue Service, P.O. Box

7604, Ben Franklin Station, Washington,

DC 20044.

from an allocation of Capacity Limitation

with respect to any property that ceases

to be property eligible for such increase

(but that does not cease to be investment

credit property within the meaning of

section 50(a) of the Code). In addition,

section 48E(i) provides an express delegation of authority for the Secretary to issue

guidance regarding implementation of

section 48E not later than January 1, 2025.

The proposed regulations are also issued

under the express delegation of authority

under section 7805 of the Code.

FOR FURTHER INFORMATION

CONTACT: Concerning the proposed

rules, Office of Associate Chief Counsel

(Passthroughs & Special Industries) at

(202) 317-6853 (not a toll-free number);

concerning submissions of comments or

the public hearing, the Publications and

Regulations Section at (202) 317-6901

(not a toll-free number) or by email at

publichearings@irs.gov (preferred).

Section 13702 of Public Law 117-169,

136 Stat. 1818, 1921 (August 16, 2022),

commonly known as the Inflation Reduction Act of 2022 (IRA), added new section

48E(h) to authorize the Secretary to establish a program for calendar years 2025

and succeeding years to award allocations

of Capacity Limitation that increase the

amount of the new clean electricity investment credit determined under section

48E(a) (section 48E credit) with respect to

eligible property that is part of an applicable facility. This document contains

proposed definitions and rules relating to

the allocation of Capacity Limitation for

calendar year 2025 and succeeding years.

The amount of section 48E credit for

a taxable year generally is calculated by

multiplying the qualified investment for

such taxable year with respect to any

qualified facility placed in service during

that taxable year by the applicable percentage (as defined in section 48E(a)(2)).

If an applicable facility is awarded an

allocation of Capacity Limitation, section

48E(h) increases the amount of the section 48E credit with respect to the applicable facility by increasing the applicable

percentage used to calculate the amount

of the section 48E credit (section 48E(h)

Increase). The term “applicable facility” is

defined in section 48E(h)(2) to mean any

qualified facility that (i) is not described in

section 45Y(b)(2)(B) of the Code (relating

to combustion and gasification facilities);

(ii) has a maximum net output of less than

SUPPLEMENTARY INFORMATION:

Authority

This document contains proposed

amendments to the Income Tax Regulations (26 CFR part 1) under section 48E(h)

of the Internal Revenue Code (Code) to

provide proposed definitions and rules

relating to the allocation of environmental justice capacity limitation (Capacity

Limitation) for calendar year 2025 and

succeeding years (proposed regulations).

Section 48E(h)(4)(A) provides an express

delegation of authority for the Secretary

of the Treasury or her delegate (Secretary)

to establish a program to allocate amounts

of Capacity Limitation to applicable facilities not later than January 1, 2025, and to

make such allocations. Section 48E(h)(5)

provides an express delegation of authority

for the Secretary, by regulations or other

guidance, to provide rules for recapturing

the benefit of any increase in the credit

allowed under section 48E(a) that results

607

Background

I. Overview

September 16, 2024

5 megawatts (MW) (as measured in alternating current (AC)); and (iii) is described

in at least one of four categories in section

48E(h)(2)(A)(iii) (as further described in

part II of this Background).

Section 48E(h)(4)(A) directs the Secretary, not later than January 1, 2025, to

establish a program to allocate amounts of

Capacity Limitation to applicable facilities

and to “provide procedures to allow for an

efficient allocation” of Capacity Limitation to applicable facilities. Accordingly,

the Treasury Department and the IRS are

establishing the Clean Electricity Low-Income Communities Bonus Credit Amount

Program (Program). As described in the

Explanation of Provisions, this notice of

proposed rulemaking provides proposed

threshold definitions and requirements for

the Program to make allocations of Capacity Limitation efficiently and effectively.

After finalizing these rules, the Treasury

Department and the IRS will provide the

procedures for the 2025 Program in a revenue procedure published in the Internal

Revenue Bulletin. See §601.601 of the

Statement of Procedural Rules (26 CFR

part 601).

Procedures for future Program years

also will be provided in guidance published

in the Internal Revenue Bulletin. The Treasury Department and the IRS expect that

many of the procedural aspects of the Program will be similar to the Low-Income

Communities Bonus Credit Program established under section 48(e) of the Code1

available for calendar years 2023 and 2024.

II. Four Categories of Applicable

Facilities

Depending on the category of the facility, an allocation of Capacity Limitation

may result in a section 48E(h) Increase

equal to either 10 percentage points or

20 percentage points. Section 48E(h)

(1)(A)(i) provides for a section 48E(h)

Increase of 10 percentage points for eligible property that is located in a low-income community, as defined in section

45D(e) of the Code (Category 1 facility),

or on Indian land, as defined in section

2601(2) of the Energy Policy Act of 1992

(25 U.S.C. 3501(2)) (Category 2 facility).

Section 48E(h)(1)(A)(ii) provides for a

section 48E(h) Increase of 20 percentage

points for eligible property that is part of a

qualified low-income residential building

project (Category 3 facility) or a qualified low-income economic benefit project

(Category 4 facility).

Section 48E(h)(2)(B) provides that a

facility will be treated as part of a “qualified low-income residential building project” if the facility is installed on a residential rental building that participates in

a covered housing program (as defined in

section 41411(a) of the Violence Against

Women Act of 1994 (34 U.S.C. 12491(a)

(3)) (VAWA)), a housing assistance program administered by the Department of

Agriculture (USDA) under title V of the

Housing Act of 1949, a housing program

administered by a tribally designated housing entity (as defined in section 4(22) of the

Native American Housing Assistance and

Self-Determination Act of 1996 (25 U.S.C.

4103(22))), or such other affordable housing programs as the Secretary may provide,

and the financial benefits of the electricity

produced by the facility are allocated equitably among the occupants of the dwelling

units of such building.

Section 48E(h)(2)(C) provides that a

facility will be treated as part of a “qualified low-income economic benefit project” if at least 50 percent of the financial

benefits of the electricity produced by

such facility are provided to households

with income of less than 200 percent of

the poverty line (as defined in section

36B(d)(3)(A) of the Code) applicable to a

family of the size involved, or less than 80

percent of area median gross income (as

determined under section 142(d)(2)(B) of

the Code).

For a qualified low-income residential

building project and a qualified low-income economic benefit project, section

48E(h)(2)(D) provides that electricity

acquired at a below-market rate will be

considered a financial benefit.

III. Overview of Clean Electricity LowIncome Communities Bonus Credit

Amount Program

Section 48E(h)(4)(A) directs the Secretary to establish the Program, not later

than January 1, 2025, to allocate amounts

of Capacity Limitation to applicable facilities. Under section 48E(h)(4)(C), the total

annual Capacity Limitation that may be

allocated is 1.8 gigawatts of direct current

capacity for each of the calendar years

during the period beginning on January

1, 2025, and ending on December 31 of

the applicable year (as defined in section

45Y(d)(3))2, and zero thereafter.

Under section 48E(h)(4)(D)(i), if the

annual Capacity Limitation for any calendar year exceeds the aggregate amount

allocated for such year, the excess is carried forward to the next year. No amount of

Capacity Limitation may be carried to any

calendar year after the third calendar year

following the applicable year (as defined

in section 45Y(d)(3)). Under section

48E(h)(4)(D)(ii), if the annual Capacity

Limitation for calendar year 2024 under

section 48(e)(4)(D) exceeds the aggregate

amount allocated for such year, the excess

amount may be carried over and applied

to the annual Capacity Limitation under

this paragraph for calendar year 2025. The

annual Capacity Limitation for calendar

year 2025 is increased by the amount of

such excess.

The proposed regulations in this notice

of proposed rulemaking would provide

definitions and requirements necessary to

submit an application to request an allocation of Capacity Limitation for calendar

year 2025 (and subsequent years) under

the Program and to claim a section 48E(h)

Increase. The Treasury Department and

the IRS request comments on these proposed definitions and requirements.

Explanation of Provisions

The proposed regulations relate to specific definitions and requirements regarding the following topics: (1) the definition

For the most recent procedures applicable to the Low-Income Communities Bonus Credit Program established under section 48(e), refer to Revenue Procedure 2024-19, 2024-16 I.R.B 899.

Section 45Y(d)(3) defines the term “applicable year” as the later of the calendar year in which the Secretary determines that the annual greenhouse gas emissions from the production of

electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for calendar year 2022, or

2032. See also proposed §1.45Y-1(c)(3).

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608

Bulletin No. 2024–38

of “applicable facility;” (2) definitions of

“eligible property” under section 48E(h)

(3); (3) the definition of “located in” for

relevant geographic criteria; (4) definitions and requirements related to the

term “financial benefit” and “electricity

acquired at a below-market rate” under

section 48E(h)(2)(D), as well as a manner

to apply such definitions, appropriately, to

Category 3 facilities that are part of qualified low-income residential building projects and Category 4 facilities that are part

of qualified economic benefit projects; (5)

a rule for facilities placed in service prior

to an allocation award; (6) reservations of

Capacity Limitation allocation for applicant facilities that meet certain Additional

Selection Criteria; (7) sub-reservations of

Capacity Limitation allocation for facilities built in a low-income community; (8)

the requirement to submit certain application materials demonstrating facility

viability in order to allow for an efficient

allocation process; (9) the requirement to

submit certain documentation and attestations when a facility is placed in service; and (10) post-allocation compliance,

including disqualification of allocations of

Capacity Limitation and recapture of the

section 48E(h) Increase.

I. Definition of Applicable Facility

The term “applicable facility” is

defined in section 48E(h)(2)(A) to mean

any qualified facility (as defined in section 48E(b)(3)) that (i) is not described in

section 45Y(b)(2)(B) (related to combustion and gasification facilities); (ii) has a

maximum net output of less than 5 MW

(as measured in AC); and (iii) is described

in at least one of the four categories

described in section 48E(h)(2)(A)(iii)

(Category 1, 2, 3, or 4). Therefore, proposed §1.48E(h)-1(b)(1) would define an

applicable facility as any qualified facility

described in section 48E(b)(3) that (i) is

a facility that is not described in section

45Y(b)(2)(B) (non-combustion and gasification facilities); (ii) has a maximum net

output of less than 5 MW (as measured in

AC); and (iii) is described in at least one

of the four categories described in section

48E(h)(2)(A)(iii) (Category 1, 2, 3, or 4).

A. Types of applicable facilities

Proposed §1.48E(h)-1(b)(1) would

also clarify that the types of qualified

facilities eligible for the Program are only

those non-combustion and gasification

qualified facilities3 (non-C&G facilities)

that the Secretary has determined have

a greenhouse gas (GHG) emissions rate

of not greater than zero. An emissions

rate table for eligible non-C&G facilities

will be published annually in the Federal

Register or the Internal Revenue Bulletin.

Consistent with the notice of proposed

rulemaking and a notice of public hearing

(REG-119283-23) published in the Federal Register (89 FR 47792) providing

guidance on the clean electricity production and investment credits under sections

45Y and 48E, the following types or categories of qualified facilities are categorically non-C&G facilities with a GHG

emissions rate that is not greater than

zero: wind facilities (including small wind

properties), hydropower facilities (including retrofits adding power production to

non-powered dams, conduit hydropower,

hydropower using new impoundments,

and hydropower using diversions such as a

penstock or channel), marine and hydrokinetic facilities, solar facilities (including photovoltaic and concentrating solar

power), geothermal facilities (including

flash and binary plants), nuclear fission

facilities, nuclear fusion facilities, and

waste energy recovery property (WERP)

that derives energy from any of the energy

sources described in proposed §1.45Y5(c)(2)(i) through (vii) (including geothermal or solar waste heat recovery such as

from a district geothermal heating system,

and waste heat recovery such as from a

nuclear reactor dedicated to heat production for an industrial facility). These categories of facilities may be eligible for an

allocation of Capacity Limitation during

the 2025 Program year. Additional types

of categories of non-C&G facilities may

be eligible in future Program years if the

Secretary determines that such facilities

have a GHG emissions rate that is not

greater than zero in guidance published in

the Federal Register or the Internal Revenue Bulletin. For ease of reference for

applicants to the Program, the Treasury

Department and the IRS will include the

list of eligible qualified facilities in the

procedural guidance that will be published

for the Program.

B. Four categories of applicable facilities

Depending on the category of the facility, an allocation of Capacity Limitation

under the Program may result in a section

48E(h) Increase equal to either 10 percentage points or 20 percentage points. Section 48E(h)(1)(A)(i) provides for a section

48(e) Increase of 10 percentage points

for eligible property that is located in a

low-income community (Category 1 facility), or on Indian land (Category 2 facility). Section 48E(h)(1)(A)(ii) provides for

a section 48E(h) Increase of 20 percentage

points for eligible property that is part of a

qualified low-income residential building

project (Category 3 facility) or a qualified low-income economic benefit project

(Category 4 facility). Proposed §1.48E(h)1(b)(2) would define the four facility categories (Category 1, 2, 3, or 4).

Section 48E(h)(2)(A)(iii)(I) defines

an “applicable facility” in part to include

a qualified facility that is located in a

low-income community (as defined in section 45D(e)). Under section 48E(h)(2)(A)

(iii)(I), the term low-income community

generally is defined under section 45D(e)

(1), with certain modifications described

elsewhere in section 45D(e), as any population census tract if the poverty rate for

such tract is at least 20 percent, or, in the

case of a tract not located within a metropolitan area, the median family income

for such tract does not exceed 80 percent

of statewide median family income, or in

the case of a tract located within a metropolitan area, the median family income

for such tract does not exceed 80 percent

of the greater of statewide median family

income or the metropolitan area median

family income.

Proposed §1.48E(h)-1(b)(2)(i) would

define a Category 1 facility consistent

with section 48E(h)(2)(A)(iii)(I) as a facility located in a low-income community,

which generally is defined under section

45D(e)(1) as any population census tract

See proposed §1.48E-2(a), as proposed in the notice of proposed rulemaking (REG-119283-23) published in the Federal Register (89 FR 47792) on June 3, 2024, and corrected at 202415718 on July 18, 2024, for more information regarding the definition of “qualified facility.”

