TD 9979

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Federal Register / Vol. 88, No. 156 / Tuesday, August 15, 2023 / Rules and Regulations

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9979]
RIN 1545–BQ81

Additional Guidance on Low-Income
Communities Bonus Credit Program
AGENCY: Internal Revenue Service (IRS),

Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final

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regulations concerning the application
of the low-income communities bonus
credit program for the energy
investment credit established pursuant
to the Inflation Reduction Act of 2022.
Under this program, applicants
investing in certain solar or windpowered electricity generation facilities
for which the applicants otherwise
would be eligible for an energy
investment credit may apply for an
allocation of environmental justice solar
and wind capacity limitation to increase
the amount of the energy investment
credit for the taxable year in which the
facility is placed in service. This
document provides definitions and
requirements that are applicable for this
program. These final regulations affect
applicants seeking allocations of the
environmental justice solar and wind
capacity limitation to increase the
amount of the energy investment credit
for which such applicants would
otherwise be eligible once the facility is
placed in service.
DATES: Effective date: These regulations
are effective on October 16, 2023.
Applicability date: For date of
applicability, see § 1.48(e)–1(o).
FOR FURTHER INFORMATION CONTACT:
Concerning the regulations, Whitney
Brady, the IRS Office of the Associate
Chief Counsel (Passthroughs and
Special Industries) at (202) 317–6853
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments
to the Income Tax Regulations (26 CFR
part 1) relating to new section 48(e) of
the Internal Revenue Code (Code).
Section 13103 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 48(e) to the Code to increase the
amount of the energy investment credit
determined under section 48(a) (section
48 credit) with respect to eligible
property of the taxpayer that is part of

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a qualified solar or wind facility if the
taxpayer applies for and is awarded an
allocation of environmental justice solar
and wind capacity limitation (Capacity
Limitation) as part of the low-income
communities bonus credit program for
the section 48 credit (Low-Income
Communities Bonus Credit Program or
Program).1 This document contains final
definitions and rules applicable to the
Program.
The section 48 credit for a taxable
year is generally calculated by
multiplying the basis of each energy
property placed in service by a taxpayer
during that taxable year by the energy
percentage (as defined in section
48(a)(2)). Section 48(e) increases the
taxpayer’s section 48 credit by
increasing the energy percentage used to
calculate the amount of the section 48
credit (section 48(e) Increase) in the case
of eligible property that is part of a
qualified solar or wind facility that
receives an allocation of Capacity
Limitation under the Program.
On February 13, 2023, the Department
of the Treasury (Treasury Department)
and the IRS released Notice 2023–17,
2023–10 I.R.B. 505, to establish the
Program. Notice 2023–17 also provided
initial Program guidance regarding
applicable definitions and Program
requirements.
On June 1, 2023, the Treasury
Department and the IRS published in
the Federal Register (88 FR 35791) a
notice of proposed rulemaking (REG–
110412–23, 2023–26 I.R.B. 1098) under
section 48(e) (Proposed Rules) relating
to the Program. Numerous commenters
responded to the Proposed Rules, and
after consideration of all comments
received by June 30, 2023, the Proposed
Rules are adopted as modified by this
Treasury decision. The areas of
comment and the revisions to the
Proposed Rules are discussed in the
following Summary of Comments and
Explanation of Revisions section of this
preamble. The comments are available
for public inspection at https://
www.regulations.gov or upon request.
Other minor, editorial, and clarifying
revisions made to the Proposed Rules as
adopted in these final regulations are
not discussed in the Summary of
Comments and Explanation of Revisions
section of this preamble.
As announced in Proposed Rules, the
Treasury Department and the IRS are
also providing procedural and clarifying
1 This notice of proposed rulemaking uses the
terms ‘‘taxpayer’’ and ‘‘applicant’’ interchangeably
(as the context may require) to avoid confusion
given that persons eligible to apply for an allocation
of Capacity Limitation under the Program may be
exempt from or otherwise not subject to Federal
income taxes imposed by chapter 1 of the Code.

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guidance applicable to the Program in
Revenue Procedure 2023–27, 2023–35
I.R.B. This procedural and clarifying
guidance is being issued simultaneously
with these final regulations and
provides the process for applying to the
Program. These procedural rules
provide guidance necessary to
implement the Program, including, in
relevant part, information an applicant
must submit, the application review
process, and the manner of obtaining an
allocation.
Summary of Comments and
Explanation of Revisions
I. Definition of Qualified Solar or Wind
Facility
Section 48(e)(2)(A) and the Proposed
Rules define a single qualified solar or
wind facility as any facility that (i)
generates electricity solely from a wind
facility, solar energy property, or small
wind energy property; (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
facility categories described in section
48(e)(2)(A)(iii) (Category 1, 2, 3, or 4 are
described in more detail in part III of
this Summary of Comments and
Explanation of Revisions section). In
addition, for purposes of determining
allocations, administering the Program
fairly, and avoiding abuse, the Proposed
Rules provided that multiple solar or
wind energy properties or facilities that
are operated as part of a single project
would be aggregated and treated as a
single facility. Whether multiple
facilities or energy properties are
operated as part of a single project
would depend on the relevant facts and
circumstances and would be evaluated
based on the factors provided in section
7.01(2)(a) of Notice 2018–59 or section
4.04(2) of Notice 2013–29, as applicable.
A few commenters suggested the
Treasury Department and the IRS
should not impose the single project
factors to aggregate multiple facilities or
energy properties into a single facility
for purposes of these regulations. For
example, some commenters said this
does not work well for Tribal or some
other partially-consolidated ‘‘projects’’
that may share ownership, financing,
and other factors for efficiency, yet are
different and distinguishable facilities.
Some of the commenters suggested that
a Tribe must be allowed to apply
Capacity Limitation allocations for
multiple projects, as separate projects,
to allow for phased deployment of
projects, and to treat each phase as a
different project. Another commenter
recommended relaxing restrictions in

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Federal Register / Vol. 88, No. 156 / Tuesday, August 15, 2023 / Rules and Regulations
the project definition so long as a
reasonable period has elapsed to ensure
adequate competitive forces in the
market become established or suggested
a carve-out from this rule for certain
projects. An additional commenter
suggested that if certain factors are
present, those single factors standing
alone should result in energy properties
or facilities being regarded as a single
project (that is, apart from other
properties or facilities with which they
might otherwise be grouped) without
the need to apply all of the factors
provided in section 7.01(2)(a) of Notice
2018–59 or section 4.04(2) of Notice
2013–29, as applicable. Similarly, a
commenter noted that co-located sites
are typically permitted as a single
project, even though the
interconnection, ownership, financing,
and construction of the facilities are
conducted independently. This
commenter stated that maintaining the
requirement of one project per permit
should not disqualify either project from
receiving allocation under the Program.
The Treasury Department and the IRS
determined that to prevent some
applicants from attempting to
circumvent the less than 5 MW
maximum net output limitation
provided in section 48(e)(2)(A)(ii) by
artificially dividing larger projects into
multiple facilities, it is necessary to
incorporate the single project factors
tests provided in section 7.01(2)(a) of
Notice 2018–59 or section 4.04(2) of
Notice 2013–29, as applicable, into the
definition of qualified solar or wind
facility. Therefore, the final regulations
generally adopt the definition of
qualified solar or wind facility provided
in the Proposed Rules. However, the
final regulations clarify that if multiple
facilities or energy properties are
regarded as a single facility for purposes
of this rule, they will be regarded as a
single facility for all purposes under the
Program. Additionally, to alleviate some
commenters’ concerns that multiple
energy properties or facilities that
satisfy any of the listed factors will
conclusively result in a single project
determination, the final regulations
clarify that whether multiple facilities
or energy properties are operated as part
of a single project and thus treated a
single facility, will depend on the
relevant facts and circumstances. Thus,
a single factor or factors are not
determinative.
A commenter noted that the Proposed
Rules specify that a qualified facility
refers to a solar energy property with an
output of less than 5 MW and
recommended aligning the Program
with the industry standard by allowing
projects that have a capacity of up to 5

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MW. This comment is not adopted
because section 48(e)(2)(A)(ii) limits the
Program to facilities that have a
maximum net output of less than 5 MW
(as measured in AC).
II. Four Categories of Qualified Solar or
Wind Facilities
Depending on the category of the
facility, an allocation of Capacity
Limitation under the Program may
result in a section 48(e) Increase equal
to either 10 percentage points or 20
percentage points. Section 48(e)(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
48(e)(1)(A)(ii) provides for a section
48(e) 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).
Under section 48(e)(2)(A)(iii)(I), the
term low-income community is
generally 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. Section 48(e)(2)(A)(iii)(I)
provides that Indian land is defined in
section 2601(2) of the Energy Policy Act
of 1992 (25 U.S.C. 3501(2)). The final
regulations clarify that the poverty rate
for a census tract is generally based on
the 2011–2015 American Community
Survey (ACS) low-income community
data for the New Markets Tax Credit
(NMTC), however, if updated data is
released, a taxpayer can choose to base
the poverty rate for any population
census tract on either the 2011–2015
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. Applicants who
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,

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unless the location of the facility
changes.
Section 48(e)(2)(B) provides that a
facility will be treated as part of a
qualified low-income residential
building project if (i) such 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 SelfDetermination Act of 1996 (25 U.S.C.
4103(22)), or such other affordable
housing programs as the Secretary may
provide, and (ii) the financial benefits of
the electricity produced by such facility
are allocated equitably among the
occupants of the dwelling units of such
building.
Section 48(e)(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).
One commenter stated that the statute
does not provide for ‘‘facility
categories’’ and that what section
48(e)(2)(A)(iii) describes is not four
distinct facility categories, but four ways
of meeting geographic or benefits-based
qualifying criteria. The Treasury
Department and the IRS determined that
a change in the final regulations is not
necessary because the use of facility
categories as a means of differentiating
the four distinct geographic or benefitsbased qualifying criteria is consistent
with the statute and serves as an
administratively convenient mechanism
to distinguish among them and describe
requirements and definitions applicable
to each. Accordingly, as discussed in
part II of this Summary of Comments
and Explanation of Revisions section,
the final regulations, consistent with the
Proposed Rules, require a qualified solar
or wind facility to be described in one
of the four categories described in
section 48(e)(2)(A)(iii) (Category 1, 2, 3,
or 4).
Another commenter asked for
clarification on whether a project must
just be located in a low-income

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community or whether benefits must
also go to a low-income community to
qualify for each category. The Treasury
Department and the IRS considered the
comment but did not make a change
because the Proposed Rules and now
the final regulations clearly describe the
categories that have applicable benefits
sharing requirements consistent with
statutory requirements, so no change is
necessary. For Category 1 and Category
2, section 48(e)(2)(A)(iii)(I) requires a
facility to be located in a low-income
community (as defined in section
45D(e)) or on Indian land (as defined in
section 2601(2) of the Energy Policy Act
of 1992 (25 U.S.C. 3501(2))), but the
statute, and accordingly the final
regulations, do not impose any
requirements to share financial benefits
with low-income subscribers or
households. Conversely, for Category 3
and Category 4, section 48(e)(2)(B) and
(C) does impose benefits sharing
requirements, and those rules were
included in the Proposed Rules and are
provided in these final regulations as
modified. See part V of this Summary of
Comments and Explanation of Revisions
section for more discussion regarding
those requirements.
Specific to Category 2, another
commenter noted that the definition of
located on Indian land should include
simple fee and trust lands located offreservation owned by Tribes. Trust
lands located off-reservation are covered
under the statutory definition of Indian
land referenced in section 48(e)(2)(A)(I).
Fee lands, however, would only be
covered if they are included within the
boundaries of a reservation or in the
census categories included within the
Indian land definition. Therefore, the
final regulations did not adopt the
commenter’s suggestion and define
‘‘Indian land’’ by reference to section
2601(2) of the Energy Policy Act of 1992
(25 U.S.C. 3501(2)) without additional
clarification.
Specific to Category 3, a commenter
asked for clarification that the
installation of a facility on a ‘‘residential
rental building’’ extends to the curtilage
of the building, including carports,
sheds, and open space on the same
property. Another commenter asked for
similar clarification stating that the
guidance currently defines a facility as
eligible if it is a facility installed on an
eligible building. This commenter stated
that this is an overly narrow statement
that would not include adjacent carport
or ground-mount solar on the same
parcel. The commenter encouraged the
Treasury Department and the IRS to
include these other solar installation
locations, as rural and suburban section
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(commonly referred to as LIHTC)
properties often have excess land or
large parking areas due to zoning
requirements that could host solar
installations. The final regulations adopt
this comment by clarifying that a facility
is treated as installed on a residential
rental building that participates in a
covered housing program or other
affordable housing program (Qualified
Residential Property) even if that facility
is not on the Qualified Residential
Property if the facility is installed on the
same or adjacent parcel of land as the
Qualified Residential Property, and the
other requirements to be a Category 3
facility are satisfied.
Several commenters requested that
the Treasury Department and the IRS
categorically include any LIHTC project
as a Category 3 project. Section
48(e)(2)(B)(i) provides that a covered
housing program is defined in VAWA.
The statutory cross-reference is
comprehensive and includes numerous
types of housing programs and policies
across Federal agencies, including the
low-income housing credit under
section 42 of title 26. Accordingly, a
solar or wind facility that is installed on
a ‘‘qualified low-income building’’
under section 42 is eligible for Category
3. In response to commenters’ general
inquiries on covered housing programs,
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 48(e)(2)(B)(i). This list will be
made available on the Program web
page and is also listed here:
Covered housing programs and
policies (as defined in VAWA) with
active affordability covenants tied to the
following:
• 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)

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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 tenant-based and projectbased 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 of the Code;
• 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;
and/or
• Department of Justice transitional
housing assistance grants for victims of
domestic violence, dating violence,
sexual assault, or stalking.
Section 48(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; and/or
• 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)).
One commenter also requested that
Federal Weatherization Assistance
Program (WAP) affordable housing
categorically qualify as Category 3
covered housing. The WAP is not a
housing program. The WAP is a
program of the DOE that provides
weatherization services and support for
qualifying housing but does not provide
or administer the actual housing.
Therefore, the WAP program is not
included as a Category 3 housing
program.
Several commenters also requested
that Category 3 include as an eligible
residential rental building housing that
is enrolled under a State-specific low-

