Treasury Details Tax-and-Climate Law Energy Community Rules

Tax attorney Amish Shah was quoted in a Bloomberg Law article about the new guidance issued by the Internal Revenue Service (IRS) and the U.S. Treasury Department on the energy community bonus tax credit requirements in President Joe Biden's tax-and-climate law.

Building facilities in an "energy community" that has been dependent on fossil fuels could increase the credits for clean energy developers and investors by 10 percent. Mr. Shah noted that $4 billion in funding will be provided to projects that are located in energy communities. These projects will get preference for allocation and will be more competitive. The guidance explains what defines an "energy community" and how to determine whether a project is in one. Mr. Shah added that companies will weigh whether projects are in energy communities based on that guidance and recognize the likelihood of getting a credit allocation is significantly higher.

"People will be able to at least get comfortable as to whether or not they're getting a 30 percent credit versus a 40 percent credit," he explained. "And again, that will help our clients and others decide when and where to build projects."

The IRS and Treasury Department also released a searchable mapping tool that helps find areas eligible for the bonus credit. Mr. Shah said the map shows "that a fairly sizable portion of the country geographically is an energy community, so it's not surprising, but certainly it's good confirmation."

READ: Treasury Details Tax-and-Climate Law Energy Community Rules