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September 16, 2024

if the poverty rate for such tract is at least

20 percent based on the most recently

released low-income community data

currently used for the New Markets Tax

Credit (NMTC) under section 45D, or, in

the case of a tract not located within a metropolitan area, the median family income

for such tract does not exceed 80 percent

of statewide median family income, or, in

the case of a tract located within a metropolitan area, the median family income

for such tract does not exceed 80 percent

of the greater of statewide median family

income or the metropolitan area median

family income. Proposed §1.48E(h)-1(b)

(2)(i) would provide that the term “low-income community” also includes the modifications in section 45D(e)(4) and (5) for

tracts with low population and modification of the income requirement for census

tracts with high migration rural counties.

Low-income community information for

NMTC can be found at the U.S. Department of Treasury, Community Development Financial Institutions Fund website

and its webpage mapping tool, https://

www.cdfifund.gov/cims.

Proposed §1.48E(h)-1(b)(2)(i) would

clarify also that the poverty rate for a census tract generally is based on the most

recently released American Community

Survey (ACS) low-income community data

for the NMTC. However, if updated data

is released, a taxpayer can choose to base

the poverty rate for any population census tract on either the prior version of the

ACS low-income community data or the

updated ACS low-income community data

for a period of 1 year following the date of

the release of the updated data. After the

1-year transition period, the updated ACS

low-income community data must be used.

Proposed §1.48E(h)-1(b)(2)(i) would

provide that population census tracts

that satisfy the definition of low-income

community at the time of application are

considered to continue to meet the definition of low-income community for the

duration of the recapture period unless the

location of the facility changes.

Section 48E(h)(2)(A)(iii)(I) defines an

“applicable facility” in part to include a

qualified facility that is located on Indian

land (as defined in section 2601(2) of the

Energy Policy Act of 1992 (25 U.S.C.

3501(2)). Proposed §1.48E(h)-1(b)(2)(ii)

would define a Category 2 facility, consis-

September 16, 2024

tent with section 48E(h)(2)(A)(iii)(I), as

facility that is located on Indian land. Proposed §1.48E(h)-1(b)(2)(ii) would provide that the term “Indian land” is defined

in section 2601(2) of the Energy Policy

Act of 1992 (25 U.S.C. 3501(2)).

Section 48E(h)(2)(A)(iii)(II) defines an

“applicable facility” in part to include a

qualified facility that is part of a qualified

low-income residential building project.

Proposed §1.48E(h)-1(b)(2)(iii) would

define a Category 3 facility as a facility

that is part of a qualified low-income residential building project. A facility would

be treated as part of a qualified low-income

residential building project if such facility

is installed on a residential rental building that participates in a covered housing

program or other affordable housing program described in section 48E(h)(2)(B)(i)

(Qualified Residential Property) and the

financial benefits of the electricity produced by such facility are allocated equitably among the occupants of the dwelling units of such building as provided in

proposed §1.48E(h)-1(e). Consistent with

the statute, proposed §1.48E(h)-1(b)(2)

(iii) would clarify that the Qualified Residential Property, and not just its tenants,

must participate in a covered housing

program or other affordable housing program described in section 48E(h)(2)(B)

(i). A Qualified Residential Property could

either be a multifamily rental property or

single-family rental property. Proposed

§1.48E(h)-1(b)(2)(iii) also would clarify

that a facility does not need to be installed

directly on the building to be considered

installed on a Qualified Residential Property if the facility is installed on the same

or an adjacent parcel of land as the Qualified Residential Property, and the other

requirements to be a Category 3 facility

are satisfied.

The statutory cross-reference to VAWA

is comprehensive and includes numerous

types of housing programs and policies

across Federal agencies. The Treasury

Department and the IRS, in consultation

with other Federal agencies, developed

an illustrative list of Federal housing programs and policies that meet the requirements in section 48E(h)(2)(B)(i):

Covered housing programs and policies (as defined in VAWA) are those with

active affordability covenants tied to the

following:

610

• Department of Housing and Urban

Development’s (HUD) Section 202

Supportive Housing for the Elderly,

including the direct loan program

under Section 202.

• HUD’s Section 811 Supportive Housing for Persons with Disabilities.

• HUD’s Housing Opportunities for Persons With AIDS (HOPWA) program.

• HUD’s homeless programs under title

IV of the McKinney-Vento Homeless

Assistance Act, including the Emergency

Solutions Grants program, the Continuum of Care program, and the Rural

Housing Stability Assistance program.

• HUD’s HOME Investment Partnerships (HOME) program.

• Federal Housing Administration (FHA)

mortgage insurance under Section 221(d)

(3) subsidized with a below-market interest rate (BMIR) prescribed in the proviso

of Section 221(d)(5) of the National

Housing Act.

• HUD’s Section 236 interest rate reduction payments.

• HUD Public Housing assisted under

section 9 of the United States Housing

Act of 1937.

• HUD project-based rental assistance

under section 8 of the United States

Housing Act of 1937.

• HUD Section 8 Moderate Rehabilitation Program.

• HUD Section 8 Moderate Rehabilitation Single Room Occupancy Program

for Homeless Individuals.

• USDA Section 515 Rural Rental Housing.

• USDA Section 514/516 Farm Labor

Housing.

• USDA Section 538 Guaranteed Rural

Rental Housing.

• USDA Section 533 Housing Preservation Grant Program.

• Treasury/IRS Low-Income Housing

Credit under section 42.

• HUD’s National Housing Trust Fund.

• Veterans Administration’s (VA) Comprehensive Service Programs for

Homeless Veterans.

• VA’s grant program for homeless veterans with special needs.

• VA’s financial assistance for supportive

services for very low-income veteran

families in permanent housing.

• Department of Justice transitional

housing assistance grants for victims

Bulletin No. 2024–38

of domestic violence, dating violence,

sexual assault, or stalking.

Section 48E(e)(2)(B)(i) also includes the

following Federal housing programs:

• Housing assistance programs administered by the USDA under title V of the

Housing Act of 1949.

• Housing programs administered by an

Indian Tribe or a Tribally designated

housing entity (as defined in section

4(22) of the Native American Housing

Assistance and Self-Determination Act

of 1996 (25 U.S.C. 4103(22)).

• Housing programs administered by the

Department of Hawaiian Homelands

as defined in Title VIII of the Native

American Housing Assistance and

Self-Determination Act of 1996 (24

CFR 1006.10), Native Hawaiian Organizations as defined in (13 CFR 124.3),

and Hawaiian Homestead Associations

as defined in (43 CFR 48.6).

This list also will be made available on the

Program web page.

Section 48E(e)(2)(B)(i) authorizes the

Secretary to add other affordable housing

programs to the list of eligible programs.

The Treasury Department and the IRS

request comment on whether other affordable housing programs should be added

to the list of eligible programs, and specifically request comment on whether and

under what conditions certain state programs should be added to the list.

Section 48E(h)(2)(A)(iii)(II) defines

an “applicable facility” in part to include

a qualified facility that is part of a qualified low-income economic benefit project. Section 48E(h)(2)(C) provides that a

facility will be treated as part of a qualified

low-income economic benefit project if at

least 50 percent of the financial benefits

of the electricity produced by such facility

are provided to households with income of

less than 200 percent of the poverty line (as

defined in section 36B(d)(3)(A)) applicable

to a family of the size involved, or less than

80 percent of area median gross income (as

determined under section 142(d)(2)(B)).

Proposed §1.48E(h)-1(b)(2)(iv), consistent with 48E(h)(2)(A)(iii)(II), would

define a Category 4 facility as a facility that

is part of qualified low-income economic

benefit project. A facility would be treated

as part of a qualified low-income economic

benefit project if, as provided in proposed

§1.48E(h)-1(f), at least 50 percent of the

financial benefits of the electricity produced by the facility are provided to households with income of less than (A) 200

percent of the poverty line (as defined in

section 36B(d)(3)(A)) applicable to a family of the size involved, or (B) 80 percent of

area median gross income (as determined

under section 142(d)(2)(B)).

C. Less than five megawatts requirement

Section 48E(h)(2)(A)(ii) requires that

an applicable facility have a maximum

net output of less than 5 (MW) (measured

in AC), referred to in this preamble as the

“less than five megawatts requirement.”

Proposed §1.48E(h)-1(b)(3)(i) would

provide that the less than five megawatts

requirement is measured at the level of

the applicable facility in accordance with

section 48E(h)(2)(A)(ii). The maximum

net output of an applicable facility is

measured only by nameplate generating

capacity of the applicable facility, which

includes only functionally interdependent

components of property that are owned by

the taxpayer, that are operated together,

and that can operate apart from other property to produce electricity, at the time the

applicable facility is placed in service. In

accordance with proposed §1.48E-2(b)(2)

(ii), proposed §1.48E(h)-1(b)(3)(i) would

provide that components of property are

functionally interdependent if the placing

in service of each component is dependent

upon placing in service other components

to produce electricity.

Proposed §1.48E(h)-1(b)(3)(ii) would

provide that the determination of whether

an applicable facility has a maximum net

output of less than 5 MW (as measured in

AC) is based on the nameplate capacity

of the applicable facility. The nameplate

capacity for purposes of the less than five

megawatts requirement is the maximum

electrical generating output in MW that

the applicable facility is capable of producing on a steady state basis and during

continuous operation under standard conditions, as measured by the manufacturer

and consistent with the definition of name-

plate capacity provided in 40 CFR 96.202.

If applicable, the International Standard

Organization conditions should be used to

measure the maximum electrical generating output of an applicable facility.

The Treasury Department and the IRS

request comments on other approaches

to address this statutory requirement that

would further the purpose of efficient

allocation of a Federal tax credit program

with a national impact and would advance

the goals of the Program to incentivize

additional deployment of qualified facilities in low-income communities. These

approaches could include rules that would

aggregate the capacity of qualified facilities with integrated operations (that is,

qualified facilities that are owned by the

same taxpayer, placed in service in the

same taxable year, and transmit electricity generated by the facilities through the

same point of interconnection or, if the

facilities are not grid-connected, to the

same end user(s)) solely for the purposes

of whether an application meets the less

than five megawatts requirement under

Section 48E(h)(2)(A)(ii).

II. Eligible Property

Section 48E(h)(3) defines “eligible property” as a qualified investment with

respect to any applicable facility. Section

48E(b) describes a qualified investment

with respect to a qualified facility. Generally, for purposes of section 48E(a),

section 48E(b)(1)(A) and (b)(1)(B)(i) provides that the qualified investment with

respect to a qualified facility for any taxable year is the sum of the basis of any

qualified property placed in service by the

taxpayer during such taxable year that is

part of a qualified facility, plus the amount

of expenditures that are paid or incurred

by the taxpayer for qualified interconnection property that is properly chargeable

to capital account of the taxpayer. Pursuant to section 48E(h)(3), eligible property

does not include any qualified investment

with respect to energy storage technology.

Proposed §1.48E(h)-1(c) would define

“eligible property” as a qualified investment (as defined in section 48E(b))4 with

respect to any applicable facility.

See proposed §1.48E-2(d), as proposed in the notice of proposed rulemaking (REG-119283-23) published in the Federal Register (89 FR 47792) on June 3, 2024, and corrected at 202415718 on July 18, 2024, for more information regarding the definition of “qualified investment.”

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September 16, 2024

III. Location

Proposed §1.48E(h)-1(d)(1) would treat

an applicable facility as “located in a low-income community” or “on Indian land” under

section 48E(h)(2)(A)(iii)(I) or located in a

geographic area under the Additional Selection Criteria (see part V.B.2. of this Explanation of Provisions) if the facility satisfies the

nameplate capacity test (Nameplate Capacity Test for Location) provided in proposed

§1.48E(h)-1(d)(2).

Under the Nameplate Capacity Test

for Location, which would be provided in

proposed §1.48E(h)-1(d)(2), an applicable

facility would be considered located in or

on the relevant geographic area described in

proposed §1.48E(h)-1(d)(1) if 50 percent or

more of the applicable facility’s nameplate

capacity is in a qualifying area. The percentage of an applicable facility’s nameplate

capacity (as defined in proposed §1.48E(h)1(d)(3)) that is in a qualifying area would

be determined by dividing the nameplate

capacity of the applicable facility’s electricity-generating units that are located in

the qualifying area by the total nameplate

capacity of all the electricity-generating

units of the applicable facility.

Proposed §1.48E(h)-1(d)(3) would pro­

vide that nameplate capacity for purposes

of the Nameplate Capacity Test for Location for an electricity generating unit

means the maximum electrical generating

output that the applicable facility is capable of producing on a steady state basis and

during continuous operation under standard conditions, as measured by the manufacturer and consistent with the definition

of nameplate capacity provided in 40 CFR

96.202. If applicable, the International

Standard Organization conditions should

be used to measure the maximum electrical

generating output of an applicable facility.

For purposes of assessing the Nameplate

Capacity Test for Location, electricity-generating units that generate direct current

(DC) power before converting to AC (for

example, solar photovoltaic) should use

nameplate capacity in DC, otherwise the

nameplate capacity in AC should be used.

IV. Financial Benefits for Category 3 and

Category 4 Allocations

Section 48E(h)(2)(D) provides that

“electricity acquired at a below market

September 16, 2024

rate” will not fail to be taken into account

as a financial benefit. To clarify this language, the Treasury Department and the

IRS propose definitions of the terms “financial benefit” and “electricity acquired at a

below market rate” under section 48E(h)

(2)(D), as well as a manner to apply such

definitions, appropriately, to qualified

low-income residential building projects

(section 48E(h)(2)(B)) and qualified economic benefit projects (section 48E(h)(2)

(C)). The definitions and requirements

would be different for an allocation under

Category 3 (section 48E(h)(2)(B)) and

Category 4 (section 48E(h)(2)(C)).

A. Financial benefits for qualified lowincome residential building projects

For a facility to be treated as part of

a qualified low-income residential building project (Category 3 facility), section

48E(h)(2)(B)(ii) provides that the financial benefits of the electricity produced by

such facility must be allocated equitably

among the occupants of the dwelling units

of a residential rental building that participates in a covered housing program or

other affordable housing program (Qualified Residential Property). The Treasury Department and the IRS propose to

reserve allocations under this category

exclusively for applicants that would

apply the financial benefits requirement in

proposed §1.48E(h)-1(e).