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Federal Register / Vol. 88, No. 156 / Tuesday, August 15, 2023 / Rules and Regulations
income housing program that is not
enrolled, or may not qualify, under the
statutorily listed Federal housing
programs. Similarly, several
commenters requested that housing
authorities under State programs be able
to appeal for qualification under the
Program. One commenter provided that
housing authorities should be able to
prove they meet certain minimum
criteria and thresholds beyond
enrollment in specified Federal
programs.
State specific housing programs do
not categorically qualify as Qualified
Residential Properties nor do the
facilities installed on such buildings
categorically meet the requirements of
section 48(e)(2)(B). The statute
specifically lists only Federal housing
programs and provides that the
Secretary may include other affordable
housing programs. The Treasury
Department and the IRS decline to
include additional housing programs in
the final regulations at this time so that
the Program will focus on the
statutorily-prescribed housing programs.
However, the Treasury Department and
the IRS may include additional housing
programs in future Program guidance.
The final regulations also do not
provide a special review process for
housing authorities to be considered as
qualifying under State specific programs
for the same reasons as provided earlier
regarding State program eligibility.
Moreover, a housing authority is not the
same thing as a housing program. It is
the solar or wind facility that is being
reviewed, upon application, to
determine whether the facility qualifies
for an allocation, and not a specific
housing authority or building that the
facility will serve. The building on
which the facility is built must already
be a part of a Qualified Residential
Property, otherwise the facility is not
eligible under the requirements for
Category 3.
One commenter also requested greater
protection for the tenants of a Qualified
Residential Property when a facility
applies for or receives an allocation
under Category 3. The commenter
requested rent protection for the life of
the solar or wind facility to ensure
tenants are not subject to rent increases
due to the installation of the solar or
wind facility. The commenter also
requested eviction protection, relocation
assistance for tenants affected by
construction, with a right of return for
those tenants after construction, a sales
restriction of five years for the building
on which the facility is installed, and
strong enforcement mechanisms.
The Treasury Department and the IRS
considered this comment but did not

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adopt the commenter’s suggestions
because the requirements recommended
by the commenter are outside the scope
of section 48(e) and therefore what
could be implemented by these final
regulations.
III. Eligible Property, Including Energy
Storage Technology Installed in
Connection With Solar or Wind Facility
‘‘Eligible property’’ as defined by
section 48(e)(3) means energy property
that (i) is part of a wind facility
described in section 45(d)(1) for which
an election to treat the facility as energy
property was made under section
48(a)(5) (wind facility), or (ii) is solar
energy property described in section
48(a)(3)(A)(i) (solar energy property) or
qualified small wind energy property
described in section 48(a)(3)(A)(vi)
(small wind energy property). Eligible
property also includes energy storage
technology (as described in section
48(a)(3)(A)(ix)) ‘‘installed in connection
with’’ such energy property.
The Proposed Rules defined
‘‘installed in connection with’’ for
energy storage technology to
demonstrate what is required for such
energy storage technology to be
considered eligible property under
section 48(e)(3), providing that this is
met if both (1) the energy storage
technology and other eligible property
are considered part of a single qualified
solar or wind facility because the energy
storage technology and other eligible
property are owned by a single legal
entity, located on the same or
contiguous pieces of land, have a
common interconnection point, and are
described in one or more common
environmental or other regulatory
permits; and (2) the energy storage
technology is charged no less than 50
percent by the other eligible property.
The Proposed Rules also added a safe
harbor, which would deem the energy
storage technology to be charged at least
50 percent by the facility if the power
rating of the energy storage technology
is less than 2 times the capacity rating
of the connected wind facility (in kW
AC) or solar facility (in kW direct
current (DC)).
A commenter stated that the last
sentence relating to the safe harbor
appears to have the phrases ‘‘power
rating’’ and ‘‘capacity rating’’ reversed,
and to have omitted how energy storage
is measured. The commenter stated that
energy storage is measured in kWh, a
measure of energy. A generating facility
such as a solar or wind farm produces
power, measured in kW. The
commenter believes that the apparent
intended meaning of the sentence
would be better rendered with: ‘‘The

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Treasury Department and the IRS also
propose to add a safe harbor, which
would deem the energy storage
technology to be charged at least 50
percent by the facility if the [capacity]
rating of the energy storage technology
[(in kWh)] is less than 2 times the
[power] rating of the connected wind
facility (in kW AC) or solar facility (in
kW DC).’’ The Treasury Department and
the IRS considered this comment, but
the final regulations do not adopt the
commenter’s suggestion.2 For energy
storage, the power rating (measured in
kilowatts) indicates how much power
can flow into or out of the battery in any
given instant. It is similar to the
capacity rating of a solar or wind
facility, which indicates how much
power can theoretically come out of the
solar or wind facility in any given
instant. In this context, the Treasury
Department and the IRS accurately
referred to the ‘‘power rating’’ of the
energy storage technology.
Additionally, a couple of commenters
requested that the Treasury Department
and the IRS eliminate the requirement
that energy storage technology be
charged at least 50 percent by other
eligible property. These commenters
point to the general language in sections
48(a)(2)(A)(i)(VI) and 48(c)(6) on energy
storage technology and argue against
including the charging requirement for
section 48(e). One commenter said there
is no statutory basis to require energy
storage technology to be charged by
other eligible energy property and this
goes against Congressional intent.
Another commenter said this rule may
set a problematic and inequitable
precedent in the context of the
underlying section 48 credit, which
Congress deliberately moved away from
this standard in the IRA to better
promote the benefits of energy storage,
and that the standard for storage
inclusion should not be more
burdensome for environmental justice
communities or Tribes than for other
projects seeking the section 48 credit.
The general language in sections
48(a)(2)(A)(vi) and 48(c)(6) describing
energy storage technology eligible for
the section 48 credit differs from what
Congress included when describing
energy storage technology eligible for a
section 48(e) Increase. Eligible property
as described in section 48(e)(3) includes
2 The commenter correctly identified that the
Proposed Rules omitted how energy storage is
measured. The omission was an error, and the
Treasury Department and the IRS issued a
correction to the Proposed Rules published in the
Federal Register (88 FR 41340) on June 26, 2023,
to clarify that the power rating of the energy storage
technology is measured in kW. The final regulations
incorporate this correction.

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energy storage technology (as described
in section 48(a)(3)(A)(ix)) installed in
connection with other eligible energy
property. The use of the phrase ‘‘in
connection with’’ limits the energy
storage technology eligible for a section
48(e) Increase to energy storage that is
installed in connection with the eligible
solar or wind facility. The general
energy storage technology language in
section 48 includes no such limiting
language. As required by the statute, the
Treasury Department and the IRS
determined that the proposed rule
serves to ensure that energy storage
technology eligible for a section 48(e)
Increase has a sufficient nexus to the
eligible property. The Treasury
Department and the IRS provide
taxpayers with the safe harbor described
earlier as a means of deeming the energy
storage technology as satisfying the
requirement that it be charged no less
than 50 percent by the other eligible
property. The Proposed Rule applies
uniformly to all taxpayers seeking an
allocation of Capacity Limitation.
Therefore, the final regulations retain
the requirement that the energy storage
technology must be charged no less than
50 percent by the other eligible
property. However, to provide
additional guidance on the application
of this standard, the final regulations
clarify that ‘‘50 percent’’ is based on an
annual average.
Another commenter suggested
eliminating the co-location requirement
applicable to energy storage technology
because the language of the statute can
and should be interpreted to include
storage projects that have firm,
contractual offtake agreements with
offsite solar or wind projects, and that
these projects would be located within
the same balancing authority, ensuring
that all benefits are local. The final
regulations do not adopt the
commenter’s suggestion because the
Treasury Department and the IRS view
the Proposed Rule that the energy
storage technology be located on the
same or contiguous pieces of land as the
other eligible property as consistent
with the statutory requirement that
limits energy storage technology eligible
for a section 48(e) Increase to only
energy storage technology that is
installed in connection with other
eligible property.
Finally, one commenter requested
clarification that the power rating of
connected energy storage technology
will not be counted against a facility’s
Capacity Limitation allocation. Because
the final regulations, consistent with the
Proposed Rules, define a qualified solar
or wind facility eligible for a Capacity
Limitation without reference to energy

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storage technology, the Treasury
Department and the IRS believe this
clarification in the final regulations is
unnecessary.
A few commenters also requested that
final regulations expand the definition
of ‘‘in connection with’’ under section
48(e)(3)(B) applicable to energy storage
technology to include interconnection
property under section 48(a)(8), so that
interconnection costs are eligible for
purposes of calculating the section 48(e)
Increase.
Section 48(e)(3)(B) provides that
energy storage technology defined under
section 48(a)(3)(A)(ix) installed in
connection with eligible solar or wind
property described in section 45(d)(1) or
section 48(a)(3)(A)(i) or (vi) is eligible
property for purposes of calculating the
section 48(e) Increase. Neither section
48(e)(3)(B) nor any other provision
applicable to section 48(e) includes
interconnection property or costs in the
definition of eligible property.
Therefore, the final regulations do not
adopt these commenters’ suggestion.
IV. Location
The Proposed Rules provided that a
qualified solar or wind facility is treated
as ‘‘located in a low-income
community’’ or ‘‘on Indian land’’ under
section 48(e)(2)(A)(iii)(I) or located in a
geographic area under the Additional
Selection Criteria (see part VII of this
Summary of Comments and Explanation
of Revisions section) if the facility
satisfies the nameplate capacity test
(Nameplate Capacity Test).
Under the Nameplate Capacity Test, a
facility that has nameplate capacity (for
example, wind and solar facilities) is
considered located in or on the relevant
geographic area if 50 percent or more of
the facility’s nameplate capacity is in a
qualifying area. A facility’s nameplate
capacity percentage is determined by
dividing the nameplate capacity of the
facility’s energy-generating units that
are located in the qualifying area by the
total nameplate capacity of all the
energy-generating units of the facility.
Nameplate capacity for an electricity
generating unit means the maximum
electricity generating output that the
unit 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 provided
in 40 CFR 96.202. Energy-generating
units that generate DC power before
converting to AC (for example, solar
photovoltaic) should use the nameplate
capacity in DC, otherwise the nameplate
capacity in AC should be used (for
example, wind facilities). Where
applicable, the International Standard

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Organization conditions are used to
measure the maximum electricity
generating output or usable energy
capacity. The nameplate capacity of any
energy storage technology installed in
connection with the qualified solar or
wind facility does not affect the
assessment of the Nameplate Capacity
Test.
A few commenters noted concerns on
the Nameplate Capacity Test and what
it means to be ‘‘located in.’’ Another
commenter suggested that the
Nameplate Capacity Test should
provide maximum flexibility. This
commenter noted that Tribal lands are
often not contiguous, and that new
housing is limited so it is often offreservation and there are also issues of
right of way.
The Nameplate Capacity Test to
determine the location of a facility
already inherently provides flexibility
because it only requires that 50 percent
or more (rather than a larger percentage)
of the facility’s nameplate capacity be in
a qualifying area. The Treasury
Department and the IRS concluded that
a 50 percent standard is a reasonable
standard, which strikes the right balance
between providing flexibility to
taxpayers and ensuring that statutory
requirements are satisfied. Additionally,
this standard is familiar to taxpayers
because it is the same standard that is
used to determine whether a facility is
located in an energy community under
Notice 2023–29, 2023–20 IRB 1.
Other commenters had concerns
about the use of AC and DC. These
commenters said that the Treasury
Department and the IRS should update
the Proposed Rules to clarify that the
use of DC is limited to project location
and does not apply to the maximum
output of a qualified facility. One
commenter also added that the Treasury
Department and the IRS should update
the Proposed Rules to clarify that an
allocation will not be reduced if a
qualified facility’s AC output is less
than the facility’s DC output.
Additionally, a few commenters
suggested that the nameplate capacity
for both wind and solar facilities should
be based on AC as the statute indicates
and questioned the differing standard.
In response to these comments, the
Treasury Department and the IRS added
language in the final regulations to
clarify that the Nameplate Capacity Test
only applies for purposes of
determining whether a facility is located
in a qualifying area. The Treasury
Department and the IRS did not modify
the Nameplate Capacity Test to remove
the reference to DC for measuring the
nameplate capacity of a solar facility
because nameplate capacity for a solar

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facility is appropriately measured in DC.
Solar facilities produce electricity in
DC, which is then converted to AC for
end use. Conversely, wind facilities
produce electricity in AC.

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V. Financial Benefits for Category 3 and
Category 4 Allocations
Section 48(e)(2)(D) provides that
‘‘electricity acquired at a below market
rate’’ will not fail to be taken into
account as a financial benefit. The
Proposed Rules provided definitions of
the terms ‘‘financial benefit’’ and
‘‘electricity acquired at a below market
rate’’ under section 48(e)(2)(D), as well
as a manner to apply such definitions,
appropriately, to qualified low-income
residential building projects (section
48(e)(2)(B)) and qualified economic
benefit projects (section 48(e)(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, section 48(e)(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
Qualified Residential Property. The
Proposed Rules reserved allocations
under this category exclusively for
applicants that would apply the
financial benefits requirement under
Category 3 in the following manner.
The Proposed Rules provided that
financial benefits can be demonstrated
through net energy savings as defined
later. At least 50 percent of the financial
value of net energy savings would be
required to be equitably passed on to
building occupants. This requirement
would recognize that not all the
financial value of the net energy savings
can be passed on to building occupants
because a certain percentage can be
assumed to be dedicated to lowering the
operational costs of energy consumption
for common areas, which benefits all
building occupants. The Proposed Rules
provided that applicants must equitably
pass on net energy savings by
distributing equal shares among the
Qualified Residential Property’s units
that are designated as low-income under
the covered housing program, or by
distributing proportional shares based
on each dwelling unit’s electricity
usage.
The Proposed Rules accounted for the
specific nature of facilities serving lowincome residential buildings and facility
ownership, as the facility may be thirdparty owned or commonly owned with
the building.
In scenarios where the facility and the
Qualified Residential Property have the

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same ownership, the Proposed Rules
defined the financial value of net energy
savings as the financial value equal to
the greater of: (1) 25 percent of the gross
financial value of the annual energy
produced or (2) the gross financial value
of the annual energy produced minus
the annual costs to operate the facility.
Gross financial value of the annual
energy produced is calculated as the
sum of (a) the total self-consumed
kilowatt-hours produced by the
qualified solar or wind facility
multiplied by the applicable building’s
metered price of electricity and (b) the
total exported kilowatt-hours produced
by the qualified solar or wind facility
multiplied by the applicable building’s
volumetric export compensation rate for
solar or wind kilowatt-hours. The
annual operating costs are calculated as
the sum of annual debt service,
maintenance, replacement reserve, and
other costs associated with maintaining
and operating the qualified solar or
wind facility.
If the facility and building are
commonly owned, a signed benefitsharing agreement between the building
owner and the tenants would be
required. The Proposed Rules requested
comments on how to adjust definitions
of gross financial value to account for
scenarios in which building occupants
are compensating the facility owner for
energy services.
In scenarios where the facility and the
Qualified Residential Property have
different ownership and the facility
owner enters into a power purchase
agreement (PPA) or other contract for
energy services with the Qualified
Residential Property owner, the
Proposed Rules defined net energy
savings as equal to the greater of: (1) 50
percent of the financial value of the
annual energy produced by the facility
that accrues to the owner of the
Qualified Residential Property in the
form of utility bill credit and/or cash
payments for net excess generation or
(2) the financial value of the annual
energy produced by the facility that
accrues to the owner of the Qualified
Residential Property in the form of
utility bill credit and/or cash payments
for net excess generation minus any
payments made by the building owner
to the facility owner for energy services
associated with the facility in a given
year. In these scenarios, the facility
owner must enter into an agreement
with the building owner for the building
owner to distribute the savings to
residents.

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1. Requirement To Equitably Allocate
Financial Benefits
Two commenters provided that under
certain State and Federal housing
programs, housing authorities receive
utility subsidies based on historical
utility costs. These commenters also
noted that a housing authority may have
their utility allowance decreased if the
housing authority reduces their utility
costs through savings from the facility.
Additionally, these commenters stated
that the department managing a housing
authority can claim a portion of net
metering credits if the housing authority
receives net metering credits. One of the
commenters, therefore, requested that
the Treasury Department and the IRS
draft a rule that the housing authority be
able to retain 100 percent of net
metering credits, regardless of the
energy savings received from the
program and the facility. The other
commenter requested that the Treasury
Department and the IRS waive the
requirement for public housing
authorities to pass financial benefits
along to residents. This commenter
stated that in public housing, all
benefits ultimately accrue to the benefit
of residents. Another commenter stated
that HUD-utility allowances may need
to be increased for buildings if net
benefits are to be shared between the
owner and tenants, and the external
financing is used to build the system,
such that additional proceeds will be
needed to pay debt service on the
energy.
The Treasury Department and the IRS
considered these comments but did not
adopt them in the final regulations
because section 48(e)(2)(B) requires that
the financial benefits of the electricity
produced by the facility be allocated
equitably among the occupants of the
Qualified Residential Property.
One commenter warned the Treasury
Department and the IRS to guard against
owner/related party financing designed
to capture all or most of the energy
savings benefits by artificially
manipulating their terms of the
financing to capture the savings during
the term of the credit, and against
owners seeking to purchase energy
wholesale and mark up value to tenants
to artificially inflate the value of the
energy savings. The commenter says the
value of the energy bill savings should
be indexed against the approved meter
rate as authorized by the relevant public
service commission (where applicable)
or some other third-party verifiable rate
unrelated to the project sponsor or
affiliates.
In response to this comment, the
Treasury Department and the IRS have

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maintained the baseline of 50 percent of
the net energy savings calculated from
a minimum of 25 percent of the gross
financial value of electricity produced
as described in the Proposed Rules to
ensure the statutory obligation that
financial benefits be allocated to
tenants. The final regulations clarify,
consistent with the comments received,
that gross financial value includes the
sale of any renewable energy credits or
other attributes associated with the
facility’s production, if separate from
the metered price of electricity or export
compensation rate.
Many commenters requested that the
final regulations provide guidance for
facility owners to prove equitable
distribution of benefits to tenants. A few
commenters stated that in certain cases,
like a project using community
renewable energy facility rate structures
offered by utilities, separately metered
residents can subscribe voluntarily, and
some residents may choose not to
subscribe. Therefore, these commenters
requested that the regulations allow for
a reduction in the equitable distribution
requirement on a pro-rata basis by the
(number) of residents who choose not to
subscribe. However, one of the
commenters recommended a minimum
threshold of resident participation,
suggesting 50 percent participation at
placed in service, for the distribution of
benefits to be considered equitable.
In consideration of these comments,
the Treasury Department and the IRS
have clarified in the final regulations
that for any occupant(s) that choose to
not receive utility bill savings, the
portion of the financial value that would
otherwise be distributed to nonparticipating occupants must be instead
distributed equitably to the participating
occupants. Additionally, 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 utilize this method of benefit
distribution.

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2. Gross Financial Value
A few commenters suggested changes
to the definition of gross financial value.
One commenter stated that for purposes
of building occupants compensating the
facility owner, gross financial value
could be calculated based on the
average monthly local utility rate for
either residential or low-income
residential (from the previous calendar
year or trailing 12 months) multiplied
by the average residential kilowatt hour
usage per square foot multiplied by the
per square footage of rentable residential
space in the building. The commenter

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provided variation and detail on how
this would be accomplished.
Another commenter requested
clarification on how to define ‘‘gross
financial value.’’ The commenter stated
that it is unclear whether the ‘‘price of
electricity’’ means only the energy costs
or also all the delivery costs and other
charges that may be charged on a per
kilowatt hour basis. Additionally, the
commenter noted that the ‘‘export
compensation rate for . . . kilowatt
hours’’ may not be solely tied to the
energy but may also include additional
compensation such as the value of
renewable energy certificates or other
incentives provided by States.
Finally, one commenter stated that
calculating the ‘‘gross financial value of
the annual energy produced,’’ as
defined in the Proposed Rules, would be
difficult for buildings due to the
complexity of electricity rate structures
in many jurisdictions, which may vary
depending on the time of day and time
of year.
The Treasury Department and the IRS
considered the commenters’ suggestions
but generally did not adopt them
because the Proposed Rules provide a
clear and accurate framework for
defining ‘‘gross financial value.’’
However, the final regulations clarify,
consistent with the comments received,
that gross financial value includes the
sale of any renewable energy credits or
other attributes associated with the
facility’s production, if separate from
the metered price of electricity or export
compensation rate. The same definition
of gross financial value applies
regardless of the ownership structure.
One commenter requested
clarification about whether front of the
meter (FTM) volumetric tariff
compensation rate, such as
Connecticut’s Residential Renewable
Energy Solutions Buy-All-Sell-All tariff
(BASA Tariff), may be included in the
gross financial value calculation when
the facility and Qualified Residential
Property have the same ownership. The
commenter believes that the BASA tariff
$/kWh revenue would be included in
the definition of gross financial value
because it is included in the definition
as part of ‘‘the total exported kilowatthours produced by the qualified solar or
wind facility multiplied by the
applicable building’s volumetric export
compensation rate for solar.’’
The Treasury Department and the IRS
considered this comment but ultimately
concluded that additional clarification
in the final regulations to address
specific State tariff rates is not
necessary. The definition of gross
financial value included in the final
regulations, consistent with the

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Proposed Rules, already includes the
total exported kilowatt-hours produced
by the qualified solar or wind facility
multiplied by the applicable building’s
volumetric export compensation rate for
solar or wind kilowatt-hours, which
would include compensation from the
electricity produced from the facility.
Another commenter stated that it is
not appropriate to define financial
benefits in terms of the value of energy
savings. Instead, this commenter
claimed that the only financial benefit
that can be generated by facilities in
Category 3 would be through net
metering, where the facility generates
excess capacity that is sold back to the
grid for off-site consumption. The
commenter also implied that, in the case
of net metering credits, the credit would
go directly to the tenants, and that the
building owner will never receive any
financial benefit.
The Treasury Department and the IRS
considered this comment but did not
adopt it in the final regulations. The
Treasury Department and the IRS
determined that gross financial value
from the electricity produced from a
qualified solar or wind facility may stem
from self-consumed kilowatt-hours
produced by the facility, exported
kilowatt-hours produced by the facility,
or the sale of any renewable energy
credits or other attributes associated
with the facility’s production (if
separate from the metered price of
electricity or export compensation rate).
Further, financial value of energy
savings from the electricity produced is
a financial benefit of the electricity
produced by the facility and section
48(e)(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 Qualified Residential
Property.
3. Net Financial Value
One commenter stated that rather
than creating two methods, the Treasury
Department and IRS should adopt a
single method to calculate net energy
savings. The commenter stated that for
both scenarios (commonly owned and
third-party owned), the final regulations
should adopt the method from the
Proposed Rules that was only proposed
to apply when the facility and Qualified
Residential Property have the same
ownership. The Treasury Department
and the IRS considered this comment
but did not adopt it in the final
regulation because it is appropriate for
‘‘net financial value’’ to be defined
differently depending on whether the
facility is commonly owned or thirdparty owned because in third-party

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owned scenarios calculating the
facility’s levelized cost of energy would
be overly complex and potentially
vulnerable to manipulation. Instead,
relying on the PPA rate is simpler and
more reliable. The final regulations
clarify that in case of a commonly
owned facility ‘‘net financial value’’ is
defined as the gross financial value of
the annual energy produced minus the
annual average (or levelized) cost of the
qualified solar or wind 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).
In the case of a third-party owned
facility, ‘‘net financial value’’ is defined
as gross financial value of the annual
energy produced minus any payments
made by the building owner and/or
building occupants to the facility owner
for energy services associated with the
facility in a given year.
Another commenter cited to the
Connecticut’s Residential Renewable
Energy Solutions BASA Tariff, which
involves FTM projects, and requested a
change to the net financial value
definition for third-party owned
facilities. The commenter proposed that,
to include FTM projects in Category 3,
the first definition of net financial value
needs to be amended to reference ‘‘the
total financial value of energy produced
by the facility that accrues to the owner
of the qualified residential property, or
the facility owner, the tenants, or a
combination thereof.’’ The commenter
further provided that a set percentage
can be required to be provided, like 25
percent, to the tenants, and the rest of
the revenue can be allocated between
the facility owner and the property
owner in whatever manner is requested.
This commenter also requested that the
second definition of net financial value
be amended to say that ‘‘the total
financial value of the annual energy
produced by the facility that accrues to
the owner of the qualified residential
property, or the facility owner, the
tenants, or a combination thereof minus
any payments made, or revenue
allocated, to the facility owner for
energy services associated with the
facility in a given year’’ to consider solar
site lease structures (for FTM project
like BASA) in addition to PPAs.
Another commenter generally
recommended that the Treasury
Department and the IRS adopt a
baseline requirement of passing on at
least 25 percent of net energy savings to
tenants, to ensure meaningful financial
benefits are afforded to households in
Category 3.

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The Treasury Department and the IRS
considered these comments but did not
adopt them in the final regulations and
maintain the baseline of 50 percent of
the net energy savings calculated from
a minimum of 25 percent of the gross
financial value of electricity produced
as described in the Proposed Rule,
which is a higher value of meaningful
financial benefits than the commenter
suggests. The other 50 percent of the net
energy savings can be assumed to be
dedicated to lowering the operational
costs of energy consumption for
common areas, which benefits all
building occupants. The Treasury
Department and the IRS determined that
the baseline of 50 percent of the net
energy savings is consistent with the
statutory intent for Category 3, which is
to provide the financial benefits of the
electricity produced directly to building
occupants.
4. Single Family Housing
One commenter generally noted that
the financial benefit definitions for
Category 3 only contemplate multifamily housing. This commenter
requests clarification for Tribal housing
programs, which the commenter states
primarily consist of Tribal single-family
residences that would have their own
meter.
In response to the comment, the
Treasury Department and the IRS have
modified the financial benefit definition
to provide clarity for single-family
residences that meet the criteria of a
Qualified Residential Property. The
final regulations state that a Qualified
Residential Property could either be a
multifamily rental property or singlefamily rental property. The same rules
for financial benefits for Category 3
apply to both property types.
5. Benefits Sharing Agreement
Several commenters expressed
concern over the signed benefits sharing
agreement between the building owner
and the tenants if the facility and
building are commonly owned.
Generally, commenters suggested the
elimination of this requirement. A few
commenters noted the administrative
burdens and challenges on the building
owner in obtaining signed agreements
from all tenants. Likewise, another
commenter said that this requirement is
overly burdensome, and that requiring
each resident to voluntarily sign a
benefits sharing agreement would
prevent a facility from proceeding. This
commenter also noted the possibility
that requiring such an agreement may
conflict with consumer protection laws,
and another commenter agreed
suggesting certain customer protection

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disclosures may be required. One
commenter also stated that this process
would potentially present a ‘false
promise’ to residents should the project
not be selected for an allocation. Some
commenters offered alternatives to a
signed benefits sharing agreement.
Several commenters recommended that
the facility owner or building owner
provide notice to all building occupants
of the expected financial benefits and
the proposed method of allocating the
benefit. Similarly, another suggested
that owners be required to develop a
benefits sharing plan that must be
communicated to tenants, with owners
ensuring that sufficient time is given for
tenants to provide feedback. Finally, a
few commenters suggested that
applicants instead submit a selfattestation form certifying that they will
equitably distribute benefits in
accordance with the standards set forth
in HUD guidelines.
One commenter supported the
requirement for a signed benefits
sharing agreement. However, the
commenter requested additional
guidance on the contents of such a
benefits sharing agreement, including
specific required consumer protection
disclosures, such as resources tenants
can access to better understand or
renegotiate the agreement. This
commenter additionally encouraged the
Treasury Department and the IRS to
adopt a model affidavit or agreement
between building owners and tenants
based on the options considered and
used in California’s Solar on
Multifamily Affordable Housing
(SOMAH) program. Another commenter
generally asked for clarification on how
to prove or attest that financial benefits
are due to cost savings associated with
solar.
Several Tribal commenters requested
that facilities owned by Tribes or Tribal
housing authorities should be presumed
to result in an economic benefit to
Tribal members who reside on the
reservation or who live in Tribal-owned
housing, and thus should not be
required to enter into a benefits sharing
agreement with Tribal members to show
the financial benefit to Tribal members.
The Treasury Department and the IRS
agree that requiring a signed benefits
sharing agreement between the building
owner and the tenants is burdensome
and not necessary to demonstrate
compliance with Program requirements.
Instead, to better achieve the goal of
verifying Program compliance and to
provide clarification to applicants
regarding how they can demonstrate
that statutory requirements are met the
final regulations require that facility
owners for all Category 3 facilities must

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prepare a Benefits Sharing Statement,
which must include (1) a calculation of
the facility’s gross financial value using
the method described in the final
regulations, (2) a calculation of the
facility’s net financial value using the
method described in the final
regulations, (3) a calculation of the
financial value required to be
distributed to building occupants using
the method described in the regulations,
(4) a description of the means through
which the required financial value will
be distributed to building occupants,
and (5) if the facility and Qualified
Residential Property are separately
owned, indication of which entity will
be responsible for the distribution of
benefits to the occupants. In addition,
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.
6. Impact of Metering on Delivery of
Financial Benefits

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Regardless of ownership, residential
buildings may have master-metered or
sub-metered utilities. Therefore, the
Proposed Rules provided that for submetered buildings, the tenants must
receive the financial value associated
with utility bill savings in the form of
a credit on their utility bills. HUD has
issued guidance for residents of submetered HUD-assisted housing that
participate in community solar,
providing an analysis of how
community solar credits may affect
utility allowance and annual income for
rent calculations.3 The Proposed Rules
provided that applicants follow the
HUD guidance and future HUD
guidance on this issue to ensure that
tenants’ utility allowances and annual
income for rent calculations are not
negatively impacted.
The Treasury Department and the IRS
are aware that in some States or
jurisdictions it may not be
administratively, or legally, possible to
apply utility bill savings on residents’
electricity bills. The Proposed Rules
requested comments on this issue and
how financial benefits, such as services
and building improvements, can be
provided to residents in such residential
buildings.
3 U.S. Department of Housing and Urban
Development, Treatment of Community Solar
Credits on Tenant Utility Bills (July 2022): MF
Memo re Community Solar Credits, (https://
www.hud.gov/sites/dfiles/Housing/documents/MF_
Memo_Community_Solar_Credits_signed.pdf) and
Community Solar Credits in PIH Programs (August
2022), (https://www.hud.gov/sites/dfiles/
documents/Solar%20Credits_PH_HCV.pdf).