Proposed §1.48E(h)-1(e)(1) would

provide that, to satisfy the requirements of

a Category 3 facility, the financial benefits

of the electricity produced by the facility

must be allocated equitably among the

occupants of the dwelling units of the

Qualified Residential Property. The same

rules for financial benefits for Category 3

facilities apply to both multi-family property and single-family Qualified Residential Property.

Proposed §1.48E(h)-1(e)(2) would provide that at least 50 percent of the financial value of the electricity produced by the

facility (as defined in proposed §1.48E(h)1(e)(3)) must be equitably allocated to the

Qualified Residential Property’s occupants

that are designated as low-income occupants under the housing program.

Proposed §1.48E(h)-1(e)(3) would

define the financial value of the electricity produced by the applicable facility as

612

the greater of: (i) 25 percent of the gross

financial value (as defined in proposed

§1.48E(h)-1(e)(4)) of the annual electricity produced by the applicable facility, or

(ii) the net financial value (as defined in

proposed §1.48E(h)-1(e)(5)) of the annual

energy produced by the applicable facility.

This requirement would recognize that

not all the financial value of the electricity produced can be passed on to building

occupants because a certain percentage

can be assumed to be dedicated to lowering the operational costs of electricity

consumption for common areas, which

benefits all building occupants.

Proposed §1.48E(h)-1(e)(4) would cal­

culate gross financial value of the annual

electricity produced by the applicable

facility as the sum of: (i) the total self-consumed kilowatt-hours produced by the

applicable facility multiplied by the Qualified Residential Property’s metered volumetric price of electricity, (ii) the total

exported kilowatt-hours produced by

the applicable facility multiplied by the

Qualified Residential Property’s volumetric export compensation rate for kilowatt-hours of electricity, and (iii) the sale

of any attributes associated with the applicable facility’s production (including, for

example, any Federal, State, or Tribal

renewable energy credits or incentives), if

separate from the metered price of electricity or export compensation rate.

The definition of net financial value

in proposed §1.48E(h)-1(e)(5) would

account for the specific nature of facilities

serving low-income residential buildings

and facility ownership, as the applicable facility may be third-party owned or

commonly owned with the building. For

common ownership, proposed §1.48E(h)1(e)(5)(i) would define net financial value

as the gross financial value of the annual

electricity produced minus the annual

average (or levelized) cost of the applicable facility over the useful life of the facility (including debt service, maintenance,

replacement reserve, capital expenditures,

and any other costs associated with constructing, maintaining, and operating the

facility). For third-party ownership, if

the facility and the Qualified Residential

Property are not commonly owned, and

the facility owner enters into a power

purchase agreement or other contract for

electricity services with the Qualified

Bulletin No. 2024–38

Residential Property owner and/or building occupants, proposed §1.48E(h)-1(e)

(5)(ii) would define net financial value

as the gross financial value of the annual

electricity produced minus any payments

made by the building owner and/or building occupants to the applicable facility

owner for electricity services associated

with the applicable facility in a given year.

Proposed §1.48E(h)-1(e)(5)(iii) would

provide different rules to ensure an equitable allocation of financial benefits

depending on whether or not financial

value is distributed to building occupants

via utility bill savings or through different

means. If financial value is distributed via

utility bill savings, proposed §1.48E(h)1(e)(5)(iii)(A) would provide that financial benefits will be considered to be allocated equitably if at least 50 percent of the

financial value of the electricity produced

by the applicable facility is distributed as

utility bill savings in equal shares to each

building dwelling unit among the Qualified Residential Property’s occupants that

are designated as low-income under the

covered housing program or other affordable housing program (described in section 48E(h)(2)(B)(i)) or alternatively distributed in proportional shares based on

each low-income dwelling unit’s square

footage, or each low-income dwelling

unit’s number of occupants. Proposed

§1.48E(h)-1(e)(5)(iii)(A) would provide also that for any occupant(s) who

choose to not receive utility bill savings

(for example, exercise their right to not

participate in or to opt out of a community generation subscription in applicable

jurisdictions), the portion of the financial

value that would otherwise be distributed to non-participating occupants must

be instead distributed to all participating

occupants. Proposed §1.48E(h)-1(e)(5)

(iii)(A) would clarify that no less than 50

percent of the Qualified Residential Property’s occupants that are designated as

low-income must participate and receive

utility bill savings for the applicable facility to use this method of benefit distribution.

Proposed §1.48E(h)-1(e)(5)(iii)(A)

also would provide that in the case of a

solar facility, applicants must follow the

HUD guidance on Treatment of Financial

Benefits to HUD-Assisted Tenants Resulting from Participation in Solar Programs

Bulletin No. 2024–38

Notice (Housing Notice 2023-09), located

at https://www.hud.gov/sites/dfiles/

OCHCO/documents/2023-09hsgn.pdf,

or future HUD guidance, or other guidance or notices from the Federal agency

that oversees the applicable housing program identified in section 48E(h)(2)(B) to

ensure that tenants’ annual income for rent

calculations or other requirements impacting total tenant payment are not impacted

negatively by the distribution of financial

value. Applicants should apply similar

principles in the case of any other applicable facility.

Proposed §1.48E(h)-1(e)(5)(iii)(B)

would provide that if financial value is

not distributed via utility bill savings,

financial benefits will be considered to

be allocated equitably if at least 50 percent of the financial value of the electricity produced by the applicable facility

is distributed to occupants using one or

more methods described Housing Notice

2023-09 for a master-metered building,

or future HUD guidance, or other guidance or notices from the Federal agency

that oversees the applicable housing program identified in section 48E(h)(2)(B).

In the case of a solar facility, applicants

must comply with HUD guidance, or

future HUD guidance, for how residents

of master-metered HUD-assisted housing

can benefit from owners’ sharing of financial benefits accrued from an investment

in solar electricity generation to ensure

that tenants’ utility allowances and annual

income for rent calculations are not negatively impacted. Applicants should apply

similar principles in the case of any other

applicable facility.

To achieve the goal of verifying Program compliance and to provide clarification to applicants regarding how they can

demonstrate that statutory requirements

are met, proposed §1.48E(h)-1(e)(6)(i)

would provide that a Category 3 facility

owner must prepare a Benefits Sharing

Statement. The Benefits Sharing Statement would be required to include (A) a

calculation of the facility’s gross financial value using the method described in

proposed §1.48E(h)-1(e)(4), (B) a calculation of the facility’s net financial value

using the method described in proposed

§1.48E(h)-1(e)(5), (C) a calculation of the

financial value required to be distributed

to building occupants using the method

613

described in proposed §1.48E(h)-1(e)(3),

(D) a description of the means through

which the required financial value will be

distributed to building occupants, and (E)

if the facility and Qualified Residential

Property are separately owned, an indication of which entity will be responsible

for the distribution of benefits to the occupants.

Proposed §1.48E(h)-1(e)(6)(ii) would

provide that the Qualified Residential

Property owner must formally notify the

occupants of units in the Qualified Residential Property of the development of the

facility and planned distribution of benefits.

B. Financial benefits in qualified lowincome economic benefit projects

For a facility to be treated as part of a

qualified low-income economic benefit

project, section 48E(h)(2)(C) requires that

at least 50 percent of the financial benefits

of the electricity produced by the facility

be provided to qualifying low-income

households.

Proposed §1.48E(h)-1(f)(1) would provide that to satisfy the requirements of a

Category 4 facility:

(i) The facility must serve multiple

qualifying low-income households under

section 48E(e)(2)(C)(i);

(ii) At least 50 percent of the facility’s

total output in kilowatts (kW) must be

assigned to Qualifying Households; and

(iii) Each Qualifying Household must

be provided a bill credit discount rate (as

defined in proposed §1.48E(h)-1(f)(2)) of

at least 30 percent.

The Treasury Department and the IRS

request comment on (1) whether a 30-percent bill credit discount rate would be feasible for Category 4 facilities, (2) whether

a rate of 30 percent or greater would be

feasible if transitioned in over time (that

is, an increase in the minimum bill credit

discount for each subsequent program

year) and, if so, what would be an appropriate rate of transition, (3) how would

this discount rate impact different eligible

technologies, and (4) the impact of a minimum bill discount credit rate for Category

4 facilities that is different from benefit

requirements for existing or planned state

programs (for example, state-level community solar programs supported by the

September 16, 2024

U.S. Environmental Protection Agency’s

Greenhouse Gas Reduction Fund).

Proposed §1.48E(h)-1(f)(2)(i) would

define a bill credit discount rate as the

difference between the financial benefit provided to a Qualifying Household

(including utility bill credits, reductions in

a Qualifying Household’s electricity rate,

or other monetary benefits accrued by the

Qualifying Household on their utility bill)

and the cost of participating in the community program (including subscription

payments for zero-carbon energy and

any other fees or charges), expressed as

a percentage of the financial benefit distributed to the Qualifying Household. The

bill credit discount rate can be calculated

by starting with the financial benefit provided to the Qualifying Household, subtracting all payments made by the Qualifying Household (or payments remitted

on behalf of the Qualifying Household

through net crediting, consolidated billing, or similar arrangements) to the facility owner and any related third parties as

a condition of receiving that financial benefit, then dividing that difference by the

financial benefit distributed to the Qualifying Household.

Proposed §1.48E(h)-1(f)(2)(ii) would

provide that in cases in which the Qualifying Household has no or only a nominal

cost of participation, and financial benefits

are delivered through a utility or government body, the bill credit discount rate

should be calculated as the financial benefit provided to a Qualifying Household

(including utility bill credits, reductions

in a Qualifying Household’s electricity

rate, or other monetary benefits accrued

by a Qualifying Household on their utility bill) divided by the total value of the

electricity produced by the facility and

assigned to the Qualifying Household

(including any electricity services, products, and credits provided in conjunction

with the electricity produced by such

facility), as measured by the utility, independent system operator (ISO), or other

off-taker procuring electricity (and related

services, products, and credits) from the

facility. Proposed §1.48E(h)-1(f)(2)(iii)

would clarify that the bill credit discount

rate is calculated on an annual basis. Proposed §1.48E(h)-1(f)(2)(iv) would provide examples to clarify that application

of proposed §1.48E(h)-1(f)(2).

September 16, 2024

The Treasury Department and the IRS

are considering adding other methods,

apart from bill credit discounts, for financial benefits to be shared with Qualifying

Households. Accordingly, the Treasury

Department and the IRS request comments on (1) what alternative methods

for delivering financial benefits should be

considered to provide equivalent financial

benefits in cases in which bill credit discounts are not available or are not feasible

for covered technologies; (2) how these

alternative mechanisms should be verified

to ensure they provide the required financial benefits to Qualifying Households;

(3) whether these alternative mechanisms

are feasible for multiple technologies; and

(4) what requirements can be put in place

to address any uncertainties related to the

potential treatment of financial benefits as

income for Federal income tax purposes

or the potential impact on eligibility for

public assistance benefits.

Proposed §1.48E(h)-1(f)(2)(iii) would

provide that if the facility derives financial

value from the production of electricity in

a manner such that this value cannot be

directly applied to the Qualifying Household’s utility bill (for example, renewable

energy credit payments made directly to

the facility owner), then no less than 30

percent of that monetary value must also

be provided to the Qualifying Household,

either through a greater bill credit discount

on the Qualifying Household’s utility bill

than would otherwise be derived from the

method described in proposed §1.48E(h)1(f)(1)(i) or through other means.

To ensure the requirements of proposed §1.48E(h)-1(f) are met, proposed

§1.48E(h)-1(f)(3) would require verification of households’ qualifying low-income status. Applicants are responsible

for proof-of-income verification. Proposed §1.48E(h)-1(f)(3)(i) would provide

that to establish that financial benefits are

provided to Qualifying Households as

provided in proposed §1.48E(h)-1(f)(1),

applicants must submit documentation in

accordance with guidance published in the

Internal Revenue Bulletin. A Qualifying

Household’s low-income status is determined at the time the household enrolls

in the subscription program and does not

need to be re-verified.

Proposed §1.48E(h)-1(f)(3)(ii) would

provide that applicants can use categori-

614

cal eligibility or other income verification

methods to establish that a household

is a Qualifying Household. Proposed

§1.48E(h)-1(f)(3)(ii)(A) would provide

that categorical eligibility consists of

obtaining proof of the household’s participation in a needs-based Federal, State,

Tribal, or utility program with income limits at or below the qualifying income level

required to be a Qualifying Household.

Federal programs may include, but are not

limited to: Medicaid, Low-Income Home

Energy Assistance Program (LIHEAP)

administered by the Department of Health

and Human Services, Weatherization

Assistance Program (WAP) administered

by the Department of Energy (DOE), Supplemental Nutrition Assistance Program

(SNAP) administered by the USDA, Section 8 Project-Based Rental Assistance,

the Housing Choice Voucher Program

administered by HUD, the Federal Communication Commission’s Lifeline Support for Affordable Communications, the

National School Lunch Program administered by the USDA, the Supplemental

Security Income Program administered

by the Social Security Administration,

and any verified government or non-profit

program serving Asset Limited Income

Constrained Employed (ALICE) persons

or households. With respect to the Federal programs listed previously an individual in the household must currently be

approved for assistance from or participation in the program with an award letter

or other written documentation within

the last 12 months for enrollment in that

program to establish categorical eligibility

of the household. State agencies also can

provide verification that a household is a

Qualifying Household if the household

participates in a State’s solar or other program and income limits for such program

are at or below the qualifying income

level required to be a Qualifying Household. The qualifying income level for a

Qualifying Household is based on where

such household is located.

Proposed §1.48E(h)-1(f)(3)(ii)(B)

would provide that paystubs, Federal or

State tax returns, or income verification

through crediting agencies and commercial data sources can also be used to

establish that a household is a Qualifying

Household. Proposed §1.48E(h)-1(f)(3)

(ii)(C) would provide that a self-attesta-

Bulletin No. 2024–38

tion from a household is not a permissible method to establish a household is a

Qualifying Household. This prohibition

on direct self-attestation from a household

does not extend to categorical eligibility

for needs-based Federal, State, Tribal, or

utility programs with income limits that

rely on self-attestation for verification of

income.