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For master-metered buildings, the
Proposed Rules provided that because
residents do not have individually
metered utilities and do not receive
utility bills, the building owner must
pass on the savings through other
means, such as by providing certain
benefits to the building residents
beyond those provided prior to the
qualified solar or wind facility being
placed in service. HUD has issued
guidance for how residents of masteredmetered HUD-assisted housing can
benefit from owners’ sharing of financial
benefits accrued from an investment in
solar energy generation.4 The Proposed
Rules provided that applicants follow
the HUD guidance and future HUD
guidance on this issue to ensure that
tenants’ utility allowances and annual
income for rent calculations are not
negatively impacted.
Many commenters noted that it is
difficult for utility bill credits to be
distributed to residents even in submetered buildings and suggested that
the financial benefit structure available
under the Proposed Rules for master
metered buildings be similarly applied
to sub-metered buildings. Several
commenters noted that it is not possible
to distribute utility bill credits to
residents in sub-metered buildings
because most States lack legislation or
regulations governing the allocation of
solar credits to consumer utility bills,
and, one commenter further stated, that
even in States that do, the utilities may
not have the administrative
infrastructure to allocate credits across
bills. Another commenter supported
this by stating that only 21 States and
DC have statewide policies that support
sharing solar savings in multi-family
housing in the form of utility bill
credits. Many commenters also voiced
general concern that the process of
distributing utility credits is
administratively burdensome on the
owner of the facility. One commenter
stated that many of the residents who
would be eligible to receive bill credits
on their utility bills will already receive
a subsidized electricity price from their
distribution company, which would
result in their cost of power already
being lower than other consumers in
their service territory. This commenter
asserts that it be more economical to
‘‘sell’’ or ‘‘allocate’’ the bill credits to
another consumer in the same service
territory and offset their higher energy
4 U.S. Department of Housing and Urban
Development, Treatment of Solar Benefits in
Mastered-metered Buildings (May 2023), MF_
Memo_re_Community_Solar_Credits_in_MM_
Buildings.pdf (https://www.hud.gov/sites/dfiles/
Housing/documents/MF_Memo_re_Community_
Solar_Credits_in_MM_Buildings.pdf).

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costs and provide a greater overall
financial benefit to tenants. The
commenter states that this system
would be similar to the process
proposed for master-metered buildings.
Many commenters asked for
flexibility in providing financial
benefits to residents. A few commenters
suggested that metering configuration
should not be regarded for purposes of
defining financial benefits. One
commenter stated that financial benefits
should be defined by HUD, and should
be applicable to all properties,
regardless of whether the residential
unit is sub-metered or if the building is
master-metered. This commenter
specifically stated that financial benefits
should be allowed to accrue to the
common area meters and then be
disbursed equitably to occupants based
upon any approved method—without
regard to metering configuration and
without requiring a bill credit allocation
method. Several other commenters
suggested, as alternatives, services such
as free or reduced cost high speed
internet, shuttle services, public
transportation subsidization, job
training programs, community events,
and building improvements as
alternatives to be allowed instead of
utility bill credits.
One commenter suggested that if
utility bill credits are not available,
applicants could determine a baseline
year and calculate the average price per
kilowatt hour for that year and then for
all subsequent years (after placed in
service date) and multiply it by the
kilowatt hours of production multiplied
by an annual acceptable adjustment.
The commenter stated that net energy
savings from a given period (month,
quarter, or year) would then be required
to be spent on residential service
programs (available to the largest group
of residents), facility upgrades
benefiting residents, and other services
that benefit a large group of residents.
A few commenters, although
supportive, noted that the HUD
guidance allowing for services or other
benefits to be provided in master
metered buildings, in lieu of direct
financial savings to tenants, is limited in
scope. One commenter pointed out that
the HUD memorandum cited in the
Proposed Rules only covers
developments subsidized through
HUD’s multifamily programs. This
commenter noted that this guidance
does not cover HUD’s Project Voucher
Program and that the USDA does not
provide matching guidance for the
USDA supported housing. Therefore,
this commenter suggests that the
regulations directly define financial
benefits for master metered housing,

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rather than by reference to memoranda,
so that this provision is clearly
applicable to all master metered
affordable housing developments.
Similarly, one commenter stated that
the types of benefits provided under the
HUD guidance for community solar
programs should be available as a
mechanism to distribute financial
benefits for all Category 3 applicants.
Similarly, another commenter noted
that certain financial benefits
distributed directly to residents may be
includable in a household’s annual
income. The commenter noted that HUD
has determined that providing financial
benefits in the form of gift cards or cash
payments would generally be included
in income. Therefore, this commenter
supported the inclusion of language in
the rules that would state that financial
benefits can include credits on utility
bills or could include benefits that can
be equitably provided to residents but
are not direct payments to the residents,
such as resident services, free or
reduced cost internet, job training, or
building upgrades. However, another
commenter requested the opposite,
stating that direct payments or other
financial benefits like rent reductions
should be the preferred form of benefits.
In response to these comments, the
Treasury Department and the IRS
modified the Proposed Rules in the final
regulations to provide maximum
flexibility to equitably allocate financial
benefits to residents while also ensuring
the statutory requirements are satisfied.
Accordingly, the final regulations
provide that financial value can be
distributed to building occupants via
utility bill savings or through different
means, and depending on the method
selected, the final regulations prescribe
the requirements that must be met. For
purposes of this via utility bill savings
provision, financial benefits will be
considered to be equitably allocated if at
least 50 percent of the financial value of
the energy 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
48(e)(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) that choose to not
receive utility bill savings (for example,
exercise their right to ‘‘opt out’’ of a
community solar subscription in
applicable jurisdictions), the portion of
the financial value that would otherwise

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be distributed to non-participating
occupants must be instead distributed 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 utilize this method of benefit
distribution. If financial value is not
distributed via utility bill savings,
financial benefits will be considered to
be equitably allocated if at least 50
percent of the financial value of the
energy produced by the facility is
distributed to occupants using one of
the methods described in HUD
guidance, or other guidance or notices
from the Federal agency that oversees
the applicable housing program
identified in section 48(e)(2)(B).
With respect to allocating financial
value via utility bill savings,
commenters addressed the language in
the Proposed Rules that provided an
alternative method for net energy
savings to be distributed in proportional
shares based on each dwelling unit’s
electricity unit. The commenters stated
that this method is not permitted by
HUD. These commenters also proposed
a third option for equitable distribution,
which they claim is used in California’s
SOMAH program, where shares are
distributed to each unit based on square
footage. In response to this comment,
the Treasury Department and the IRS
added language in the final regulations
to clarify that the financial value should
be distributed in equal shares to each
building dwelling unit among the
Qualified Residential Property’s
occupants that are designated as lowincome under the covered housing
program or other affordable housing
program (described in section
48(e)(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.
Another commenter suggested that in
a master-metered building, the facility
owner be allowed to allocate the value
of energy savings to the building’s
tenant association to distribute equally
as the association sees fit. This was
suggested in addition to and as
alternative to the options provided in
the HUD guidance.
In response to this comment, the
Treasury Department and the IRS
considered but did not adopt this
suggestion. The Treasury Department
and the IRS have provided additional
clarity on the applicability of HUD
guidance in the final regulations to
provide flexibility to the applicant to
determine the methodology most
appropriate for allocation of the value of

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energy savings based on the
circumstances of the Qualified
Residential Property. This includes
options that have been determined to
not affect a tenants utility allowance
and annual income for rent calculations.
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 48(e)(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. To
satisfy this standard, the Proposed Rules
required that the facility serve multiple
households and at least 50 percent of
the facility’s total output is distributed
to qualifying low-income households
under section 48(e)(2)(C)(i) or (ii). In
addition, to further the overall goals of
the Program, the Proposed Rules
reserved allocations under this category
exclusively for applicants that would
provide at least a 20-percent bill credit
discount rate for all such low-income
households. The Proposed Rules
defined a ‘‘bill credit discount rate’’ as
the difference between the financial
benefit distributed to the low-income
household (including utility bill credits,
reductions in the low-income
household’s electricity rate, or other
monetary benefits accrued by the
household) and the cost of participating
in the Program (including subscription
payments for renewable energy and any
other fees or charges), expressed as a
percentage of the financial benefit
distributed to the low-income
household. The bill credit discount rate
can be calculated by starting with the
financial benefit distributed to the lowincome household, subtracting all
payments made by the low-income
customer 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 low-income
household.
1. Category 4 Community Solar
Because of the financial benefits
requirements that are structured for
community solar projects, several
commenters thought that the Proposed
Rules too narrowly limited Category 4.
Commenters noted that the Proposed
Rule precluded otherwise eligible
facilities from qualifying under Category
4, including behind the meter (BTM)
facilities that meet the Category 4
requirements. One commenter suggested
that Category 4 should be open to
projects that directly benefit Tribal
member small businesses. Similarly, a

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commenter noted that Category 4 should
be open to all projects, whether FTM or
BTM, that directly benefit Tribal
member small businesses (where the
small business can apply for the section
48 credit) or Tribal enterprises, located
on Tribal lands, that may want to
deploy commercial roof-top or groundmount solar (such as canopies) to offset
energy costs, provide energy security, or
support job creation. Another
commenter also criticized the narrow
nature of Category 4 noting that the
Proposed Rules have made eligibility for
Category 4 solely applicable to
multifamily and community solar.
Some commenters also made
suggestions on how to define Category
4. One commenter suggested that
projects under Category 4 allow only onsite commercial and industrial projects
to reach overall deployment and savings
goals. Similarly, one commenter
requested that Category 4 incentivize
larger agribusiness projects that employ
residents living in these areas and
working at these agribusiness facilities
(or similar industries) and stated that
the 50 percent household requirement is
too complicated. This commenter felt
that residential facilities are being
prioritized in categories 1, 3, and 4, and,
therefore, that Category 4 should be
modified to incentivize facilities
supplying power to businesses but
providing financial benefits to lowincome residents in the same area.
Another commenter recommended that
the Category 4 allocation give priority to
qualified low-income benefit projects
less than 1 MW that are located in lowincome communities.
The Treasury Department and the IRS
recognize the commenters’ concerns
that Category 4 is limited. However,
projects must meet the statutory
requirements under section 48(e)(2)(C)
to be considered eligible for Category 4.
To ensure these requirements are not
too narrowly construed, the Treasury
Department and the IRS adopted a
change to the FTM definition in the
final regulations applicable to Category
4 to ensure that projects meeting the
intent of Category 4, as that intent was
described in the Proposed Rules, are not
unintentionally disqualified due to an
overly strict definition of FTM. The
final regulations clarify that a facility is
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. The final regulations also clarify
that for the purpose of Category 4, a
qualified solar or wind facility is also

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FTM if 50 percent or more of its
electricity generation on an annual basis
is physically exported to the broader
electricity grid.
However, the Treasury Department
and the IRS emphasize that this does
not change the intent of Category 4 that
projects falling under the definition of
BTM are not eligible for Category 4, and
that financial benefits to eligible lowincome households can only be
delivered via utility bill savings. Based
on industry and market research,
community solar programs primarily
use utility bill savings to deliver
financial benefits to households. For
this reason, the Treasury Department
and the IRS have defined financial
benefits in this manner.
At least one other commenter
requested allowing public and
affordable housing buildings to
participate in Category 4 through the
use of geo-eligibility to establish
qualification for a Category 4 site. One
of these commenters mentioned the
process being adopted in New York for
its Inclusive Community Solar Adder,
which will allow anyone who lives in
a designated ‘‘Disadvantaged
Community’’ to qualify upon
demonstration that their address is in
one of the so-called DAC zones. This
commenter noted that the Climate and
Economic Justice Screening Tool
(CEJST) map is already being used to
qualify sites for Category 1
participation.
Because section 48(e)(2)(C) provides
requirements for ensuring that the
financial benefits of the electricity
produced by a qualified solar or wind
facility are provided to qualifying
households, establishing categorical
eligibility for Category 4 based on
geographic location of the project is
inappropriate. Similarly, as discussed in
more detail later under part V.B.6. of
this Summary of Comments and
Explanation of Revisions section,
qualifying households based on
geography is also inappropriate because
of statutory requirements. Similarly,
establishing eligibility for multifamily
buildings (including master-metered
buildings), agribusinesses, or other
arrangements that do not directly result
in utility bill savings for low-income
households is also inappropriate. As
discussed earlier, financial benefits to
eligible low-income households can
only be delivered via utility bill savings
under these regulations. Therefore, the
final regulations do not adopt these
comments.
2. Twenty Percent Bill Credit Discount
One commenter urged the Treasury
Department and the IRS to require a

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higher bill discount rate than 20
percent, stating the programs in Illinois,
Massachusetts, and Maryland already
provide discounts at or above the
proposed threshold level. This
commenter believes that the increased
credit for qualified low-income
economic benefit projects should allow
for an increase in the amount of
financial benefit delivered to lowincome customers in these markets.
Another commenter supported the
method of requiring financial benefits in
the form of bill credits, but suggested an
additional requirement to be included
in cases where beneficiaries have no
cost of participation through a
subscription fee. In this situation, the
commenter suggested that the bill credit
discount rate should be calculated as
the total savings on a customer’s utility
bill, annually, divided by the total value
of the electricity produced by the
project, as measured by the income to
the project paid by the utility,
independent system operator (ISO), or
other customer procuring power from
the project.
Another commenter requested
clarification on the interpretation of bill
credit discount rate, which the
commenter read to mean that 20 percent
of the total export credit rate would be
the minimum required revenue share
with the low-income customer, rather
than 20 percent of the customer’s presolar electricity bill. This commenter
also requested clarification as to
whether the calculation will be annual,
and whether the form of benefits must
specifically be ‘‘utility bill credits’’ or
could be other documented financial
benefits provided to tenants.
One commenter stated that a 20
percent cost savings requirement will
likely be unattainable in some energy
markets, specifically States and
localities that have less amicable laws
and utility regulations for community
solar. This commenter recommended a
15 percent cost savings for 2023, stating
that 15 percent is still on the higher end
of the current industry average for
community solar cost savings. This
commenter also requested that the
benefit should be an annual reduction
(of 15 percent) because there can be cost
savings fluctuations throughout a
calendar year. Although the Treasury
Department and the IRS considered
various percentages for required cost
savings between 5 percent and 20
percent, based on a review of various
State program rates and market
information, the Treasury Department
and the IRS have decided to maintain
the 20 percent rate. This rate will allow
for the greatest savings to the lowincome households and further the

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requirement of section 48(e)(2)(C) that
50 percent of the financial benefits of
the electricity produced by the facility
are provided to such households.
Additionally, in response to comments,
the Treasury Department and the IRS
clarified that the 20 percent bill
discount is an annual savings.
Tribal commenters requested that
projects owned by Tribes or Tribal
housing authorities should be presumed
to result in an economic benefit to
Tribal members who reside on the
reservation or who live in Tribal-owned
housing.
The Treasury Department and the IRS
decline to adopt the suggestion of
presumption of economic benefit. The
statutory requirements for the Program
require that an qualified low-income
economic benefit project serves multiple
households and at least 50 percent of
the facility’s total output is distributed
to qualifying low-income households
under section 48(e)(2)(C). To help
applicants meet this requirement, the
Treasury Department and the IRS have
provided in the final regulations an
illustrative list of categorical eligibility
options to provide maximum flexibility
to qualify low-income households. This
includes eligibility based on Tribal
programs and housing programs, among
many other options.
3. Single Household
Several commenters have requested
that the Treasury Department and the
IRS add eligibility under Category 4 for
projects that benefit one single-family
residence where 100 percent of the
facility’s total output is distributed to
the qualifying low-income household
residing at that residence, provided that
the project meets all other Category 4
criteria, and the facility provides at least
a 20-percent utility bill savings for such
low-income household. Several
commenters also added that Congress’s
use of the term ‘‘households’’ is more
properly read as a programmatic term
applying to all low-income households
that can benefit from the Program, rather
than a narrower reading suggested in the
Proposed Rules. One commenter argued
that this narrow reading (excluding
single family households from Category
4) would unnecessarily and unfairly
discriminate against certain households.
After consideration of all these
comments, the final regulations do not
adopt the commenter’s suggestion.
Section 48(e)(2)(C) applicable to
Category 4 facilities requires that at least
50 percent of the financial benefits of
the electricity produced by the facility
be provided to ‘‘households’’ with
certain income levels. Because the
statute uses the plural term

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‘‘households,’’ the Treasury Department
and the IRS determined that providing
financial benefits to a single household
is insufficient to meet the requirements
of section 48(e)(2)(C) applicable to
Category 4 facilities.
4. Utility Bill Savings
Several Tribal comment letters
requested that Category 4 should not be
limited to projects that provide only
individual benefits or community-scale
projects. These commenters urged the
Treasury Department and the IRS to
expand the definition of ‘‘financial
benefit’’ to include community-wide
benefits, such as direct benefits to the
Tribal government from the additional
tax credit (especially for projects owned
by the Tribe and receiving elective
payments from the Treasury
Department), job creation and economic
benefits to low-income Tribal members.
These same commenters also stated that
Category 4 should be open to all
projects, regardless of metering, that
directly benefit Tribal member small
businesses (where the small business
can apply for the section 48 credit) or
Tribal enterprises located on Tribal
lands. Additionally, some of the Tribal
comments requested flexibility for
Tribal housing or economic
development projects that are serving
Tribal lands and Tribal households to
define benefits collectively (rather than
individually), because many of the
Tribal commenters are located in States
that do not allow for community solar.
These commenters stated that they will
have to negotiate directly with a utility
to deploy community scale projects on
the Reservation.
To promote more flexibility with
respect to financial benefits
requirements in Category 4, a few
commenters requested that the Treasury
Department and the IRS extend the
same flexibility is provided for Category
3 projects regarding financial benefits to
Category 4 projects as well. These
commenters requested that a manner
other than bill credits be permitted to
provide financial benefits directly to
low-income subscribers in Category 4
that still meets the nominal 20 percent
discount requirement, like gift cards,
direct payments, or checks. One
commenter asked whether mastermetered projects are eligible for
Category 4 if a project adheres to the
same HUD guidance used for Category
3 projects.
The Treasury Department and the IRS
considered the comments requesting
expansion or flexibility with respect to
financial benefits for Category 4 to allow
methods other than utility bill savings
but ultimately decided not to adopt the

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commenters’ suggestions in these final
regulations. Requiring financial benefits
via utility bill savings is the only means
through which the Treasury Department
and the IRS can ensure that the
provision of financial benefits to
qualifying households is sufficiently
regulated such that the requirements of
section 48(e)(2)(C) are satisfied.
Therefore, the final regulations clarify
that financial benefits for Category 4
must be tied to a utility bill of a
qualifying household. The Treasury
Department and the IRS may consider
other methods of determining Category
4 financial benefits in future years.
The final regulations, however,
address comments regarding the
potential unsuitably of the proposed
rules to net-credit billing, or other
structures where the qualifying
household does not make a direct
payment to the project owner by
providing an alternative methodology
for calculating a 20 percent bill credit
discount rate in this scenario. In cases
where the qualifying household has no
or only a nominal cost of participation,
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 paid by the utility, ISO, or other offtaker procuring electricity (and related
services, products, and credits) from the
facility.
5. Fifty Percent of the Facility’s Total
Output to Low-Income Households
One commenter requested that the
facility should not have to provide
power to households, as long as the
financial benefits were distributed to
residents of qualifying households. In
this case, the commenter stated that a
non-profit organization planned to build
a facility on the non-profit office
building but distribute the savings the
non-profit derived from the facility to
the residents of apartments the nonprofit administers. Similarly, another
commenter noted that the use of
‘‘distribute’’ rather than ‘‘assigned’’ in
the requirement in the Proposed Rules
that 50 percent of the facility’s total
output is distributed to qualifying lowincome households may imply that
beneficiaries are expected to receive the
physical flows of electricity from the

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facility, which is not how community
solar works in most cases, nor is it what
the statute requires.
In response to these comments and to
clarify the intent of the Proposed Rules,
which was to structure Category 4
consistent with the market as it exists
today (including community solar
business models), the final regulations
adopt the suggestion of the commenter
to change ‘‘distributed’’ to ‘‘assigned.’’
Therefore, the full clause in the final
regulations is ‘‘at least 50 percent of the
facility’s total output must be assigned
to Qualified Households.’’
6. Low-Income Verification
To ensure the requirements of section
48(e)(2)(C) are met, verification of
households’ qualifying low-income
status is required. The Proposed Rules
provided that applicants are responsible
for proof-of-income verification and
would be required to submit
documentation upon placing the
qualified solar or wind facility in
service that identifies each qualifying
low-income household, the output
allocated to each qualifying low-income
household in kW, and the method of
income verification utilized.
The Proposed Rules provided that
applicants may use categorical
eligibility or other income verification
methods to qualify low-income
households. Categorical eligibility
consists of obtaining proof of household
participation in a needs-based Federal,5
State, Tribal, or utility program with
income limits at or below the qualifying
income level for the specific facility
(qualifying program). State agencies (for
example, State community solar/wind
program administrators) can also
provide verification of low-income
status if the State program’s income
limits are at or below the qualifying
income level for the qualified solar or
wind facility. If a household is not
enrolled in a qualifying program,
additional income verification methods
can be used such as: paystubs, tax
returns, or income verification through
crediting agencies and commercial data
sources. Eligibility based on the
applicant (or contractors or
subcontractors) collecting selfattestations from households is not
permitted.
Several commenters commented on
the verification methods to qualify lowincome households. On self-attestation,
5 Federal programs may include, but are not
limited to: Medicaid, Low-Income Home Energy
Assistance Program (LIHEAP), Weatherization
Assistance Program (WAP), Supplemental Nutrition
Assistance Program (SNAP), Section 8 ProjectBased Rental Assistance, and the Housing Choice
Voucher Program.

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many commenters disagree with the
Proposed Rules prohibiting eligibility
based on self-attestation. Many
commenters were in favor of selfattestation, which according to one
commenter could include an attestation
to the effect that the household either
participates in one of the programs that
has the relevant standard as a criterion
or otherwise meets the standard to the
best of the resident’s knowledge. One
commenter stated that self-attestation is
the fastest and most efficient way to
ensure maximum low-income customer
participation. This commenter noted
that many customers will be skeptical of
providing documents, and that the
process of obtaining, processing, and
verifying the documentation is
administratively burdensome and time
consuming. Another commenter noted a
practical consideration that by accepting
self-certification, households who are
not yet enrolled in Federal or State
energy assistance programs but are
eligible or in the process of enrolling
may still participate in qualified lowincome economic benefit projects.
Another commenter stated that only a
fraction of eligible households currently
participate in existing State, Federal,
utility, or Tribal programs for which
they are eligible, and many barriers—
including knowledge, time,
documentation, and language fluency—
prevent many households from
participating.
Some of the commenters’
recommendations also tied into the use
of State programs. One commenter
suggested removing the self-attestation
limitation where self-attestation is
permitted by State agencies. Two other
commenters similarly suggested the
rules accept income verification via
State-program verification where States
specifically accept self-attestation with
one of the commenters noting that
subscribers and applicants should not
have to double verify a household if
self-attestation is used on the State
level. Another commenter encouraged
that applicants be allowed to use benefit
cards as sufficient evidence of
participation in qualifying programs
where such cards are the means by
which a State makes the benefit
available to participants.
Another commenter requested that
the rules clarify whether the use of
State-approved geo-qualification maps
or CEJST are approved income
verification methods and recommended
that, for individuals who reside within
a CEJST or Persistent Poverty County
(PPC), the rules should consider
allowing self-attestation as a means of
income-qualification in States where it
is a permissible method for income-

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qualification. Another commenter asked
for clarification about the interaction
between this Program and State agency
provided income verification, as well as
Department of Energy’s (DOE)
community solar subscription tool tying
eligibility, initially, to LIHEAP. The
commenter noted that some State
agencies allow self-attestation and/or
State-approved geo-qualification maps
in various programs and requested that
the rules allow self-attestation and geoqualification (including both State maps
and CEJST) meeting certain standards to
the maximum extent allowable by law.
Another commenter suggested
expanding those who can provide
verification to not just the State agencies
but also utilities. In contrast, another
commenter instead recommended
removing the concept of allowing State
agencies to provide verification at all
and proposed adding a requirement to
make clear that the requirement is on
applicants to receive verification
directly from the customers.
Some commenters asked for the
expansion of categorical eligibility. For
example, one commenter recommended
that public housing, USDA Rural
Development, and the Project Based
Voucher Program be added to the list of
categorically eligible Federal assistance
programs noted in footnote 5 of the
Proposed Rules. Another commenter
asked if the listed methods are the only
possible methods of verification or if
other State-approved methods may be
considered as well. Another commenter
also suggested for purposes of Category
4 that the rules allow participation in
more programs as proof of income and
that paystubs, tax returns, and credit
checks should be removed as
possibilities as these could alienate lowincome households. An additional
commenter noted their view on the
importance of protecting Tribal data
sovereignty. This commenter said the
rules should not tie Tribes to external
sources of data. This commenter
believes that self-certification as to
poverty levels or other metrics by Tribes
should be sufficient.
A few commenters suggested adding
geographic eligibility to verify lowincome status. One commenter
suggested adding geographic eligibility
to the ‘‘category eligibility’’ and ‘‘other
income verification methods’’ to qualify
low-income households, where
‘‘geographic eligibility’’ is defined as a
household that is currently residing in
a LIHTC Qualified Census Tract (LIHTC
Qualified Census Tract) and where at
least one adult in that household has
resided for at least the previous six
months. The commenter claims that the
LIHTC Qualified Census Tract

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household income standard is stricter
than that in section 48(e)(2)(C)(ii), and
thus this standard is an administratively
efficient method of qualifying lowincome households for a tax credit
similar to the Low-Income Communities
Bonus Credit. Another commenter
recommended adding the physical
location of the customer’s home as an
additional qualifying criterion, noting a
reasonable criterion for inclusion as
areas where at least 20 percent of the
population falls below the poverty line,
with prevalent harmful environmental
impacts as outlined in the 2014–2018 5year American Community Survey
(ACS), conducted by the U.S. Census
Bureau. Moreover, one commenter
suggested including geo-qualification
based on State maps and the CEJST
Tool.
In contrast, one commenter supported
the Proposed Rules noting that
categorical income verification
decreases costs and increases available
low-income customer benefits. Another
commenter provided an entirely
different suggestion stating that income
verification is a vestige of the
community solar subscription model
and is alternatively achieved by serving
communities in low-income areas as
measured by area or State median
income census data. The commenter
suggested that income verification
through the Statewide Shared Clean
Energy Facility (SCEF) program (which
is a Connecticut program) relies on the
distribution utilities determining
customer eligibility.
After consideration of all of comments
on the verification methods to qualify
low-income households, the final
regulations adopt these comments in
part. The Treasury Department and the
IRS considered numerous verification
methods in crafting the Proposed Rules
and the final regulations to strike a
balance between reducing
administrative burden for taxpayers and
households and ensuring adequate
checks that the facilities receiving a
Capacity Limitation under Category 4
meet the requirements of section
48(e)(2)(C). The final regulations adopt
the Proposed Rules’ prohibition on selfattestations because they are not
sufficiently reliable or verifiable.
However, this prohibition on direct selfattestation 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. The final regulations clarify
that income verification is accepted via
program verification where the relevant
jurisdiction specifically accepts selfattestation.
The Treasury Department and the IRS
agree that subscribers and applicants
should not have to double verify when
a State program accepts self-attestation.
The final regulations, consistent with
the Proposed Rules, provide flexibility
for applicants to qualify households
through several means, including
categorical eligibility and paystubs, tax
returns, or income verification through
crediting agencies and commercial data
sources. Moreover, the list of Federal
programs included in footnote 5 of the
Proposed Rules is not the exclusive list
of Federal programs that could be used
to demonstrate categorical eligibility,
which provide additional flexibility to
qualify households. However, in
response to the comments, the final
regulations will include additional
examples of programs that will be
considered categorically eligible based
on income status. Therefore, in response
to the commenter’s request the
following additional programs will be
added to the illustrative list that was
provided in the Proposed Rules: Federal
Communication Commission’s Lifeline
Support for Affordable
Communications, USDA’s National
School Lunch Program; U.S. Social
Security Administration’s Supplemental
Security Income; or any verified
government or non-profit program
serving Asset Limited Income
Constrained Employed (ALICE) persons
or households. The final regulations
also clarify that to qualify for categorical
eligibility under one of these programs,
an individual in the household must be
currently enrolled or must have
received an award letter or other written
documentation from the program in the
last 12 months.
With respect to State programs, the
final regulations, consistent with the
Proposed Rules, provide that categorical
eligibility also consists of obtaining
proof of household participation in a
needs-based State or utility program, so
long as the income limits are at or below
the qualifying income level for the
specific facility. The final regulations
clarify that the qualifying income level
for a household is based on where such

household is located. Without
additional information or requirements,
geographic-based eligibility verification
does not prove that a particular
household necessarily meets the income
parameters of section 48(e)(2)(C).
Although one commenter, for example,
noted that LIHTC Qualified Census
Tracts have stricter income
requirements, this does not address the
concern that a particular household’s
income may not qualify under the
statute but only that there are
households in the census tract that
would qualify.
Two commenters requested eligibility
of low-income households be
established only at the time of
enrollment and remain for the length of
the subscription and that there should
not be a continual obligation to verify
households as low-income. This request
is consistent with the Proposed Rules,
which provided that applicants are
responsible for proof-of-income
verification and would be required to
submit documentation once upon
placing the qualified solar or wind
facility in service that identifies each
qualifying low-income household as
well as other information. The final
regulations maintain the Proposed Rule
but clarify that the low-income status of
a household is determined at the time
the household is enrolled in the
community program and does not need
to be re-verified. Similarly, the
recapture rules discussed in part XIII of
this Summary of Comments and
Explanation of Revisions section are not
imposed if the low-income status of
households change in later years;
however, the Treasury Department and
the IRS determined that a change in the
final regulations to clarify this point is
unnecessary.
VII. Annual Capacity Limitation
Under section 48(e)(4)(C), the total
annual Capacity Limitation is 1.8
gigawatts (GW) of DC capacity for each
of the calendar year 2023 and 2024
programs. Consistent with section 4.02
of Notice 2023–17, the Proposed Rules
specified how the annual Capacity
Limitation would be allocated across the
four facility categories for 2023. The
Proposed Rules, consistent with Notice
2023–17, reserved a portion of the total
annual Capacity Limitation of 1.8 GW of
DC capacity for each facility category for
calendar year 2023 as follows:

Category 1: Located in a Low-Income Community .................................................................................................................
Category 2: Located on Indian land ........................................................................................................................................
Category 3: Qualified Low-Income Residential Building Project .............................................................................................
Category 4: Qualified Low-Income Economic Benefit Project ................................................................................................

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700 megawatts.
200 megawatts.
200 megawatts.
700 megawatts.

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The Proposed Rules also provided
that the Treasury Department and the
IRS would retain the discretion to
reallocate Capacity Limitation across
categories and sub-reservations to
maximize allocation in the event one
category or sub-reservation is
oversubscribed and another has excess
capacity.
One commenter suggested eliminating
the 1.8 GW Capacity Limitation
altogether, in favor of the same
uncapped allocation that they view
other solar customers, typically
customers in a higher income bracket,
have previously received. However,
section 48(e)(4)(C) provides the 1.8 GW
Capacity Limitation, and it cannot be
modified by the final regulations.
Therefore, the final regulations do not
adopt this comment.
Another commenter suggested reallocating the Capacity Limitation under
Category 3 to Category 4 to increase the
total number of MW that can be
deployed efficiently while yielding the
highest economic benefit. Similarly, a
different commenter recommended
increasing Category 4 by combining
Category 1 and 4 into a single 1.4 GW
category applicable to both. In addition,
this commenter suggested that the
Treasury Department and the IRS
should layer on preferences for
economic benefits over location in
facility selection, similar to its
preferences around ownership and
location (discussed in part VII of this
Summary of Comments and Explanation
of Revisions section). Procedurally, an
applicant would submit an application
for this combined category in the
applicable sub-allocation and indicate
under which category qualification, and
thus bonus level, for the project is
sought. The commenter added that the
Treasury Department and the IRS can
apply a similar approach to the
Proposed Rules to sub-allocate capacity
among facility types within that
combined category, subdividing among
commercial, community, and singlefamily residential solar as strongly
recommended by both industry and
environmental justice groups since last
year. Another commenter also had
recommendations about how to reallocate capacity taking into account the
Additional Selection Criteria (ASC). The
commenter suggested that the Treasury
Department and the IRS reallocate
unused capacity in the same year.
Specifically, the commenter suggested
that if there is unused capacity from a
category or an ASC reservation that it be
allocated in the same year to ensure all
1.8 GW of projects can be efficiently
deployed annually. The commenter
encouraged the Treasury Department

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and the IRS to consider implementing
subcategory capacity carveouts within
each category to effectively allow for a
rolling application system. For example,
in Category 4, there should be more
capacity dedicated to certain projects
over others. Two commenters expressed
disagreement for the large total
reservation in Category 1. These
commenters suggested that some of the
Category 1 reservation should be moved
to Category 4.
After consideration of these
comments, the final regulations,
consistent with the Proposed Rules,
provide that the total Capacity
Limitation for each Program year will be
divided across the 4 facility categories
and that the Treasury Department and
the IRS retain the discretion to
reallocate Capacity Limitation across
categories and sub-reservations to
maximize allocation in the event one
category or sub-reservation is
oversubscribed and another has excess
capacity. The Treasury Department and
the IRS continue to believe that the
reservations based on facility category
best allow a wide variety of facilities
and benefits to go to low-income
communities to further the intent of the
statute. Absent category reservations, all
the annual Capacity Limitation could
get allocated to one facility category,
which is contrary to the statute
providing four distinct categories.
The final regulations clarify that the
specific reservations for a Program year
are provided in guidance published in
the Internal Revenue Bulletin. For
Program year 2023, Notice 2023–17 and
Revenue Procedure 2023–27 provide the
specific reservation amounts for each
category. As clarified in the final
regulations, the specific reservation
amounts are established 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.
One commenter stated that suballocations should be adaptable in
future Program years to account for
lessons learned. However, the
commenter said that the 200 MW for
Indian land should not be reallocated to
other categories even if not fully
claimed by applications in any given
year, nor should any shortfall of
applications be used to justify smaller
future allocations. The Treasury
Department and the IRS understand the
importance of all of the categories
provided by Congress in the statute and
agree that the Capacity Limitation
allocated to each facility category

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should be adaptable. Accordingly, the
Treasury Department and the IRS have
retained discretion to reallocate
Capacity Limitation and to revise
amounts reserved for each category in
each Program year. After the 2023
Program year, the Treasury Department
and the IRS will determine whether to
change the facility category reservation
amounts for the 2024 Program year
based on the factors provided in the
final regulations and will announce the
specific reservation amounts in Program
guidance applicable to 2024.
VIII. Additional Selection Criteria
The Proposed Rules provided that
facilities that meet at least one of the
two categories of Ownership and
Geographic Criteria, collectively the
ASC, would receive priority for an
allocation within each facility category
described in section 48(e)(2)(A)(iii). The
Proposed Rules also provided that at
least 50 percent of the total Capacity
Limitation in each facility category
would be reserved for facilities meeting
ASC.
The Proposed Rules provided 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 ASC. If the eligible applications for
Capacity Limitation for facilities that
meet at least one of the two ASC criteria
exceed the Capacity Limitation for a
category, facilities meeting both ASC
criteria would be prioritized for an
allocation.
Several commenters expressed overall
agreement and support for the inclusion
of ASC, and the purpose behind these
criteria, which commenters feel will
promote community ownership. One
commenter expressed disagreement
with the use of ASC in the Program or
that it should not be used for the 2023
Program. Another commenter echoed
this by saying that the Treasury
Department and the IRS should first
assess the Program and applications
received for 2023, and then consider
including the ASC and a corresponding
capacity reserve amount.
Other commenters suggested that if
ASC is used, the percentage of the total
Capacity Limitation in each facility
category for ASC should be reduced
from 50 percent to 25 percent or to 10
percent. Another commenter stated that
the Ownership Criteria is too restrictive,
and few applicants will be able to meet
the high standard. This commenter
recommended giving preferential
allocation of capacity limitation to
groups that meet one or both of the ASC,
without reserving 50 percent of the
capacity under each category on a

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rolling basis. One commenter similarly
stated that an inflexible reservation of
50 percent of the total Capacity
Limitation in each category for facilities
meeting ASC may result in potentially
hundreds of MW of unclaimed Capacity
Limitation for 2023. This commenter
suggested that a smaller amount of
reservation should be reserved for ASC
projects in 2023, and that the amount of
reservation should be increased in
future years. A few other commenters,
similarly, suggested that in the first year
of the Program, ten percent of the
capacity in each sub-reservation should
be reserved for ASC applicants, with the
Treasury Department and the IRS
retaining authority to reallocate the
capacity and expand the capacity
reservations in future Program years.
One commenter separately stated that
except for reallocations (meaning
reallocations of capacity between
categories) for facilities meeting the
ASC, the Treasury Department and the
IRS should ensure that proposed
reallocations more than 50 MW are
subject to public notice and comment.
A few commenters who supported
reduction of the ASC reservation
amounts, stated that it will take
significant time and coordinated effort
for new community solar markets to
emerge where efforts to establish
Program frameworks have been lacking
to date. These commenters stated that it
is likely that there will be few
applicants who meet the ASC, or that
the projects developed by owners that
would qualify tend to be small scale
projects. Some commenters also
asserted that the restrictive Ownership
Criteria would likely encourage gaming.
In contrast, some commenters
expressed support for at least 50 percent
of the total Capacity Limitation being
reserved for facilities meeting ASC.
Additionally, one of the commenters
supporting the reduction in the ASC
reservation amounts stated that the
Treasury Department and the IRS
should prioritize reallocations to facility
categories with more than 25 percent of
the facilities meeting the ASC.
One commenter suggested that a third
set of ‘‘Market-based’’ criteria should be
added to ASC. The commenter stated
that these criteria would prioritize
projects that maximize the benefit
delivered to the largest number of lowincome customers. The two criteria
provided by the commenter under this
category are: 1. Proposed discount rate:
Savings delivered to low-income
customers; and 2. Percentage of project
reserved for low-income customers: The
percentage of the output capacity that
will service low-income customers.
However, the commenter only includes

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community solar projects in discussing
the reason for this proposal. Two other
commenters also proposed a third set of
criteria focused on prioritizing projects
that are participating in State lowincome renewable energy programs,
with one commenter specifically
naming programs funded under the
Environmental Protection Agency’s
(EPA) Greenhouse Gas Reduction Fund
Solar For All Program. However, one of
the comments specifically limits these
criteria to Category 1 projects. Neither of
the comments explain how these criteria
would be equitably applied to facilities
applying from all States, especially
States that do not have such programs,
nor do the commenters explain how
wind facilities would be eligible under
the previously recommended criteria.
Other commenters provided additional
criteria that could be considered
including the use of minority and
woman-owned businesses as contractors
and employment of workers from lowincome communities. Finally, a group of
commenters suggested that the Treasury
Department and the IRS consider
applicants under ASC if the applicant
signs a binding commitment to provide
financial benefits for longer than the
statute requires; or if the applicant sign
a binding commitment promising to
provide greater financial benefits than
required. Another commenter, similarly,
suggested incorporating a new category
of ASC based on whether the project
provides benefits to the local
community and its members. The
commenter suggested that this would
better ensure that Category 1 and
Category 2 projects are providing direct
benefits to households or the local
community. This comment gives
examples of criteria for this ‘‘provision
of benefits’’ category including: targeted
hiring provisions, local procurement
standards for Minority, Women and
Disadvantaged owned Business
Enterprises, Community Workforce
Agreements, and Community Benefit
Agreements; provision of direct
financial benefits to community
members, such as energy bill savings or
reduction of energy burden; and for
Category 1 projects, actual low-income
status of households who would be
benefited.
After consideration of these
comments, the final regulations,
consistent with the Proposed Rules,
maintain that at least 50 percent of the
total Capacity Limitation be reserved for
facilities meeting ASC to help achieve
the Treasury Department and the IRS’s
stated goals of the Program in Notice
2023–17 to (1) increase adoption of and
access to renewable energy facilities in

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55521

low-income communities and
communities with environmental justice
concerns; (2) encourage new market
participants in the clean energy
economy; and (3) provide social and
economic benefits to people and
communities that have been
marginalized from economic
opportunities and overburdened by
environmental impacts. While many of
the comments provide suggestions for
alternative or additional ASC, many of
the suggestions could not be applied to
all categories or applied nation-wide
such as the use of enrollment in a
specific State energy program. Other
suggestions are infeasible due to
statutory conflict such as providing
benefits for a longer duration than the
statute requires. Lastly, the Treasury
Department and the IRS are anticipating
upwards of 100,000 applications
annually for the Program. Selection
criteria that is qualitative, subjective,
and would require significant review
such as a Community Benefits
Agreement, Workforce Agreement, or
procurement or hiring targets are
administratively infeasible to have
timely decisions made throughout the
year. The Treasury Department and the
IRS heard from many stakeholders that
timely decisions will be key to Program
success. The ASC proposed by the
Treasury Department and the IRS are
also directly connected to the applicant
(ownership) or the facility (geography),
which allows objective criteria. The
Treasury Department and the IRS may
consider other ASC in future guidance
that help achieve these goals and are
administratively feasible for the
Program. However, the Treasury
Department and the IRS did not adopt
the commenters’ suggestions to add
other ASC at this time because the
Treasury Department and the IRS
determined the ASC provided in the
Proposed Rules best promote the
Program goals discussed earlier and
should be the focus of the Program.
The final regulations maintain that at
least 50 percent of the Capacity
Limitation in each facility category will
be reserved for facilities meeting the
ASC but clarify that the method for
utilizing the ASC and the specific
amount of the reservation (at or above
50 percent) will be provided in
guidance published in the Internal
Revenue Bulletin. For program year
2023, those procedures are provided in
Revenue Procedure 2023–27. The final
regulations clarify that the total
Capacity Limitation in each facility
category reserved for qualified facilities
meeting the ASC may be reevaluated in
future guidance provided at least 50