V. Proposed Program Requirements and

Structure

A. Annual capacity limitation

Under section 48E(h)(4)(C), the total

annual Capacity Limitation is 1.8 gigawatts of DC capacity for each calendar

year during the period beginning on January 1, 2025, and ending on December

31 of the applicable year (as defined in

section 45Y(d)(3))5, and zero thereafter.

Proposed §1.48E(h)-1(g) would provide

that the Treasury Department and the IRS

intend to announce how the annual Capacity Limitation would be allocated across

the four facility categories (described in

proposed §1.48E(h)-1(b)(2)) in future

guidance published in the Internal Revenue Bulletin. Proposed §1.48E(h)-1(g)(1)

also would provide that the Capacity Limitation for each Program year is divided

across the four facility categories based

on factors such as the anticipated number

of applications that are expected for each

category and the amount of Capacity Limitation that needs to be reserved for each

category to encourage market participation in each category consistent with statutory intent and the goals of the Program.

After the Capacity Limitation for each

facility category is established in guidance published in the Internal Revenue

Bulletin, it may be reallocated later across

facility categories and sub-reservation in

the event one category or sub-reservation

is oversubscribed and another has excess

capacity. Proposed §1.48E(h)-1(g) would

specify that a facility category or sub-reservation is oversubscribed if it receives

applications in excess of Capacity Limitation reserved for the facility category or

sub-reservation.

Proposed §1.48E(h)-1(g)(2) would

provide that if the annual Capacity Limitation for any calendar year exceeds the

aggregate amount of annual Capacity

Limitation allocated for a calendar year

under proposed §1.48E(h)-1(g)(2), then

the annual Capacity Limitation for the

succeeding calendar year is increased by

the amount of such excess. No amount of

Capacity Limitation may be carried to any

calendar year after the third calendar year

following the applicable year (as defined

in section 45Y(d)(3)).

B. Additional Selection Criteria

Proposed §1.48E(h)-1(h)(1) would

provide that at least 50 percent of the

total Capacity Limitation in each facility

category would be reserved for facilities

meeting criteria described in proposed

§1.48E(h)-1(h)(2) (relating to ownership

criteria) and proposed §1.48E(h)-1(h)

(3) (relating to geographic criteria); both

the ownership and the geographic criteria

are collectively referred to as “Additional

Selection Criteria”. The specific amount

of Capacity Limitation reserved (but not

less than 50 percent) would be provided in

guidance published in the Internal Revenue Bulletin for each Program year.

The procedure for using these Additional Selection Criteria also will be

provided in guidance published in the

Internal Revenue Bulletin. The Treasury

Department and the IRS expect that in

evaluating applications received during

the initial application window, priority

would be given to eligible applications

for facilities meeting at least one of the

two Additional Selection Criteria. The

Treasury Department and the IRS expect

that if the eligible applications for Capacity Limitation for facilities that meet at

least one of the two Additional Selection

Criteria categories exceed the Capacity

Limitation for a category, then facilities

meeting both of the Additional Selection

Criteria categories would be prioritized

for an allocation. If eligible applications

for facilities that meet at least one of the

two Additional Selection Criteria categories received during the initial application

window total less than 50 percent of the

Capacity Limitation for a category, then

additional Capacity Limitation would be

reserved during the rolling application

period such that 50 percent of the total

Capacity Limitation in the category would

be reserved for these facilities.

Proposed §1.48E(h)-1(h) also would

provide that after the reservation of

Capacity Limitation for qualified facilities

meeting the Additional Selection Criteria

described in proposed §1.48E(h)-1(h)(2)

and (3) is established in guidance published in the Internal Revenue Bulletin,

it may be reallocated later across facility

categories and sub-reservations in the

event one category or sub-reservation

within a category is oversubscribed and

another has excess capacity. The Treasury

Department and the IRS would retain the

discretion to reallocate Capacity Limitation across categories and sub-categories

to maximize allocations in the event one

category or sub-reservation is oversubscribed and another has excess capacity.

1. Ownership criteria

Proposed §1.48E(h)-1(h)(2) would

provide criteria based on ownership

(Ownership Criteria). The Ownership Criteria category is based on characteristics

of the applicant that owns the applicable

facility. An applicable facility would meet

the Ownership Criteria if it is owned by a

Tribal enterprise, an Alaska Native Corporation, a Native Hawaiian Organization, a

renewable energy cooperative, or a qualified tax-exempt entity. If an applicant

wholly owns an entity that is the owner

of an applicable facility, and the entity is

disregarded as separate from its owner for

Federal income tax purposes (disregarded

entity), then the applicant, and not the

disregarded entity, is treated as the owner

of the applicable facility for purposes of

the Ownership Criteria. For corporations

incorporated under the authority of either

section 17 of the Indian Reorganization

Act of 1934, 25 U.S.C. 5124 or section

3 of the Oklahoma Indian Welfare Act,

25 U.S.C. 5203, an application may be

made as a Tribal Enterprise. If an appli-

Section 45Y(d)(3) defines the term "applicable year" as the later of the calendar year in which the Secretary determines that the annual greenhouse gas emissions from the production of

electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for calendar year 2022, or

2032. See also proposed §1.45Y-1(c)(3).

5

Bulletin No. 2024–38

615

September 16, 2024

cant is an entity treated as a partnership

for Federal income tax purposes, and an

entity described in proposed §1.48E(h)1(h)(2)(i)(A) through (E) owns at least

a one percent interest (either directly or

indirectly) in each material item of partnership income, gain, loss, deduction, and

credit and is a managing member or general partner (or similar title) under State or

Tribal law of the partnership (or directly

owns 100 percent of the equity interests

in the managing member or general partner) at all times during the existence of the

partnership, the applicable facility will be

deemed to meet the Ownership Criteria. If

the partnership becomes the owner of the

facility after an allocation is made to an

entity described in proposed §1.48E(h)1(h)(2)(i)(A) through (E), the transfer

of the facility to the partnership is not a

disqualification event for purposes of proposed §1.48E(h)-1(m)(5), so long as the

requirements of proposed §1.48E(h)-1(m)

(5) are satisfied. The original applicant

and the successor partnership should refer

to guidance published in the Internal Revenue Bulletin for the procedures to request

a transfer of the Capacity Limitation allocation to the successor partnership.

Currently, these proposed regulations

do not include an Ownership Criteria category for emerging market businesses,

such as those businesses that do not have

large market shares that could be demonstrated by the number of employees,

annual revenue, and other factors. The

Treasury Department and IRS considered

including a category for emerging market

businesses similar to the qualified renewable energy company category under the

section 48(e) Low-Income Communities

Bonus Credit Program and §1.48(e)-1(h)

(2)(vi), but ultimately decided not to retain

the qualified renewable energy company

category for purposes of the Program

under section 48E(h) and these proposed

regulations. The Treasury Department and

IRS request comments on how an administrable emerging market business Ownership Criteria category could be structured,

including what thresholds a definition

should include to define market share

and size, age of business, the number of

employees (both minimum and maxi6

7

mum) and/or annual gross receipts generated by an emerging market business, and

the supporting documentation that could

be provided as part of the application to

verify an applicant meets such criteria.

Additionally, the Treasury Department

and the IRS request comments on any

other appropriate Ownership Criteria that

might be applied, for example the degree

to which a business focuses its efforts on

and delivers benefits to low-income and

disadvantaged communities, and the supporting documentation that could be provided as part of the application to verify

an applicant meets such criteria.

a. Tribal enterprise

A “Tribal enterprise” for purposes of

the Ownership Criteria is an entity that is

(1) owned at least 51 percent directly by

an Indian Tribal government (as defined in

section 30D(g)(9) of the Code), or owned

at least 51 percent indirectly through a

corporation that is wholly owned by the

Indian Tribal government and is created

either under the Tribal laws of the Indian

Tribal government or through a corporation

incorporated under the authority of either

section 17 of the Indian Reorganization Act

of 1934, 25 U.S.C. 5124, or section 3 of the

Oklahoma Indian Welfare Act, 25 U.S.C.

5203, and (2) subject to Tribal government

rules, regulations, and/or codes that regulate the operations of the entity.

b. Alaska Native Corporation

An “Alaska Native Corporation”

for purposes of the Ownership Criteria is defined in section 3 of the Alaska

Native Claims Settlement Act, 43 U.S.C.

1602(m).

c. Native Hawaiian Organization

A “Native Hawaiian Organization”

for purposes of the Ownership Criteria is

defined in 13 CFR 124.3.

d. Renewable energy cooperative

A “renewable energy cooperative” for

purposes of the Ownership Criteria is an

entity that develops applicable facilities

and is either (1) a consumer or purchasing cooperative controlled by its members

with each member having an equal voting

right and with each member having rights

to profit distributions based on patronage as defined by proportion of volume

of energy or energy credits purchased

(kWh), volume of financial benefits delivered ($), or volume of financial payments

made ($), and in which at least 50 percent

of the patronage in the qualified facility is

by cooperative members who are low-income households (as defined in section

48(e)(2)(C)); or (2) a worker cooperative

controlled by its worker-members with

each member having an equal voting right.

e. Qualified tax-exempt entity

A “qualified tax-exempt entity” for

purposes of the Ownership Criteria is:

(1) An organization exempt from the

tax imposed by subtitle A of the Code

by reason of being described in section

501(c)(3) or (d) of the Code;

(2) Any State, the District of Columbia, or

political subdivision thereof, or any agency or

instrumentality of any of the foregoing;

(3) An Indian Tribal government (as

defined in section 30D(g)(9)), a political subdivision thereof, or any agency or

instrumentality of any of the foregoing; or

(4) Any corporation described in section 501(c)(12) operating on a cooperative

basis that is engaged in furnishing electric

energy to persons in rural areas.

2. Geographic criteria

Proposed §1.48E(h)-1(h)(3) would

provide criteria based on geography (Geographic Criteria). The Geographic Criteria category is based on where the facility will be placed in service. Geographic

Criteria would not apply to Category 2

facilities. To meet the Geographic Criteria, a facility would need to be located

in a Persistent Poverty County (PPC)6 as

described in proposed §1.48E(h)-1(h)(3)

(ii) or in certain census tracts identified on

the Climate and Economic Justice Screening Tool (CEJST)7 and as described in

proposed §1.48E(h)-1(h)(3)(iii). Proposed

https://www.ers.usda.gov/data-products/county-typology-codes/.

https://screeningtool.geoplatform.gov/en/#3/33.47/-97.5.

September 16, 2024

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Bulletin No. 2024–38

§1.48E(h)-1(h)(3) would also provide that

applicants who meet the Geographic Criteria at the time of application are considered to continue to meet the Geographic

Criteria for the duration of the recapture

period described in proposed §1.48E(h)1(n)(1) unless the location of the facility

changes.

Proposed §1.48E(h)-1(h)(3)(ii) would

describe a PPC as any county in which 20

percent or more of residents have experienced high rates of poverty over the past

30 years. For purposes of the Program, the

Treasury Department and the IRS propose

using the PPC measure adopted by the

USDA to make this determination. The

most recent measure, which would apply

for the 2025 program year, incorporates

poverty estimates from the 1990 and 2000

censuses, and 2007-2011 and 2017-2021

ACS Survey 5-year averages.8

Proposed §1.48E(h)-1(h)(3)(iii) would

provide that a census tract qualifies under

§1.48E(h)-1(h)(3)(i) if it is described in

the latest official CEJST, as greater than

or equal to the 90th percentile for energy

burden and greater than or equal to the

65th percentile for low income, or as

greater than or equal to the 90th percentile for PM2.5 exposure and greater than

or equal to the 65th percentile for low

income. Proposed §1.48E(h)-1(h)(3)(iii)

(A) through (C) would provide definitions

for terms used in identifying census tracts

described in proposed §1.48E(h)-1(h)(3)

(iii). See CEJST, Methodology & data,

https://screeningtool.geoplatform.gov/

en/methodology for more information on

these terms as applied in the screening

tool.

C. Sub-reservations of allocation for

facilities located in a low-income

community

The Treasury Department and the IRS

anticipate that Category 1 will receive the

largest number of applications, and that

within Category 1, many applications will

involve residential solar facilities that are

smaller in scale and have relatively short

construction completion timelines. Therefore, proposed §1.48E(h)-1(i) would subdivide the Capacity Limitation reservation

8

for facilities seeking a Category 1 allocation with a portion of the Capacity Limitation specifically reserved for eligible residential behind the meter (BTM) facilities,

including rooftop solar. The sub-reservation of a substantial portion of the allocation in Category 1 for eligible residential

BTM facilities would help ensure that

allocations predominantly are awarded

to facilities serving residences and consumers, rather than facilities serving businesses. Proposed §1.48E(h)-1(i) would

reserve the remaining Capacity Limitation

in Category 1 for applicants with front

of the meter (FTM) facilities as well as

non-residential BTM facilities. Proposed

§1.48E(h)-1(i) clarifies that the specific

amounts of the Category 1 sub-reservations will be provided in future guidance

published in the Internal Revenue Bulletin that is applicable to a Program year

based on factors such as promoting efficient allocation of Capacity Limitation

and allowing like-projects to compete for

an allocation. Proposed §1.48E(h)-1(i)

provides that after the sub-reservation

is established in guidance published in

the Internal Revenue Bulletin, it may be

reallocated later in the event it has excess

capacity.

Proposed §1.48E(h)-1(i)(2)(ii) would

define an eligible residential BTM facility as single-family or multi-family residential applicable facility that does not

meet the requirements for Category 3 and

is BTM. Proposed §1.48E(h)-1(i)(2)(ii)

would provide that an applicable facility is

residential if it is uses energy to generate

electricity for use in a dwelling unit that is

used as a residence. Proposed §1.48E(h)1(i)(2)(i) would define an applicable facility as BTM if: (1) it is connected with an

electrical connection between the facility

and the panelboard or sub-panelboard of

the site where the facility is located, (2) it

is to be connected on the customer side of

a utility service meter before it connects

to a distribution or transmission system

(that is, before it connects to the electricity

grid), and (3) its primary purpose is to provide electricity to the utility customer of

the site where the facility is located. This

also includes systems not connected to a

grid and that may not have a utility service

meter, and whose primary purpose is to

serve the electricity demand of the owner

of the site where the system is located.