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percent is reserved. The final
regulations also clarify that after the
reservation for qualified facilities
meeting the ASC is established in
guidance, it may later be re-allocated
across facility categories and subreservations in the event one category or
sub-reservation within a category is
oversubscribed and another has excess
capacity.
One commenter stated that most, if
not all, categories, will be
oversubscribed, and acknowledged that
there will need to be a selection process
other than a first-come, first-served
application process. However, this
commenter recommended against using
the proposed Ownership and
Geographic Criteria as a means for
prioritizing applications. This
commenter asserted that criteria related
to the ownership or location of a project
provides no indication of project
viability. This commenter stated that
instead, applicants should be prioritized
based on project maturity, providing a
list of factors that are already included
in the Proposed Rules for the Program,
for some or all categories, such as site
control and possession of all nonministerial permits. The commenter
suggested that a lottery be used in
oversubscribed categories for projects
that meet the commenters stated project
maturity factors. A few other
commenters requested that applicants
who have made meaningful financial
investments in relatively mature
projects should be shown preference for
an allocation. Specifically, this group of
commenters suggested that the Treasury
Department and the IRS, in addition to
the Ownership and Geographic Criteria,
prioritize projects that have signed
agreements with income-qualified
customers representing 10 percent of a
project’s capacity.
After consideration by the Treasury
Department and the IRS, these
comments are not adopted. The project
maturity selection criteria that these
commenters suggest are already part of
the minimum Program requirements to
apply that were provided in the
Proposed Rules. ASC are selection
factors for prioritizing projects in
addition to the already required
minimum project maturity level that
this commenter requests. Prioritizing
signed agreements with customers
would not work for all categories, and
applicants in Category 4

facility will meet the Ownership Criteria
if it is owned by a Tribal enterprise, an
Alaska Native Corporation, a renewable
energy cooperative, a qualified
renewable energy company meeting
certain characteristics, or a qualified
tax-exempt entity. If an applicant
wholly owns an entity that is the owner
of a qualified solar or wind facility, and
the entity is disregarded as separate
from its owner for Federal income tax
purposes (disregarded entity), the
applicant, and not the disregarded
entity, is treated as the owner of the
qualified solar or wind facility for
purposes of the Ownership Criteria.
The Proposed Rules provided that a
Tribal enterprise, for purposes of the
Ownership Criteria, (1) is an entity that
is owned at least 51 percent, either
directly or indirectly (through a wholly
owned corporation created under its
Tribal laws or through a section 3 or
section 17 Corporation),6 by an Indian
Tribal government (as defined in section
30D(g)(9) of the Code), and (2) the
Indian Tribal government has the power
to appoint and remove a majority (more
than 50 percent) of the individuals
serving on the entity’s board of directors
or equivalent governing board.
The Proposed Rules provided that 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).
The Proposed Rules provided that a
Renewable Energy Cooperative, for
purposes of the Ownership Criteria, is
an entity that develops qualified solar
and/or wind facilities and owns at least
51 percent of a facility and is either (1)
a consumer or purchasing cooperative
controlled by its members who are lowincome households (as defined in
section 48(e)(2)(C)) with each member
having an equal voting right, or (2) a
worker cooperative controlled by its
worker-members with each member
having an equal voting right.
The Proposed Rules provided that a
Qualified Renewable Energy Company
(QREC), for purposes of the Ownership
Criteria, is an entity that serves lowincome communities and provides
pathways for the adoption of clean
energy by low-income households. In
addition to its general business purpose,
the Proposed Rules noted that the
Treasury Department and the IRS were
considering the following requirements
and specifically requested comments on

A. Ownership Criteria
The Proposed Rules provided that the
Ownership Criteria category is based on
characteristics of the applicant that
owns the qualified solar or wind
facility. A qualified solar or wind

6 A ‘‘section 17 corporation’’ is a corporation
incorporated under the authority of section 17 of
the Indian Reorganization Act of 1934, 25 U.S.C.
5124. A ‘‘section 3 corporation’’ is a corporation
that is incorporated under the authority of section
3 of the Oklahoma Indian Welfare Act, 25 U.S.C.
5203.

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these potential requirements that a
QREC would need to satisfy:
(1) At least 51 percent of the entity’s
equity interests are owned and
controlled by (a) one or more
individuals, (b) a Community
Development Corporation (as defined in
13 CFR 124.3), (c) an agricultural or
horticultural cooperative (as defined in
section 199A(g)(4)(A) of the Code), (d)
an Indian Tribal government (as defined
in section 30D(g)(9)), (e) an Alaska
Native corporation (as defined in
section 3 of the Alaska Native Claims
Settlement Act, 43 U.S.C. 1602(m)), or
(f) a Native Hawaiian organization (as
defined in 13 CFR 124.3);
(2) After applying the controlled
group rules under section 52(a) of the
Code, the entity has less than 10 fulltime equivalent employees (as
determined under section
4980H(c)(2)(E) and (c)(4) of the Code)
and less than $5 million in annual gross
receipts in the previous calendar year;
(3) The entity first installed or
operated a qualified solar or wind
facility as defined in section 48(e)(2)(A)
two or more years prior to the date of
application; and
(4) The entity has installed and/or
operated qualified solar or wind
facilities as defined in section
48(e)(2)(A) with at least 100 kW of
cumulative nameplate capacity located
in one or more Low-Income
Communities as defined in section
48(e)(2)(A)(iii)(I).
The Proposed Rules provided that 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 section 501(d); (2) Any
State, the District of Columbia, or
political subdivision thereof, any
territory of the United States, or any
agency or instrumentality of any of the
foregoing; (3) An Indian Tribal
government (as defined in section
30D(g)(9)), 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.
The final regulations modify the
definition of ‘‘qualified tax-exempt
entity’’ by striking ‘‘any territory of the
United States.’’ The Treasury
Department and the IRS made this
change to correct a drafting error. The
tax rules in section 50(b) related to
investment tax credits (ITCs), such as
section 48, generally provide that crediteligible property cannot be used
predominantly outside the United States

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(the fifty States and the District of
Columbia) unless the property is owned
by a U.S. corporation or U.S. citizen
(other than a citizen entitled to the
benefits of section 931 (Guam, American
Samoa, or the Northern Mariana Islands)
or section 933 (Puerto Rico)). Therefore,
property used in the territories and
owned by a territory government, or an
entity created in or organized under the
laws of a U.S. territory, generally would
not qualify for a section 48 credit.
Another commenter stated that the
Ownership Criteria should be
eliminated because Congress indicated
no intent in the IRA to prefer
applications for the Program on project
ownership. This commenter asserts that
the Ownership Criteria results in nonprofits organizations receiving outright
allocation awards, while qualified
business taxpayers will be subject to a
lottery system for any remaining credit.
Similarly, another commenter stated
that the ASC and the reservations for
ASC are not grounded in the statute.
Although Congress did not include
Ownership Criteria directly in the
statute, it did direct the Treasury
Department to create a Program to
allocate the annual Capacity Limitation
of 1.8 GW as measured in DC. As
discussed earlier, the Treasury
Department and the IRS stated three
goals for the Program: (1) increase the
adoption of and access to renewable
energy facilities in low-income
communities and communities with
environmental justice concerns; (2)
encourage new market participants in
the clean energy economy; and (3)
provide social and economic benefits to
people and communities that have been
marginalized from economic
opportunities and overburdened by
environmental impacts. Based on the
breadth of research around the barriers
to adoption of renewable energy
technology by low-income communities
and to meet statutory objectives and
Program goals, the inclusion of
Ownership Criteria will allow the
participation of institutions that are well
positioned to increase adoption of clean
energy in low-income communities and
by low-income households. Moreover,
all applicants, with limited exception,
in a given category and sub-category, are
generally required to meet the same
requirements to be awarded an
allocation amount based on the
projected net output of the facility. No
applicant is being awarded the actual
bonus credit amount during the
application and selection period. All
facility owner-applicants who are
awarded an allocation will then have to
place the facility in service and meet

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certain requirements before the owner
can claim the section 48(e) Increase for
the section 48 credit.
A few commenters stated that it is not
appropriate to apply the ASC to
Category 3 facilities. One commenter
said that multi-family affordable
housing guarantees that the benefits in
Category 3 will be provided to lowincome households. Another
commenter claimed that Category 3
facilities are subject to existing rules
that conflict with the ASC.
Several commenters stated that the
current Ownership Criteria may conflict
with ownership structures typically
used for LIHTC projects. One
commenter expressed concern that a
tax-exempt applicant who is an owner
of a facility through a partnership
structured as a limited liability
company or a limited partnership for
State law purposes would not be
considered a qualified tax-exempt entity
because the tax-exempt applicant is not
the sole owner. This commenter
requested revision of the Ownership
Criteria to ensure that tax-exempt
entities (and other prioritized owner
types) remain eligible if the entity
controls the managing member or
general partner of the partnership that
owns the facility for Federal income tax
purposes. Another commenter suggested
that additional language should state
that a qualified tax-exempt entity would
still meet the Ownership Criteria if the
tax-exempt entity directly serves as the
managing member or general partner of
the partnership that owns the facility for
Federal income tax purposes. A few
commenters also stated that most taxexempt entities entering into a
renewable energy tax credit transaction
related to a LIHTC project will enter
into a partnership with a tax equity
investor where the tax-exempt entity is
a general partner or managing member
and has control over the partnership’s
operations, but is not the majority
owner. The tax equity investor is
usually the majority owner to allow the
investor to claim most of the tax credits
generated by the project.
The Treasury Department and the IRS
understand that for tax credit
monetization purposes, LIHTC projects
and solar and wind facilities are often
financed using tax equity partnership
structures where a tax-exempt entity (or
other Ownership Criteria entities) owns
a minority interest (either directly or
indirectly) in an entity treated as a
partnership for Federal income tax
purposes that owns the project or
facility. In response to these comments,
the Treasury Department and the IRS
have clarified through additional
language in the final regulations that a

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qualified solar or wind facility owned
by an entity treated as a partnership for
Federal income tax purposes is eligible
for ASC consideration if an entity that
meets the Ownership Criteria has at
least a one percent interest (either
directly or indirectly) in each material
item of partnership income, gain, loss,
deduction, and credit of the partnership
and is a managing member or general
partner (or similar title) under State 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. Because indirect ownership
is permissible, this means an entity that
meets the Ownership Criteria can hold
its partnership interest through a taxable
subsidiary. This clarification should
allow tax partnerships formed for the
purpose of monetizing LIHTCs or
section 48 credits that are directly or
indirectly owned and managed by an
entity that satisfies the Ownership
Criteria to meet the ASC and thus better
reflect potential applicants and
financing structures for all Categories.
The final regulations also clarify that a
facility that has received a Capacity
Limitation allocation based, in part, on
meeting the Ownership Criteria will not
be disqualified and lose its allocation if
it is transferred by the original applicant
to a tax partnership, prior to being
placed in service, in which the original
applicant retains the requisite direct or
indirect ownership of the tax
partnership and is a managing member
or general partner (or similar title) under
State law of such 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.
One commenter specifically noted
that some Tribal enterprises do not have
a ‘‘board of directors or equivalent
governing board,’’ but the corresponding
Tribes own utilities and have the power
to appoint and remove the utility’s
leadership. Therefore, the commenter
asked that the Treasury Department and
the IRS to clarify Tribally owned
utilities (or those Tribally owned
entities that do not have a ‘‘board,’’ such
as an LLC) meet the Ownership Criteria
set forth in the Program. The commenter
also stated that ‘‘Ownership’’ should
stem from a Tribe’s sovereign decision
to construct a project rather than how a
managing entity is structured and stated
that Tribes should be able to attest to
ownership control without further
documentation. Several commenters
included a similar statement. Another
commenter further requested that the
Tribe be considered the applicant and

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not the LLC, but that the LLC should
also be allowed to apply, if it is a
disregarded entity, and wholly owned
by the Tribe (or Tribal enterprise).
In response to these comments, the
Treasury Department and the IRS have
modified the definition of Tribal
enterprise in the final regulations by
providing that a Tribal enterprise for
purposes of the Ownership Criteria is an
entity that (1) an Indian Tribal
government (as defined in section
30D(g)(9) of the Code) owns at least a 51
percent interest in, either directly or
indirectly (through a wholly owned
corporation created under its Tribal
laws or through a section 3 or section
17 Corporation), and (2) is subject to
Tribal government rules, regulations,
and or codes that regulate the operations
of the entity.
Several commenters requested
revisions to the definition of QREC. One
commenter requested that QREC be
further defined but did not provide
specific language to further define the
term. Additionally, a few commenters
recommended that the Treasury
Department and the IRS change the
‘‘and’’ at the end of the list of
requirements that a QREC must satisfy
to ‘‘or’’ so that the applicant only needs
to meet one requirement, inclusive of
the general business purpose to serve
low-income communities. One
commenter added that this would be
more inclusive for new market entrants.
Another commenter requested that the
criteria for QREC be modified to include
trusts as individuals, and that the
requirement that 51 percent of the
equity interest be controlled by an
individual be reduced to 45 percent or,
alternatively, at least 25 percent
employee owned, and that the second
requirement be expanded to provide
that the company must have less than
100 full time employees and less than
$30 million in annual gross receipts
from the previous calendar year. The
same commenter also suggested that the
definition of a QREC be expanded to
include public benefit corporations. One
commenter suggested that Category 1(a)
of the QREC definition, which currently
reads as ‘‘one or more individuals,’’
should be replaced with ‘‘renewable
energy cooperative,’’ claiming that this
keeps the consistency of the definition
with the previous section and requires
more rigorous working agreements.
A few commenters variously
commented on employee requirements
for QRECs. Two commenters, also
commenting on the gross receipts
threshold, suggested that a QREC
maintain less than 10 full time
employees and less than $30.4 million
in annual gross receipts from the

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previous calendar year. Another
commenter stated that requiring a QREC
to have fewer than ten full-time
equivalent employees is excessively
restrictive and unrealistic. This
commenter also stated that the less than
$5 million threshold for annual gross
receipts in the previous calendar year
may be unrealistically low. One
commenter stated that the small size
requirement appears to be arbitrary and
suggested that the Treasury Department
and the IRS use the Small Business
Administration (SBA) small business
size and revenue requirement to
promote small business entrants.
Further, another commenter stated that
imposing an additional requirement to
employ workers in certain low-income
communities would be too onerous.
Additionally, one commenter stated that
it is unclear whether the requirement to
employ low-income persons would be
applicable at the time of application or
through the life of the project. This
commenter requested that the Treasury
Department and the IRS clarify that this
requirement is applicable at the time of
application, and then consider allowing
State or Federally approved workforce
training programs, supported through
the project, as a means of qualification.
However, another commenter, who
generally opposed the inclusion of
QRECs as an ASC Ownership Criteria
category, requested that the Treasury
Department and the IRS require such
companies to enter into Community
Workforce Agreements to ensure
workers within low-income and
disadvantaged communities benefit
from the wealth building opportunities
provided by the Program. This
commenter also provided a list of the
community benefits that should be
incorporated into the commenter’s
suggested agreements.
Additionally, one commenter stated
that new market entrants are altogether
barred from meeting this definition.
Overall, the same commenter suggested
as modification adding other consumer
protection measures, minority- or
women-owned business enterprise
criteria, individual rather than
company-based experience thresholds,
and providing flexibility with regard to
size, so as to enable more local clean
energy business growth. A separate
commenter also noted that new entrant
companies, that would otherwise meet
the QREC definition, will not qualify
due to the specific experience
requirement. Another commenter
requested the Treasury Department and
the IRS update the definition of QREC
to include qualified rooftop lessors. This
commenter provided an example of