Proposed §1.48E(h)-1(i)(2)(iii) would

define a facility as FTM if it is directly

connected to a grid and its primary purpose is to provide electricity to one or

more offsite locations via such grid or utility meters with which it does not have an

electrical connection; alternatively, FTM

is defined as a facility that is not BTM.

For purposes of Category 4 facilities, an

applicable facility is also FTM if 50 percent or more of its electricity generation

on an annual basis is physically exported

to the broader electricity grid.

D. Application and selection process

Section 48E(h)(4)(A) provides that “[i]

n establishing such program and to carry

out the purposes of this paragraph, the Secretary shall provide procedures to allow

for an efficient allocation process.” The

Treasury Department and the IRS anticipate that the number of eligible applicants

seeking an allocation may exceed the total

Capacity Limitation allocation available

to be allocated. Accordingly, the Treasury

Department and the IRS are designing an

application process that both ensures that

allocations are awarded to facilities that

advance the Program goals and facilitates

an efficient allocation process.

Proposed §1.48E(h)-1(j)(1) provides

that applications for a Capacity Limitation

allocation will be evaluated according to

the procedures specified in guidance published in the Internal Revenue Bulletin.

Based on feedback received with respect

to the section 48(e) Low-Income Communities Bonus Credit Program (a similar program applicable solely to qualified

solar and wind facilities in 2023 and 2024)

and an assessment of operational capabilities set up to administer the Program, the

Treasury Department and the IRS expect

to provide a process that includes one or

more initial application windows in which

applications received by a certain time

and date would be evaluated together, followed by a rolling application process if

Capacity Limitation is not fully allocated

after an initial application window closes.

https://www.ers.usda.gov/data-products/poverty-area-measures.

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September 16, 2024

Facilities that meet at least one of the two

categories of specified Ownership and

Geographic criteria (Additional Selection Criteria, discussed in part V.B. of this

Explanation of Provisions) would receive

priority for an allocation within each facility category described in section 48E(h)

(2)(A)(iii).

Because section 48E(h) is subject to

a finite annual Capacity Limitation, the

Treasury Department and the IRS think

that allocating amounts of Capacity Limitation to a group of related qualified

facilities with an aggregate total maximum net output equal to or greater than

five megawatts (as measured in alternating current) could concentrate allocations

in a smaller number of communities,

which would not further the purpose of

efficient allocation of a Federal tax credit

program with a national impact. The

Treasury Department and the IRS additionally believe that although such facilities could be provided a small capacity

allocation rather than be deprioritized,

providing a small allocation to a group

of related qualified facilities with a much

larger aggregate capacity is not likely to

be determinative of the deployment of

those qualified facilities and thus would

not advance the goals of the Program

to incentivize additional deployment of

qualified facilities in low-income communities. The Treasury Department and

the IRS therefore intend to deprioritize

review of applications for an applicable

facility that together with other qualified

facilities (1) share a point of interconnection, (2) produce electricity using the

same technology, (3) are owned by the

same taxpayer, and (4) have an aggregate

total maximum net output (as determined

by the sum of the maximum net output of

the applicable facility and each qualified

facility under proposed §1.48E(h)-1(b)

(3)(ii)) equal to or greater than five megawatts (alternating current). Deprioritized

applications will be considered after

other applications in the current allocation round, or a subsequent allocation

round at the Secretary’s discretion. An

application for review may be deemed to

not be part of a group of related qualified

facilities with a total combined maximum

net output equal to or greater than five

megawatts if it has an interconnection

agreement for less than five megawatts.

September 16, 2024

Section 48E(h)(4)(A) directs the Secretary to provide procedures to allow for

an efficient allocation process. Additionally, section 48E(h)(4)(E)(i) requires that

facilities allocated an amount of Capacity

Limitation be placed in service within four

years of the date of allocation. To promote

efficient allocation, and to ensure that allocations will be awarded to facilities that

are sufficiently viable and well defined to

allow for a review for an allocation, and

sufficiently advanced such that they are

likely to meet the four-year placed-in-service deadline, proposed §1.48E(h)-1(j)

(2) would require applicants to submit

certain information, documentation, and

attestations when applying for an allocation that demonstrate project eligibility

and viability. Proposed §1.48E(h)-1(j)(2)

would clarify that the specific information, documentation, and attestation to be

submitted will be provided in future guidance published in the Internal Revenue

Bulletin that is applicable to a Program

year. Details regarding the application

process will be provided in future procedural guidance published in the Internal

Revenue Bulletin. Procedural guidance

for the 2025 Program year will be issued

later this year.

The Treasury Department and the IRS

expect that the specific application information, documentation, and attestation

requirements provided in procedural guidance applicable to the Program published

in the Internal Revenue Bulletin will

be substantially similar to requirements

applicable the section 48(e) Low-Income

Communities Bonus Program provided

in Revenue Procedure 2024-19, 202416 I.R.B. 899. Like the section 48(e)

program, some requirements may differ

for FTM and BTM facilities and other

requirements may differ by Facility Category and Additional Selection Criteria.

The Treasury Department and the IRS will

periodically assess the Program and previous applications to determine any changes

to the Program’s application process. The

Treasury Department and the IRS request

comments on all aspects of the application and selection process but specifically

request comments on whether (1) modifications are necessary with respect to any

of the application requirements so that

the Program is available to all applicable

facilities under the Program, and (2) cer-

618

tain facility categories can demonstrate

project viability with other types of documentation.

Proposed §1.48E(h)-1(j)(3) would provide that there is no administrative appeal

of Capacity Limitation allocation decisions.

E. Documentation and attestations to be

submitted when placed in service

The Treasury Department and the

IRS also propose in §1.48E(h)-1(k)(1) to

require facilities that received a Capacity

Limitation allocation to report to the DOE

the date the eligible property was placed

in service. Proposed §1.48E(h)-1(k)(1)

also would require that this report be made

through the same portal used to submit the

original application for allocation.

Proposed §1.48E(h)-1(k)(2) would

require facilities that received a Capacity

Limitation to submit additional documentation or complete additional attestations

with this reporting. At the time of application, applicants would not necessarily be able to demonstrate compliance

with certain eligibility requirements, as

the facility would not yet be operating

at that time. Requiring placed in service

reporting would allow for final verification that the facilities that were awarded a

Capacity Limitation Allocation have met

certain eligibility requirements under the

Program. Therefore, proposed §1.48E(h)1(k)(2) would require facilities awarded

a Capacity Limitation to submit final eligibility information at placed in service

time. At the time that the owner reports

that eligible property has been placed in

service the owner also must confirm information about the facility and submit additional documentation to prove the facility

is still eligible to maintain the allocation

and the increased applicable percentage

under section 48E(h)(1) as specified in

guidance published in the Internal Revenue Bulletin.

Proposed §1.48E(h)-1(k)(3) would provide that the DOE will review the placed

in service documentation and attestations

to determine if the facility meets the eligibility criteria for the owner to claim

an increased applicable percentage. The

DOE then provides a recommendation to

the IRS regarding whether the facility continues to meet the eligibility requirements

Bulletin No. 2024–38

for the facility to retain its allocation or if

the facility should be disqualified (as provided in proposed §1.48E(h)-1(m)). Based

on DOE’s recommendation, the IRS will

decide whether the facility should retain

its allocation or if the facility should be

disqualified and will notify the applicant of its decision. Each applicant must

receive confirmation from the IRS that the

DOE has reviewed the placed in service

submissions, and that eligibility is confirmed, prior to the owner (or a partner or

shareholder in the case of a partnership

or S corporation) claiming the increased

credit amount on Form 3468, Investment

Credit (or Form 3800, General Business

Credit), or successor form, or, if eligible,

making a transfer election under section

6418 of the Code, or an elective payment

election under section 6417 of the Code.

Proposed §1.48E(h)-1(k)(4) would

provide a definition of placed in service.

Pursuant to proposed §1.48E(h)-1(k)(4),

for purposes of §1.48E(h)-1(k), eligible

property is considered placed in service

in the earlier of the following taxable

years: (i) the taxable year in which, under

the taxpayer’s depreciation practice, the

period for depreciation with respect to

such eligible property begins; or (ii) the

taxable year in which the eligible property is placed in a condition or state of

readiness and availability for a specifically assigned function, whether in a

trade or business or in the production of

income.

F. Placed in service prior to allocation

award

The Treasury Department and the IRS

propose in §1.48E(h)-1(l) that facilities

placed in service prior to being awarded

an allocation of Capacity Limitation

would not be eligible to receive an allocation. One of the goals of the Program is to

increase adoption of and access to renewable energy facilities in low-income and

other communities with environmental

justice concerns. Awarding an allocation

to facilities that have already been placed

in service would be inconsistent with this

goal. Further, section 48E(h)(4)(E)(i)

provides that a facility must be placed in

service within four years of receiving an

allocation of Capacity Limitation, indicating that allocations should be made

Bulletin No. 2024–38

to new facilities that have not yet been

placed in service. Accordingly, the Treasury Department and the IRS propose that

facilities placed in service prior to being

awarded an allocation of Capacity Limitation would not be eligible to receive an

allocation.

VI. Post-Allocation Compliance

A. Disqualification after receiving an

allocation

The Treasury Department and the

IRS recognize that because, under section 48E(h)(4)(E)(i), an applicant has

four years after the date of an allocation

of Capacity Limitation to place eligible

property in service, circumstances may

change prior to the property being placed

in service such that a facility is no longer eligible for the allocation it received.

In addition, to promote an efficient allocation process consistent with section

48E(h)(4)(A), the Treasury Department

and the IRS want to discourage material

changes in project plans, such as significant reductions in facility size that tie up

Capacity Limitation that could otherwise

be awarded to other qualified facilities.

Accordingly, proposed §1.48E(h)-1(m)

would provide that a facility that was

awarded a Capacity Limitation allocation

is disqualified and loses its allocation if

prior to or upon the facility being placed

in service: (1) the location where the

facility will be placed in service changes;

(2) the maximum net output of the facility increases such that it exceeds the less

than five megawatt requirement provided

in section 48E(h)(2)(A)(ii) or the nameplate capacity decreases by the greater of

2 kW or 25 percent of the Capacity Limitation awarded in the allocation; (3) the

facility cannot satisfy the financial benefits requirements under section 48E(h)

(2)(B)(ii) and proposed §1.48E(h)-1(e)

as planned (if applicable) or cannot satisfy the financial benefits requirements

under section 48E(h)(2)(C) and proposed

§1.48E(h)-1(f) as planned (if applicable); (4) the eligible property that is part

of the facility that received the Capacity

Limitation allocation is not placed in service within four years after the date the

applicant was notified of the allocation of

Capacity Limitation to the facility; or (5)

619

the facility received a Capacity Limitation allocation based, in part, on meeting

the Ownership Criteria and ownership of

the facility changes prior to the facility

being placed in service, unless the original applicant transfers the facility to an

entity treated as a partnership for Federal

income tax purposes and retains at least

a one percent interest (either directly or

indirectly) in each material item of partnership income, gain, loss, deduction, and

credit of such partnership and is a managing member or general partner (or similar

title) under State or Tribal law of the partnership (or directly owns 100 percent of

the equity interests in the managing member or general partner) at all times during

the existence of the partnership.

B. Recapture of section 48E(h) Increase

Section 48E(h)(5) requires the Secretary, by regulations or other guidance, to

provide rules for recapturing the benefit of

any section 48E(h) Increase with respect

to any property that ceases to be property

eligible for such section 48E(h) Increase

(but that does not cease to be investment

credit property within the meaning of section 50(a)). The period and percentage of

such recapture is determined under rules

similar to the rules of section 50(a). To

the extent provided by the Secretary, such

recapture may not apply with respect to

any property if, within 12 months after

the date the applicant becomes aware (or

reasonably should have become aware)

of such property ceasing to be property

eligible for such section 48E(h) Increase,

the eligibility of such property for such

section 48E(h) Increase is restored. Such

restoration of a section 48E(h) Increase is

not available more than once with respect

to any facility.

Proposed §1.48E(h)-1(n)(1) would

provide that if, at any time during the fiveyear recapture period beginning on the

date that an applicable facility under section 48E(h) is placed in service, there is a

recapture event under proposed §1.48E(h)1(n)(3) with respect to such property, then

the Federal income tax imposed on the

taxpayer by chapter 1 of the Code for the

taxable year in which the recapture event

occurs is increased by the recapture percentage of the benefit of the increase in the

section 48E credit. The recapture percent-

September 16, 2024

age is determined according to the table

provided in section 50(a)(1)(B).

Proposed §1.48E(h)-1(n)(2) would

provide that recapture under proposed

§1.48E(h)-1(n)(1) may not apply with

respect to any property if, within 12

months after the date the applicant

becomes aware (or reasonably should

have become aware) of such property

ceasing to be property eligible for such

increase in the credit allowed under section 48E(a), the eligibility of such property for such increase pursuant to section

48E(h) is restored. Such restoration of an

increase pursuant to section 48E(h) is not

available more than once with respect to

any facility.

Proposed §1.48E(h)-1(n)(3) would

provide that the following circumstances

result in a recapture event if the property

ceases to be eligible for the increased

credit under section 48E(h): (1) property described in section 48E(h)(2)(A)

(iii)(II) fails to provide financial benefits over the 5-year period after its original placed-in-service date; (2) property

described under section 48E(h)(2)(B)

ceases to allocate the financial benefits equitably among the occupants of

the dwelling units, such as not passing

on to residents the required net energy

savings of the electricity; (3) property

described under section 48E(h)(2)(C)

ceases to provide at least 50 percent of

the financial benefits of the electricity

produced to Qualifying Households as

described under section 48E(h)(2)(C)(i)

or (ii), or fails to provide those households the required minimum 30 percent

bill credit discount rate; (4) for property

described under section 48E(h)(2)(B),

the residential rental building the facility is a part of ceases to participate in a

covered housing program or any other

housing program described in section

48E(h)(2)(B)(i), if applicable; and (5) a

facility increases its maximum net output such that the facility’s maximum net

output is 5 MW AC or greater.

Proposed §1.48E(h)-1(n)(4) would

provide that any event that results in recapture under section 50(a) also will result in

recapture of the benefit of the increase in

the section 48E credit by reason of section 48E(h). The exception to the application of recapture provided in proposed

§1.48E(h)-1(n)(2) does not apply in the

September 16, 2024

case of a recapture event under section

50(a).

Proposed Applicability Date

These regulations are proposed to

apply to qualified facilities placed in service after December 31, 2024, and during

taxable years ending after the date the final

regulations are filed for public inspection

by the Office of the Federal Register.

Special Analysis

I. Regulatory Planning and Review –

Economic Analysis

Pursuant to the Memorandum of

Agreement, Review of Treasury Regulations under Executive Order 12866 (June

9, 2023), tax regulatory actions issued by

the IRS are not subject to the requirements

of section 6 of Executive Order 12866, as

amended. Therefore, a regulatory impact

assessment is not required.

II. Paperwork Reduction Act

The Paperwork Reduction Act of 1995

(44 U.S.C. 3501-3520) (PRA) requires

that a Federal agency obtain the approval

of OMB before collecting information

from the public, whether such collection

of information is mandatory, voluntary,

or required to obtain or retain a benefit.

The collections of information in these

proposed regulations contain reporting

and recordkeeping requirements that are

required to obtain the section 48E(h)

Increase. This information in the collections of information would generally

be used by the IRS and the DOE for tax

compliance purposes and by taxpayers

to facilitate proper reporting and compliance. A Federal agency may not conduct

or sponsor, and a person is not required

to respond to, a collection of information

unless the collection of information displays a valid control number.

The recordkeeping requirements mentioned within this proposed regulation

are considered general tax records under

§1.6001-1(e). These records are required

for the IRS to validate that taxpayers have

met the regulatory requirements and are

entitled to receive section 48E(h) Increase.

For PRA purposes, general tax records are

620

already approved by OMB under 15450123 for business filers, 1545-0074 for

individual filers, and 1545-0047 for tax-exempt organizations.

The proposed regulations also provide

reporting requirements related to providing attestations and supporting documentation for initial application, supplemental

documentation for specific facilities, and

to confirm a facility is placed in service

as detailed in this NPRM. These attestations and documentation would allow

IRS to allocate Capacity Limitation and

ensure taxpayers keep and maintain compliance for the credits. To assist with the

collections of information, the DOE will

provide certain administration services

for the Program. Among other things, the

DOE will establish a website portal to

review the applications for eligibility criteria and will provide recommendations to

the IRS regarding the selection of applications for an allocation of Capacity Limitation. These collection requirements will

be submitted to the Office of Management

and Budget (OMB) under 1545-NEW

for review and approval in accordance

with 5 CFR 1320.11. The likely respondents are business filers, individual filers, and tax-exempt organization filers. A

­summary of paperwork burden estimates

for the application and attestations is as

follows:

Estimated number of respondents:

70,000

Estimated burden per response: 60

minutes

Estimated frequency of response: 1 for

initial applications, 1 for follow-up documentation, and 1 for projects placed in

service.

Estimated total burden hours: 210,000

burden hours

IRS will be soliciting feedback on the

collection requirements for the application

and attestations. Commenters are strongly

encouraged to submit public comments

electronically. Written comments and

recommendations for the proposed information collection should be sent to www.

reginfo.gov/public/do/PRAMain. Comments on the collection of information

should be received by October 3, 2024.

Comments are specifically requested concerning:

(1) Whether the proposed collection

of information is necessary for the proper

Bulletin No. 2024–38

performance of the functions of the IRS,

including whether the information will

have practical utility;

(2) The accuracy of the estimated burden associated with the proposed collection of information;

(3) How the quality, utility, and clarity

of the information to be collected may be

enhanced;

(4) How the burden of complying with

the proposed collection of information

may be minimized, including through the

application of automated collection techniques or other forms of information technology; and

(5) Estimates of capital or start-up

costs and costs of operation, maintenance,

and purchase of services to provide information.

III. Regulatory Flexibility Act

The Regulatory Flexibility Act (5

U.S.C. 601 et seq.) (RFA) imposes certain

requirements with respect to Federal rules

that are subject to the notice and comment

requirements of section 553(b) of the

Administrative Procedure Act (5 U.S.C.

551 et seq.) and that are likely to have a

significant economic impact on a substantial number of small entities. Unless

an agency determines that a proposal is

not likely to have a significant economic

impact on a substantial number of small

entities, section 603 of the RFA requires

the agency to present an initial regulatory

flexibility analysis (IRFA) of the proposed

rule. The Treasury Department and the IRS

have not determined whether the proposed

rule would likely have a significant economic impact on a substantial number of

small entities. This determination requires

further study and an IRFA is provided in

these proposed regulations. The Treasury

Department and the IRS invite comments

on both the number of entities affected

and the economic impact on small entities.

Pursuant to section 7805(f), this notice

of proposed rulemaking has been submitted to the Chief Counsel of Advocacy of

the Small Business Administration for

comment on its impact on small business.

1. Need for and Objectives of the Rule

The proposed regulations would provide guidance to potential applicants to

Bulletin No. 2024–38

determine eligibility to apply for an allocation of Capacity Limitation under section 48E(h), and, in general, to taxpayers

awarded an allocation of Capacity Limitation to understand the requirement to

claim the section 48E(h) Increase. The

proposed regulations are expected to

encourage applicants to invest in applicable facilities. Thus, the Treasury Department and the IRS intend and expect that

the proposed rule will deliver benefits

across the economy and environment that

will beneficially impact various industries.

2. Affected Small Entities

The Small Business Administration

estimates in its 2018 Small Business Profile that 99.9 percent of United States businesses meet its definition of a small business. The applicability of these proposed

regulations does not depend on the size of

the business, as defined by the Small Business Administration. As described more

fully in the preamble to this proposed regulation and in this IRFA, these rules may

affect a variety of different businesses

across serval different industries.

The Treasury Department and the IRS

expect to receive more information on

the impact on small businesses through

comments on this proposed rule and again

when participation in the Program commences.

3. Impact of the Rules

The recordkeeping and reporting

requirements would increase for applicants that participate in the Program.

Although the Treasury Department and

the IRS do not have sufficient data to

determine precisely the likely extent of

the increased costs of compliance, the

estimated burden of complying with the

recordkeeping and reporting requirements

are described in the Paperwork Reduction

Act section of the preamble.

4. Alternatives Considered

The Treasury Department and the IRS

considered alternatives to the proposed

regulations. For example, the Treasury

Department and the IRS considered

requests from stakeholders that potential

applicants be able to place a facility in

621

service before applying for or receiving

an allocation of Capacity Limitation. The

Treasury Department and IRS determined

it would not be possible to accommodate

this request in the proposed regulations

because the statutory language under

section 48E(h)(4)(E)(i) requires that the

facility be placed in service by a date that

is 4 years after the date of the allocation.

Moreover, facilities that were placed in

service prior to the allocation process do

not increase adoption of and access to

renewable energy facilities, as compared

to the absence of the Program, and so do

not further Program goals.

Additionally, the Treasury Department

and IRS considered proposing a variety

of bill credit discounts for Category 4

qualified low-income benefit project facilities, including the 20 percent bill credit

discount rate used in the Low-Income

Communities Bonus Credit Program

established under section 48(e). However,

to ensure that low-income customers are

receiving meaningful financial benefits,

the Treasury Department and the IRS

decided to propose a 30 percent bill credit

discount for the Program but are also

requesting comments on whether this is

the most appropriate bill credit discount

rate for the Program and whether a transition rule to achieve this bill discount rate

is necessary.

Another example is the revisions to the

list of eligible covered housing programs

that can be found in the Explanation of

Provisions section of this document. In

the preamble to Treasury Decision 9979,

applicable to the Low-Income Communities Bonus Credit Program established

under section 48(e), the Treasury Department and the IRS included as an eligible

covered housing program, HUD tenantbased rental assistance under section 8 of

the United States Housing Act of 1937.

The Treasury Department and IRS considered retaining tenant-based housing

assistance programs. However, after

consulting with HUD, it was determined

that tenant-based assistance is assistance

that can only be attributed to a particular

tenant, and not a building. Under section

48E(h)(2)(B), for a facility to qualify as a

being part of a qualified low-income residential building project, the facility must

be installed on a residential rental building that participates in a covered housing

September 16, 2024

program (that is, a Qualified Residential

Property). Tenant-based housing assistance programs applicable to a particular tenant do not qualify the building in

which the tenant resides as participating

in a covered housing program. Therefore, because tenant-based assistance

under Section 8 does not comport with

the requirements under section 48E(h)

(2)(B), tenant-based housing assistance

programs under Section 8, have been

removed as an eligible covered housing

program for purposes of the Program

under section 48E(h).

Additionally, the Treasury Department

and IRS considered whether to propose to

include the sub-reservation for Category

1 facilities for eligible residential BTM

facilities but concluded this sub-reservation should be proposed for the Program.

The sub-reservation of a substantial portion of the allocation in Category 1 for

eligible residential BTM facilities would

help ensure that allocations are predominantly awarded to facilities serving residences and consumers, rather than facilities serving businesses.

Comments are requested on the

requirements in the proposed regulations,

including specifically, whether there are

less burdensome alternatives that ensure

the Treasury Department and IRS and

DOE can efficiently administer the Program.

5. Duplicative, Overlapping, or

Conflicting Federal Rules

The proposed rule would not duplicate,

overlap, or conflict with any relevant Federal rules. As discussed in the Explanation

of Provisions, the proposed rules would

merely provide requirements, procedures,

and definitions related to the Program.

The Treasury Department and the IRS

invite input from interested members of

the public about identifying and avoiding

overlapping, duplicative, or conflicting

requirements.

IV. Unfunded Mandates Reform Act

Section 202 of the Unfunded Mandates

Reform Act of 1995 (UMRA) requires

that agencies assess anticipated costs and

benefits and take certain other actions

before issuing a final rule that includes

September 16, 2024

any Federal mandate that may result in

expenditures in any one year by a State,

local, or Indian Tribal government, in the

aggregate, or by the private sector, of $100

million (updated annually for inflation).

These proposed regulations do not include

any Federal mandate that may result in

expenditures by State, local, or Indian

Tribal governments, or by the private sector in excess of that threshold.

V. Executive Order 13132: Federalism

Executive Order 13132 (Federalism)

prohibits an agency from publishing any

rule that has federalism implications if

the rule either imposes substantial, direct

compliance costs on State and local governments, and is not required by statute,

or preempts State law, unless the agency

meets the consultation and funding

requirements of section 6 of the Executive order. These proposed regulations do

not have federalism implications and does

not impose substantial direct compliance

costs on State and local governments or

preempt State law within the meaning of

the Executive order.

VI. Executive Order 13175: Consultation

and Coordination With Indian Tribal

Governments

Executive Order 13175 (Consultation

and Coordination With Indian Tribal Governments) prohibits an agency from publishing any rule that has Tribal implications if the rule either imposes substantial,

direct compliance costs on Indian Tribal

governments, and is not required by statute, or preempts Tribal law, unless the

agency meets the consultation and funding requirements of section 5 of the Executive order. These proposed regulations

do not have substantial direct effects on

one or more Federally recognized Indian

tribes and does not impose substantial

direct compliance costs on Indian Tribal

governments within the meaning of the

Executive order.

Nevertheless, consistent with Treasury’s Tribal Consultation Policy, the

Treasury Department and the IRS will

hold a consultation with Tribal leaders

requesting assistance in addressing questions related to these proposed regulations.

622

Comments and Public Hearing

Before these proposed amendments to

the regulations are adopted as final regulations, consideration will be given to comments regarding the notice of proposed

rulemaking that are submitted timely to

the IRS as prescribed in the preamble

under the ADDRESSES section. The

Treasury Department and the IRS request

comments on all aspects of the proposed

regulations. All comments will be made

available at https://www.regulations.gov.

Once submitted to the Federal eRulemaking Portal, comments cannot be edited or

withdrawn.

A public hearing with respect to this

notice of proposed rulemaking has been

scheduled for October 17, 2024, beginning at 10 a.m. EST. The hearing scheduled for October 17, 2024, will be held in

the Auditorium at the Internal Revenue

Building, 1111 Constitution Avenue, NW.,

Washington, D.C. Due to building security

procedures, visitors must enter at the Constitution Avenue entrance. In addition, all

visitors must present photo identification

to enter the building. Because of access

restrictions, visitors will not be admitted

beyond the immediate entrance area more

than 30 minutes before the hearing starts.

Participants may alternatively attend the

public hearing by telephone.

The rules of 26 CFR 601.601(a)(3)

apply to the public hearing. Persons who

wish to present oral comments at the

public hearing must submit an outline of

the topics to be discussed and the time

to be devoted to each topic by October

3, 2024. A period of 10 minutes will be

allotted to each person for making comments. An agenda showing the scheduling

of the speakers will be prepared after the

deadline for receiving outlines has passed.

Copies of the agenda will be available

free of charge at the public hearing. If no

outline of the topics to be discussed at the

public hearing is received by October 3,

2024, the public hearing will be cancelled.

If the public hearing is cancelled, a notice

of cancellation of the public hearing will

be published in the Federal Register.

Individuals who want to testify in person at the public hearing must send an

email to publichearings@irs.gov to have

your name added to the building access

list. The subject line of the email must

Bulletin No. 2024–38

contain the regulation number REG108920-24 and the language TESTIFY In

Person. For example, the subject line may

say: Request to TESTIFY In Person at

Hearing for REG-108920-24.

Individuals who want to testify by telephone at the public hearing must send an

email to publichearings@irs.gov to receive

the telephone number and access code for

the public hearing. The subject line of the

email must contain the regulation number

REG-108920-24 and the language TESTIFY

Telephonically. For example, the subject line

may say: Request to TESTIFY Telephonically at Hearing for REG-108920-24.

Individuals who want to attend the public hearing in person without testifying must

also send an email to publichearings@irs.

gov to have your name added to the building access list. The subject line of the email

must contain the regulation number REG108920-24 and the language ATTEND In

Person. For example, the subject line may

say: Request to ATTEND Hearing In Person for REG-108920-24. Requests to attend

the public hearing must be received by 5

p.m. EST on October 15, 2024.

Individuals who want to attend the public hearing by telephone without testifying

must also send an email to publichearings@irs.gov to receive the telephone

number and access code for the public

hearing. The subject line of the email

must contain the regulation number REG108920-24 and the language ATTEND

Hearing Telephonically. For example, the

subject line may say: Request to ATTEND

Hearing Telephonically for REG-10892024. Requests to attend the public hearing

must be received by 5 p.m. EST on October 15, 2024.

Public hearings will be made accessible to people with disabilities. To request

special assistance during a public hearing

please contact the Publications and Regulations Section of the Office of Associate

Chief Counsel (Procedure and Administration) by sending an email to publichearings@irs.gov (preferred) or by telephone

at (202) 317-6901 (not a toll-free number)

and must be received by October 11, 2024.

Statement of Availability of IRS

Documents

Guidance cited in this preamble is published in the Internal Revenue Bulletin

Bulletin No. 2024–38

and is available from the Superintendent

of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by

visiting the IRS website at https://www.

irs.gov.

Drafting Information

The principal author of these proposed

rules is the Office of the Associate Chief

Counsel (Passthroughs and Special Industries), IRS. However, other personnel

from the Treasury Department and the

IRS participated in their development.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the

Regulations

Accordingly, the Treasury Department

and IRS propose to amend 26 CFR part 1

as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for part 1 is amended by adding an entry

for §1.48E(h)-1 in numerical order to read

in part as follows:

Authority: 26 U.S.C. 7805 * * *

*****

Section 1.48E(h)-1 also issued under

26 U.S.C. 48E(h) and (i).

*****

Par. 2. Sections 1.48E(h)-0 and

1.48E(h)-1 are added to read as follows:

§1.48E(h)-0 Table of contents.

This section lists the captions contained in §1.48E(h)-1.

§1.48E(h)-1 Clean Electricity LowIncome Communities Bonus Credit

Amount Program.

(a) Overview.

(1) General rule.

(2) Certain terms used in this section.

(i) Applicants.

(ii) Internal Revenue Bulletin.

(b) Applicable facility defined.

(1) In general.

623

(2) Facility categories.

(i) Category 1 facility.

(ii) Category 2 facility.

(iii) Category 3 facility.

(iv) Category 4 facility.

(3) Less than five megawatts requirement.

(i) In general.

(ii) Nameplate capacity for purposes of

the less than five megawatts requirement.

(c) Eligible property.

(d) Location.

(1) In general.

(2) Nameplate Capacity Test for Location.

(3) Nameplate capacity for purpose of

Nameplate Capacity Test for Location.

(e) Financial benefits for a Category 3

facility.

(1) In general.

(2) Threshold requirement.

(3) Financial value of the electricity

produced by the facility.

(4) Gross financial value.

(5) Net financial value defined.

(i) Common ownership.

(ii) Third-party ownership.

(iii) Equitable allocation of financial

benefits.

(A) If financial value distributed via

utility bill savings.

(B) If financial value is not distributed

via utility bill savings.

(6) Benefits sharing statement.

(i) In general.

(ii) Notification requirement.

(f) Financial benefits for a Category 4

facility.

(1) In general.

(2) Bill credit discount rate.

(i) In general.

(ii) No or nominal cost of participation.

(iii) Other value from electricity production.

(iv) Calculation on annual basis.

(v) Examples.

(A) Example 1.

(B) Example 2.

(C) Example 3.

(3) Low-income verification.

(i) In general.

(ii) Methods of verification.

(A) Categorical eligibility.

(B) Other income verification methods.

(C) Impermissible verification method.

(g) Annual Capacity Limitation.

(1) In general.

September 16, 2024

(2) Carryover of unallocated Annual

Capacity Limitation.

(h) Reservations of Capacity Limitation allocation for facilities that meet certain Additional Selection Criteria.

(1) In general.

(2) Ownership criteria.

(i) In general.

(ii) Indirect ownership.

(A) Disregarded entities.

(B) Partner qualifying partnership

under ownership criteria.

(iii) Tribal enterprise.

(iv) Alaska Native Corporation.

(v) Native Hawaiian Organization.

(vi) Renewable energy cooperative.

(vii) Qualified tax-exempt entity.

(3) Geographic criteria.

(i) In general.

(ii) Persistent Poverty County.

(iii) Certain census tracts under Climate and Economic Justice Screening

Tool.

(A) Energy burden.

(B) PM2.5.

(C) Low-income.

(i) Sub-reservations of allocation for

Category 1 facilities.

(1) In general.

(2) Definitions.

(i) Behind the meter (BTM) facility.

(ii) Eligible residential BTM facility.

(iii) FTM facility.

(j) Process of application evaluation.

(1) In general.

(2) Information required as part of

application.

(3) No administrative appeal of Capacity Limitation allocation decisions.

(k) Placed in service.

(1) Requirement to report date placed

in service.

(2) Requirement to submit final eligibility information at placed in service

time.

(3) DOE confirmation.

(4) Definition of placed in service.

(l) Facilities placed in service prior to

an allocation award.

(1) In general.

(2) Rejection or rescission.

(m) Disqualification.

(n) Recapture of section 48E(h)

Increase to the section 48E(a) credit.

(1) In general.

(2) Exception to application of recapture.

September 16, 2024

(3) Recapture events.

(4) Section 50(a) recapture.

(o) Applicability date.

§1.48E(h)-1 Clean Electricity LowIncome Communities Bonus Credit

Amount Program.

(a) Overview—(1) General rule. For

purposes of section 46 of the Internal

Revenue Code (Code), if an allocation of

the environmental justice capacity limitation (Capacity Limitation) is made with

respect to eligible property (as defined in

paragraph (c) of this section) that is part of

any applicable facility (as defined in paragraph (b) of this section) placed in service

in connection with low-income communities under the Clean Electricity Low-Income Communities Bonus Credit Amount

Program (Program) established under section 48E(h)(4), the applicable percentage

used to calculate the amount of the clean

electricity investment credit determined

under section 48E(a) (section 48E credit)

is increased under section 48E(h)(1).

(2) Certain terms used in this section.

In this section:

(i) Applicants. The terms applicant and

taxpayer are used interchangeably as the

context may require.

(ii) Internal Revenue Bulletin. The term

Internal Revenue Bulletin has the meaning

provided in §601.601 of this chapter.

(b) Applicable facility defined—(1) In

general. An applicable facility means any

qualified facility (as defined in section

48E(b)(3)) that—

(i) Is a non-combustion and gasification facility for which the Secretary of the

Treasury or her delegate has determined

has a greenhouse gas (GHG) emissions

rate of not greater than zero in guidance

published either in the Federal Register

or in the Internal Revenue Bulletin as

of the opening date for a Program year,

which the Internal Revenue Service will

publicly announce;

(ii) Has a maximum net output of less

than 5 megawatts (MW) (as measured in

alternating current (AC)); and

(iii) Is described in at least one of

the four categories described in section

48E(h)(2)(A)(iii) and paragraph (b)(2) of

this section.

(2) Facility categories—(i) Category

1 facility. A facility is a Category 1 facil-

624

ity if it is located in a low-income community. The term low-income community

generally is defined under section 45D(e)

(1) of the Code as any population census

tract for which the poverty rate is at least

20 percent based on the most recently

released American Community Survey

(ACS) low-income community data currently used for the New Markets Tax

Credit (NMTC) under section 45D, or, in

the case of a tract not located within a metropolitan area, the median family income

for such tract does not exceed 80 percent

of statewide median family income, or, in

the case of a tract located within a metropolitan area, the median family income for

such tract does not exceed 80 percent of the

greater of statewide median family income

or the metropolitan area median family

income. The term low-income community

also includes the modifications in section

45D(e)(4) and (5) for tracts with low population and modification of the income

requirement for census tracts with high

migration rural counties. Low-income

community information for NMTC can be

found at https://www.cdfifund.gov/cims3.

For purposes of this paragraph (b)(2)(i),

if updated ACS low-income community

data is released for the NMTC program,

a taxpayer can choose to base the poverty

rate for any population census tract on

either the prior version of the ACS low-income community data for the NMTC

program or the updated ACS low-income

community data for the NMTC program

for a period of 1 year following the date

of the release of the updated data. After

the 1-year transition period, the updated

ACS low-income community data for the

NMTC program must be used to determine the poverty rate for any population

census tract. Population census tracts that

satisfy the definition of low-income community at the time of application are considered to continue to meet the definition

of low-income community for the duration of the recapture period described in

paragraph (n)(1) of this section unless the

location of the facility changes.

(ii) Category 2 facility. A facility is a

Category 2 facility if it is located on Indian

land. The term Indian land is defined in

section 2601(2) of the Energy Policy Act

of 1992 (25 U.S.C. 3501(2)).

(iii) Category 3 facility. A facility is a

Category 3 facility if it is part of a quali-

Bulletin No. 2024–38

fied low-income residential building project. A facility will be treated as part of a

qualified low-income residential building

project if such facility is installed on a

residential rental building that participates

in a covered housing program or other

affordable housing program described in

section 48E(h)(2)(B)(i) (Qualified Residential Property) and the financial benefits of the electricity produced by such

facility are allocated equitably among the

occupants of the dwelling units of such

building as provided in paragraph (e) of

this section. A Qualified Residential Property could either be a multifamily rental

property or single-family rental property.

However, the building, and not merely

the tenants, must participate in a covered

housing program or other affordable housing program described in section 48E(h)

(2)(B)(i). A facility does not need to be

installed directly on the building to be

considered installed on a Qualified Residential Property if the facility is installed

on the same or an adjacent parcel of land

as the Qualified Residential Property, and

the other requirements to be a Category 3

facility are satisfied.

(iv) Category 4 facility. A facility is a

Category 4 facility if it is part of a qualified low-income economic benefit project.

A facility will be treated as part of a qualified low-income economic benefit project if, as provided in paragraph (f) of this

section, at least 50 percent of the financial

benefits of the electricity produced by

such facility are provided to households

with income of less than—

(A) Two-hundred percent of the poverty line (as defined in section 36B(d)(3)

(A) of the Code) applicable to a family of

the size involved; or

(B) Eighty percent of area median

gross income (as determined under section 142(d)(2)(B) of the Code).

(3) Less than five megawatts requirement—(i) In general. For purposes of this

paragraph (b), the less than five megawatts requirement is measured at the level

of the applicable facility in accordance

with section 48E(h)(2)(A)(ii). The maximum net output of an applicable facility

is measured only by nameplate generating

capacity of the applicable facility, which

includes only functionally interdependent

components of property that are owned by

the taxpayer, that are operated together,

Bulletin No. 2024–38

and that can operate apart from other

property to produce electricity, at the time

the applicable facility is placed in service.

Components of property are functionally

interdependent if the placing in service of

each component is dependent upon placing in service other components to produce electricity.

(ii) Nameplate capacity for purposes of

the less than five megawatts requirement.

The determination of whether an applicable facility has a maximum net output

of less than 5 MW (as measured in AC)

is based on the nameplate capacity of the

applicable facility. The nameplate capacity for purposes of the less than five megawatts requirement is the maximum electrical generating output in MW that the

applicable facility is capable of producing

on a steady state basis and during continuous operation under standard conditions,

as measured by the manufacturer and consistent with the definition of nameplate

capacity provided in 40 CFR 96.202. If

applicable, the International Standard

Organization conditions should be used to

measure the maximum electrical generating output of an applicable facility.

(c) Eligible property. Eligible property

means a qualified investment (as defined

in section 48E(b)) with respect to any

applicable facility.

(d) Location—(1) In general. An

applicable facility is treated as located in

a low-income community or located on

Indian land under section 48E(h)(2)(A)

(iii)(I) if the applicable facility satisfies

the Nameplate Capacity Test for Location

of paragraph (d)(2) of this section. Similarly, an applicable facility is treated as

located in a geographic area under the

Additional Selection Criteria described in

paragraph (h) of this section if it satisfies

the Nameplate Capacity Test for Location.

(2) Nameplate Capacity Test for Location. An applicable facility is considered

located in or on the relevant geographic

area described in paragraph (d)(1) of this

section if 50 percent or more of the applicable facility’s nameplate capacity is in

a qualifying area. The percentage of an

applicable facility’s nameplate capacity

(as defined in paragraph (d)(3) of this section) that is in a qualifying area is determined by dividing the nameplate capacity

of the applicable facility’s electricity-generating units that are located in the quali-

625

fying area by the total nameplate capacity

of all the electricity-generating units of

the applicable facility.

(3) Nameplate capacity for purpose of

Nameplate Capacity Test for Location.

Nameplate capacity for an electricity generating unit means the maximum electrical output that the applicable facility is

capable of producing on a steady state

basis and during continuous operation

under standard conditions, as measured by

the manufacturer and consistent with the

definition of nameplate capacity provided

in 40 CFR 96.202. If applicable, the International Standard Organization conditions

should be used to measure the maximum

electrical generating output. For purposes

of assessing the Nameplate Capacity Test,

electricity-generating units that generate

direct current (DC) power before converting to AC (for example, solar photovoltaic), should use nameplate capacity in

DC, otherwise the nameplate capacity in

AC should be used.

(e) Financial benefits for a Category

3 facility—(1) In general. To satisfy the

requirements of a Category 3 facility as

provided in paragraph (b)(2)(iii) of this

section, the financial benefits of the electricity produced by the facility must be

allocated equitably among the occupants

of the dwelling units of the Qualified

Residential Property. The same rules for

financial benefits for Category 3 facilities

apply to both multi-family property and

single-family Qualified Residential Property.

(2) Threshold requirement. At least 50

percent of the financial value of the electricity produced by the facility (as defined

in paragraph (e)(3) of this section) must be

allocated equitably to the Qualified Residential Property’s occupants that are designated as low-income occupants under

the covered housing program or other

affordable housing program.

(3) Financial value of the electricity

produced by the facility. For purposes of

this paragraph (e), the financial value of

the electricity produced by the facility is

defined as the greater of:

(i) 25 percent of the gross financial

value (as defined in paragraph (e)(4) of

this section) of the annual electricity produced by the applicable facility; or

(ii) The net financial value (as defined

in paragraph (e)(5) of this section) of the

September 16, 2024

annual electricity produced by the applicable facility.

(4) Gross financial value. For purposes

of this paragraph (e), gross financial value

of the annual electricity produced by the

applicable facility is calculated as the sum

of:

(i) The total self-consumed kilowatt-hours produced by the applicable

facility multiplied by the Qualified Residential Property’s metered volumetric

price of electricity;

(ii) The total exported kilowatt-hours

produced by the applicable facility multiplied by the Qualified Residential Property’s volumetric export compensation rate

for the type of electricity produced by the

applicable facility per kilowatt-hour; and

(iii) The sale of any attributes associated with the applicable facility’s production (including, for example, any Federal,

State, or Tribal renewable energy credits or incentives), if separate from the

metered price of electricity or export compensation rate.

(5) Net financial value defined—(i)

Common ownership. For purposes of this

paragraph (e), if the facility and Qualified Residential Property are commonly

owned, net financial value is defined as

the gross financial value of the annual

electricity produced minus the annual

average (or levelized) cost of the applicable facility over the useful life of the facility (including debt service, maintenance,

replacement reserve, capital expenditures,

and any other costs associated with constructing, maintaining, and operating the

facility).

(ii) Third-party ownership. For purposes of this paragraph (e), if the facility

and the Qualified Residential Property

are not commonly owned and the facility owner enters into a Power Purchase

Agreement or other contract for electricity services with the Qualified Residential

Property owner and/or building occupants,

net financial value is defined as the gross

financial value of the annual electricity

produced minus any payments made by

the building owner and/or building occupants to the facility owner for electricity

services associated with the facility in a

given year.

(iii) Equitable allocation of financial

benefits. There are different rules to ensure

an equitable allocation of financial bene-

September 16, 2024

fits depending on whether or not financial

value is distributed to building occupants

via utility bill savings or through different

means. Previously distributed financial

benefits or investments already made to

the Qualified Residential Property are not

considered eligible financial benefits for

this purpose.

(A) If financial value distributed via

utility bill savings. If financial value is

distributed via utility bill savings, financial benefits will be considered to be

allocated equitably if at least 50 percent

of the financial value of the electricity

produced by the facility is distributed as

utility bill savings in equal shares to each

building dwelling unit among the Qualified Residential Property’s occupants that

are designated as low-income under the

covered housing program or other affordable housing program (described in section 48E(h)(2)(B)(i)) or alternatively distributed in proportional shares based on

each low-income dwelling unit’s square

footage, or each low-income dwelling

unit’s number of occupants. For any

occupant(s) who choose to not receive

utility bill savings (for example, exercise

their right to not participate in or to opt

out of a community solar subscription

in applicable jurisdictions), the portion

of the financial value that would otherwise be distributed to non-participating

occupants must be distributed instead to

all participating occupants. No less than

50 percent of the Qualified Residential

Property’s occupants that are designated

as low-income must participate and

receive utility bill savings for the facility

to use this method of benefit distribution.

In the case of a solar facility, applicants

must follow the Department of Housing

and Urban Development (HUD) guidance on Treatment of Financial Benefits

to HUD-Assisted Tenants Resulting from

Participation in Solar Programs Notice

(Housing Notice 2023-09), located at

h t t p s : / / w w w. h u d . g o v / s i t e s / d f i l e s /

OCHCO/documents/2023-09hsgn.pdf,

or future HUD guidance, or other guidance or notices from the Federal agency

that oversees the applicable housing program identified in section 48E(h)(2)(B)

to ensure that tenants’ annual income for

rent calculations or other requirements

impacting total tenant payment are not

negatively impacted by the distribution

626

of financial value. Applicants should

apply similar principles in the case of any

other applicable facility.

(B) If financial value is not distributed

via utility bill savings. If financial value

is not distributed via utility bill savings,

financial benefits will be considered to

be allocated equitably if at least 50 percent of the financial value of the electricity produced by the facility is distributed

to occupants using one or more methods

described in Housing Notice 2023-09 for

a master-metered building, or future HUD

guidance, or other guidance or notices

from the Federal agency that oversees

the applicable housing program identified in section 48E(h)(2)(B). In the case

of a solar facility, applicants must comply with HUD guidance, or future HUD

guidance, for how residents of master-metered HUD-assisted housing can benefit

from owners’ sharing of financial benefits

accrued from an investment in solar electricity generation to ensure that tenants’

utility allowances and annual income

for rent calculations are not negatively

impacted. Applicants should apply similar

principles in the case of any other applicable facility.

(6) Benefits sharing statement—(i) In

general. The facility owner must prepare

a Benefits Sharing Statement, which must

include:

(A) A calculation of the facility’s gross

financial value using the method described

paragraph (e)(4) of this section;

(B) A calculation of the facility’s net

financial value using the method described

in paragraph (e)(5) of this section;

(C) A calculation of the financial value

required to be distributed to building

occupants using the method described in

paragraph (e)(3) of this section;

(D) A description of the means through

which the required financial value will be

distributed to building occupants; and

(E) If the facility and Qualified Residential Property are separately owned,

specify the entity that will be responsible

for the distribution of benefits to the occupants.

(ii) Notification requirement. The Qualified Residential Property owner must

formally notify the occupants of units in

the Qualified Residential Property of the

development of the facility and planned

distribution of benefits.

Bulletin No. 2024–38

(f) Financial benefits for a Category

4 facility—(1) In general. To satisfy the

requirements of a Category 4 facility as

provided in paragraph (b)(2)(iv) of this

section:

(i) The facility must serve multiple

qualifying low-income households under

section 48E(h)(2)(C)(i) or (ii) (Qualifying

Household);

(ii) At least 50 percent of the facility’s

total output in kW must be assigned to

Qualifying Households; and

(iii) Each Qualifying Household must

be provided a bill credit discount rate (as

defined in paragraph (f)(2) of this section)

of at least 30 percent.

(2) Bill credit discount rate—(i) In

general. A bill credit discount rate is the

difference between the financial benefit provided to a Qualifying Household

(including utility bill credits, reductions in

a Qualifying Household’s electricity rate,

or other monetary benefits accrued by the

Qualifying Household on their utility bill)

and the cost of participating in the community program (including subscription

payments for zero carbon and any other

fees or charges), expressed as a percentage of the financial benefit distributed to

the Qualifying Household. The bill credit

discount rate can be calculated by starting with the financial benefit provided to

the Qualifying Household, subtracting all

payments made by the Qualifying Household (or payments remitted on behalf of

the Qualifying Household through net

crediting, consolidated billing, or similar

arrangements) to the facility owner and

any related third parties as a condition of

receiving that financial benefit, then dividing that difference by the financial benefit

distributed to the Qualifying Household.

(ii) No or nominal cost of participation.

In cases in which the Qualifying Household has no or only a nominal cost of participation, and financial benefits are delivered through a utility or government body,

the bill credit discount rate should be calculated as the financial benefit provided

to a Qualifying Household (including

utility bill credits, reductions in a Qualifying Household’s electricity rate, or other

monetary benefits accrued by a Qualifying

Household on their utility bill) divided by

the total value of the electricity produced

by the facility and assigned to the Qualifying Household (including any electricity

Bulletin No. 2024–38

services, products, and credits provided in

conjunction with the electricity produced

by such facility), as measured by the utility, independent system operator, or other

off-taker procuring electricity (and related

services, products, and credits) from the

facility.

(iii) Other value from electricity production. If the facility derives financial

value from the production of electricity

in a manner such that this value cannot be

directly applied to the Qualifying Household’s utility bill (for example, renewable

energy credit payments made directly to

the facility owner), than no less than 30

percent of that monetary value must also

be provided to the Qualifying Household,

either through a greater bill credit discount

on the Qualifying Household’s utility bill

than would otherwise be derived from the

method described in paragraph (f)(2)(i) of

this section or through other means.

(iv) Calculation on annual basis. In all

instances, the bill credit discount rate is

calculated on an annual basis.

(v) Examples. The provisions of this

paragraph (f)(2) may be illustrated by the

following examples:

(A) Example 1. A Qualifying Household signs

a community solar subscription agreement with the

facility owner. Each month, the facility owner will

assign a portion of the electricity generated (or its

value) by the facility to the household’s utility bill,

and the household will pay the facility owner. The

amount the household pays the facility owner cannot exceed 70 percent of the monetary value of the

assigned generation. The remaining 30 percent is a

cost savings to the household on electricity. In this

example, over the course of the first year the facility

owner or their agent cause $180 in utility bill credits

to be placed on the Qualifying Household’s bill, and

the Qualifying Household pays $126, inclusive of

any upfront fees. The subsequent year, due to variation in solar generation and/or the compensation

paid by the utility for solar generation, the facility

owner, in accordance with the community solar subscription agreement, causes $240 in bill credits to be

provided to the Qualifying Household’s bill and the

household pays $168. In each year of facility operation described within this example, a bill credit discount rate of 30 percent is maintained (($180 - $126)

/ $180 = 30%) and (($240 -$168) / $240 = 30%),

respectively.

(B) Example 2. Due to the regulatory structure

of the applicable jurisdiction or program, the terms

of the community solar subscription, the use of a

net-crediting mechanism, or other reason, the Qualifying Household does not make a direct payment

to the facility owner, but rather payment is remitted

on their behalf by the utility. In this example, over

the course of the first year the facility owner or their

agent cause $200 in utility bill credits to be placed

on the Qualifying Household’s bill, and the Quali-

627

fying Household’s utility remits $126 to the facility

owner, inclusive of any upfront fees. The subsequent

year, due to variation in solar generation and/or the

compensation paid by the utility for solar generation,

the facility owner, in accordance with the community solar subscription agreement, causes $240 in bill

credits to be provided to the Qualifying Household’s

bill and the utility remits $168 to the facility owner.

In each year of facility operation described within

this example, a bill credit discount rate of 30 percent is maintained (($180 - $126) / $180 = 30%) and

(($240 -$168) / $240 = 30%), respectively.

(C) Example 3. Assume the facility is part of a

program by which the financial benefits are delivered to Qualifying Households through a utility or

government body, and each Qualifying Household

pays no cost to participate. Assume that the total

annual financial benefit for a Qualifying Household

is $180 in the first year and $240 in the second year.

Assume further that the value of the electricity produced by the facility and assigned to the Qualifying

Household though a utility or government body, as

measured by the utility, independent system operator, or other off-taker procuring the electricity, is

$600 in the first year and $800 in the second year. In

this case, the bill credit discount rate is 30 percent in

each year (($600 x 30% = $180) and ($800 x 30% =

$240), respectively).

(3) Low-income verification—(i) In

general. To establish that financial benefits are provided to Qualifying Households

as provided in paragraph (f)(1) of this section, applicants must, in accordance with

guidance published in the Internal Revenue Bulletin, submit documentation upon

placing the applicable facility in service.

A Qualifying Household’s low-income

status is determined at the time the household enrolls in the subscription program

and does not need to be re-verified.

(ii) Methods of verification. Applicants

may use categorical eligibility or other

income verification methods to establish

that a household is a Qualifying Household.

(A) Categorical eligibility. Categorical

eligibility consists of obtaining proof of

the household’s participation in a needsbased Federal, State, Tribal, or utility program with income limits at or below the

qualifying income level required to be a

Qualifying Household. Federal programs

may include, but are not limited to: Medicaid, Low-Income Home Energy Assistance Program (LIHEAP) administered by

the Department of Health and Human Services, Weatherization Assistance Program

(WAP) administered by the Department

of Energy (DOE), Supplemental Nutrition Assistance Program (SNAP) administered by the Department of Agriculture

(USDA), Section 8 Project-Based Rental

September 16, 2024

Assistance, the Housing Choice Voucher

Program administered by HUD, the Federal Communication Commission’s Lifeline Support for Affordable Communications, the National School Lunch Program

administered by the USDA, the Supplemental Security Income Program administered by the Social Security Administration, and any verified government or

non-profit program serving Asset Limited

Income Constrained Employed (ALICE)

persons or households. With respect to

the Federal programs listed previously an

individual in the household must currently

be approved for assistance from or participation in the program with an award letter or other written documentation within

the last 12 months for enrollment in that

program to establish categorical eligibility of the household. State agencies can

also provide verification that a household

is a Qualifying Household if the household participates in a State’s solar or other

energy program and income limits for

such program are at or below the qualifying income level required to be a Qualifying Household. The qualifying income

level for a Qualifying Household is based

on where such household is located.

(B) Other income verification methods. Paystubs, Federal or State tax returns,

or income verification through crediting

agencies and commercial data sources can

be used to establish that a household is a

Qualifying Household.

(C) Impermissible verification method.

A self-attestation from a household is not

a permissible method to establish a household is a Qualifying Household. This prohibition on direct self-attestation from a

household does not extend to categorical

eligibility for needs-based Federal, State,

Tribal, or utility programs with income

limits that rely on self-attestation for verification of income.

(g) Annual Capacity Limitation—(1)

In general. Under section 48E(h)(4)(C),

the total annual Capacity Limitation is 1.8

gigawatts of DC capacity for each calendar

year of the Program. The annual Capacity Limitation for each Program year is

divided across the four facility categories

described in section 48E(h)(2)(A)(iii) and

paragraph (b)(2) of this section as provided in guidance published in the Internal Revenue Bulletin. The Capacity Limitation for each Program year is divided

September 16, 2024

across the four facility categories based

on factors such as the anticipated number

of applications that are expected for each

category and the amount of Capacity Limitation that needs to be reserved for each

category to encourage market participation in each category consistent with statutory intent and the goals of the Program.

After the Capacity Limitation for each

facility category is established in guidance published in the Internal Revenue

Bulletin, it may be reallocated later across

facility categories and sub-reservation in

the event one category or sub-reservation

is oversubscribed and another has excess

capacity. A facility category or sub-reservation is oversubscribed if it receives

qualified applications in excess of Capacity Limitation reserved for the facility category or sub-reservation.

(2) Carryover of u

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