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projects installed by small businesses
that otherwise meet the definition but
are counterparties to a lease provided by
a third-party project developer. This
commenter said that many single-family
residential rooftop facilities use thirdparty ownership (TPO) models to meet
the requirements of section 48 but
claims that in many States legal title to
such facilities is not possible for entities
meeting the definition of a QREC,
which, by virtue of their small size, do
not have access to a lease fund. One
commenter also noted that many new
market entrants have prior experience as
part of other solar projects that they do
not own and suggested that companies
that have been subcontractors be
included for criteria (3) and (4), and that
the scope be broadened to be ‘‘any solar
provider.’’ A Tribal comment letter also
stated that the definition of a QREC is
too limited and does not support newly
formed entities that are owned in part
by Tribes. This commenter claims that,
prior to the IRA, Tribes were not able to
create joint ventures to deploy solar or
wind projects.
After consideration of all comments
on the definition of QREC, the final
regulations adopt some changes and do
not adopt others. The Treasury
Department and the IRS will maintain
the inclusion of QREC in the final
regulations. However, to provide
increased flexibility and to encourage
new market participants, the Treasury
Department and the IRS have modified
the QREC definition to allow for
previous participation in a renewable
energy project as a service provider
(either as an individual or a company)
to demonstrate a track record for serving
low-income communities. While some
commenters stated that brand new
entities may not meet the criteria for
QREC, the Treasury Department and the
IRS developed the QREC criteria to
support companies or entrepreneurs
with a commitment and track record of
serving low-income communities that
have not been able to grow their market
share. The Treasury Department and the
IRS also increased the annual gross
receipts threshold based on the
comments and additional market
research to allow for flexibility to
growing companies that may still not
have significant market-share. After
careful assessment of all the proposals
provided in the comments and current
market information, the final regulations
provide additional flexibility to new
market entrants by modifying the
requirements that a QREC would need
to satisfy:
(1) At least 51 percent of the entity’s
equity interests are owned and
controlled by (a) one or more

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Federal Register / Vol. 88, No. 156 / Tuesday, August 15, 2023 / Rules and Regulations
individuals, (b) a Community
Development Corporation (as defined in
13 CFR 124.3), (c) an agricultural or
horticultural cooperative (as defined in
section 199A(g)(4)(A) of the Code), (d)
an Indian Tribal government (as defined
in section 30D(g)(9)), (e) an Alaska
Native corporation (as defined in
section 3 of the Alaska Native Claims
Settlement Act, 43 U.S.C. 1602(m)), or
(f) a Native Hawaiian organization (as
defined in 13 CFR 124.3);
(2) Has less than 10 full-time
equivalent employees (as determined
under section 4980H(c)(2)(E) and (c)(4)
of the Code) and less than $20 million
in annual gross receipts in the previous
calendar year;
(3) First installed or operated a
qualified solar and or facility as defined
in section 48(e)(2)(A) two or more years
prior to the date of application; or
(4) Has provided solar services as a
contractor or subcontractor to qualified
solar or wind facilities as defined in
section 48(e)(2)(A) with at least 100 kW
of cumulative nameplate capacity
located in one or more Low-Income
Communities as defined in section
48(e)(2)(A)(iii)(I).
The Treasury Department and the IRS
may consider other changes to the
definition of a QREC in future guidance
based on updated market information
and what is administratively feasible for
the Program.
Another commenter suggested that
the definition of QREC be revised to
provide that the 51 percent ownership
requirement applies as an average over
the life of the project because of tax
credit equity partnerships that may
change facility ownership for a period of
time.
In response to these comments, the
Treasury Department and the IRS have
clarified through additional language in
the final regulations that a partnership
for Federal income tax purposes is
eligible for ASC consideration so long as
an entity that meets the Ownership
Criteria has at least a one percent
interest (either directly or indirectly) in
each material item of partnership
income, gain, loss, deduction, and credit
of the partnership that owns the
qualified solar or wind facility and is a
managing member or general partner (or
similar title) under State 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. Therefore, there is no need
to revise the 51 percent ownership
requirement as it applies as an average
over the life of the project as the
commenter suggests. This also allows
more flexibility for all applicants that

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meet the Ownership Criteria to enter
financing arrangements such as tax
equity partnerships.
This commenter also suggested that
the definition of Renewable Energy
Cooperatives be revised to require not
only that each member have an equal
voting right, but also that each member
have rights to profit distributions based
on patronage as defined by the
proportion of either (i) volume of energy
or energy credits purchased (kWh), (ii)
volume of financial benefits delivered
($), or (iii) volume of financial payments
made ($), and in which at least 50
percent of the patronage in the qualified
project is by cooperative members who
are low-income households. The
commenter noted that the second
requested change clarifies that the
Renewable Energy Cooperative as a
whole does not need to be made up
solely of low-income households, but
only that for qualified projects that are
seeking the Low-Income Bonus Credit,
over 50 percent of the participating
member interests (and corresponding
member benefits) must accrue to
households that qualify as low-income
(as defined in section 48(e)(2)(C)).
One commenter stated, regarding
Renewable Energy Cooperatives, that it
may be difficult for cooperatives to
ensure income verification of their
members, and suggested adding
eligibility pathways, potentially based
on geography or charter documents, that
retain an equity and justice focus while
allowing greater flexibility.
Based on these comments, the
Treasury Department and the IRS have
modified the definition of Qualified
Renewable Energy Cooperative in the
final regulations to account for different
energy cooperative models where profits
could be distributed to members based
on volume of energy, volume of
financial benefits delivered, or volume
of financial payments made. The
modified language states that a
Qualified Renewable Energy
Cooperative is an entity that develops
qualified solar and/or wind 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 the proportion of either (i)
volume of energy or energy credits
purchased (kWh), (ii) volume of
financial benefits delivered ($), or (iii)
volume of financial payments made ($),
and in which at least 50 percent of the
patronage in the qualified project is by
cooperative members who are lowincome households (as defined in
section 48(e)(2)(C)) or (2) a worker

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cooperative controlled by its workermembers with each member having an
equal voting right.
One commenter expressed that
qualified tax-exempt entity should not
include all section 501(c)(3) entities
without additional guardrails. This
commenter further suggests that if
QRECs are required to submit
documentation of ‘‘general business
purpose,’’ then section 501(c)(3)
organizations applying as a qualified
tax-exempt entity should be required to
provide minimal documentation
showing relevant charitable purposes.
This commenter additionally requested
clarification about the manner of
application for tax-exempt entities in
Puerto Rico and other territories.
Similarly, one commenter noted that
many large corporations have section
501(c)(3) organizations that could
deploy renewable energy projects
without tax credits but will be eligible
under the definition in the Proposed
Rules. This commenter proposed adding
to the definition the following
requirements: annual gross receipts of
no more than $30.4 million (consistent
with recommendations for QRECs);
prior experience owning, operating, or
consulting on a renewable energy
project; and an organizational mission
statement and/or values that show
alignment with the Program.
One commenter requested more
clarity on how Tribal enterprises, as
well as Tribal governments, political
sub-divisions, and agencies or
instrumentalities thereof under the
qualified tax-exempt entity definition
and Tribally owned QRECs can satisfy
the Ownership Criteria.
The Treasury Department and the IRS
have not adopted any changes in the
final regulations regarding qualified taxexempt entities. The addition of
guardrails such as requiring a particular
business or charitable purpose is
infeasible. All tax-exempt organizations
that qualify for ASC will need to
demonstrate a charitable purpose
through their tax-exempt designation.
The Treasury Department and the IRS
anticipate that a wide variety of
qualified tax-exempt entities may
participate in the Program that may
include community-based
organizations, educational institutions
of all sizes, and State and local
governments, among others.
Accordingly, there is no one business or
charitable purpose for qualified taxexempt entities that would apply to the
range of entities that support meeting
the stated goals of the Program. The
Treasury Department and the IRS may
consider changes in future guidance
based on updated market information

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and what is administratively feasible for
the Program. The Treasury Department
and the IRS are also providing clarity
through modifications in the definition
of Tribal enterprise, and the
circumstances in which Tribal
governments, political sub-divisions,
and agencies or instrumentalities
thereof would meet the criteria of the
qualified tax-exempt entity definition
and other Ownership Criteria based on
a variety of comments provided by
Tribes.

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B. Geographic Criteria
The Proposed Rules provided that the
Geographic Criteria category is based on
where the facility will be placed in
service. To meet the Geographic
Criteria, a facility would need to be
located in a PPC 7 or in a census tract
that is designated in the CEJST as
disadvantaged based on whether the
tract is either (a) greater than or equal
to the 90th percentile for energy burden
and is greater than or equal to the 65th
percentile for low income, or (b) greater
than or equal to the 90th percentile for
PM2.5 exposure and is greater than or
equal to the 65th percentile for low
income.8 The Proposed Rules provided
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, unless
the location of the facility changes.
The Proposed Rules defined a PPC
generally as any county where 20
percent or more of residents have
experienced high rates of poverty over
the past 30 years. For the purposes of
the Program, the Proposed Rules
provided that the PPC measure adopted
by the USDA should be used to make
this determination. The most recent
measure, which would apply for the
2023 Program year, incorporates poverty
estimates from the 1980, 1990, 2000
censuses, and 2007–11 ACS 5-year
average.
Generally, commenters were
supportive of the Geographic Criteria,
including several commenters who had
7 https://www.ers.usda.gov/data-products/
poverty-area-measures/.
8 https://screeningtool.geoplatform.gov/en/#3/
33.47/-97.5. The CEJST website provides further
detail on the terms used in identifying census tracts
for the Energy category. ‘‘Energy cost’’ is defined as
‘‘Average household annual energy cost in dollars
divided by the average household income.’’ PM2.5
is defined as ‘‘Fine inhalable particles with 2.5 or
smaller micrometer diameters. The percentile is the
weight of the particles per cubic meter.’’ ‘‘Low
income’’ is defined as ‘‘Percent of a census tract’s
population in households where household income
is at or below 200% of the Federal poverty level,
not including students enrolled in higher
education.’’ See Methodology & data—Climate &
Economic Justice Screening Tool (geoplatform.gov).

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concerns with Ownership Criteria.
However, one commenter stated that the
Geographic Criteria conflict with
existing Federal housing policy because
it would encourage facilities to be built
in connection with housing in certain
areas, rather than supporting lowincome residents no matter where they
live. Another commenter stated that the
Geographic Criteria is imprecise because
it does not take into account
disadvantaged communities in certain
areas, especially those that are highly
disadvantaged but border affluent
communities.
Several commenters on behalf of
Tribes stated that Geographic Criteria
should not be applied to Category 2
Projects. However, a few Tribal
commenters asked that the Treasury
Department and the IRS retain
Geographic Criteria for Category 3 and
Category 4 projects that are located on
Indian land so that Tribal projects can
better compete. In response to these
comments, the Treasury Department
and the IRS have decided to not include
Geographic Criteria as an ASC for
Category 2 but maintain the use of
Geographic Criteria as an ASC as stated
in the Proposed Rules in all other
categories.
Another commenter provided several
suggestions for revising the Geographic
Criteria, stating that the Treasury
Department and the IRS should consider
broadening the Geographic Criteria by
including all Indian land or not
applying additional Geographic Criteria
to them; adding LIHTC and New
Markets Tax Credit designations;
applying all or at least more of CEJST’s
burden thresholds as well as the
Environmental Protection Agency’s
EJScreen’s thresholds; allowing State
screening tools and maps; providing for
community self-nomination; or perhaps
including adjacent tracts.
Another commenter, providing a
comment on Category 3 projects,
generally supported the use of
Geographic Criteria to prioritize
allocations, but recommended
reconsideration of the use of the PPCs
as a poverty measure. This commenter
stated that the PPCs provide data at a
county-level designation and that this
masks significant variation within
counties and does not capture persistent
poverty within counties not registering
as PPCs. This commenter instead
recommended that the LIHTC Qualified
Census Tract geographic definition be
utilized as an option to determine
whether a project meets the Geographic
Criteria, stating that the QCT
designation denotes census tracts where
either (1) 50 percent or more of the
households have an income less than 60

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percent of the Area Median Gross
Income, or (2) the poverty rate is over
25 percent. One Tribal commenter
recommended that the Treasury
Department and the IRS use a
geographic determination based on the
LIHTC, or the NMTC because Tribes
have been using these to build new
Tribal housing or invest in clean energy.
Additionally, another commenter
suggested that the Geographic Criteria
should be expanded to include:
disadvantaged communities in other
burdened categories; a process for
communities to be recognized as
communities with environmental justice
concerns based on State environmental
justice screening tools; and a selfnomination process for communities to
submit additional information to
demonstrate that they are communities
with environmental justice concerns
that may not be captured by CEJST or
other screening tools. This commenter
additionally requested the provision of
a publicly accessible mapping tool to
identify the areas that meet the
geographic criteria.
After consideration of these
comments, the Treasury Department
and the IRS have not adopted the
suggestions. The intent of the
Geographic Criteria as applied to
Category 3 and to other categories is to
encourage the construction of energy
facilities in areas across the country that
have high energy costs and that might
otherwise suffer from underinvestment.
This includes areas of the country
where affordable housing currently
exists but where the adoption of
renewable energy technology may be
challenging. The Treasury Department
and the IRS have determined ASC based
on their applicability across all
categories. While LIHTC Qualified
Census Tract as a Geographic criteria
may meet some goals of the program, it
is a methodology that is used primarily
in the LIHTC industry and not widely
known or used by other housing
programs or in energy programs.
Therefore, its inclusion as a Geographic
Criteria is not adopted. Additionally, an
allocation based on Geographic Criteria
in Category 3 for a facility built in
connection with an existing Federally
subsidized housing building does not
impact the Federal housing policy with
regards to siting of the housing itself.
The Treasury Department and the IRS
may consider other metrics for
Geographic Criteria in future guidance
that help achieve the Program goals and
are administratively feasible for the
Program. A publicly accessible mapping
tool will be available on DOE’s Program
website.

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Federal Register / Vol. 88, No. 156 / Tuesday, August 15, 2023 / Rules and Regulations
IX. Sub-Reservation of Allocation for
Facilities Located in a Low-Income
Community
The Proposed Rules provided that the
700 MW Capacity Limitation reservation
for facilities seeking a Category 1
allocation would be sub-divided with
560 MW reserved specifically for
eligible residential BTM facilities,
including rooftop solar. The Proposed
Rules provided that the remaining 140
MW of Capacity Limitation would be
available for applicants with FTM
facilities as well as non-residential BTM
facilities.
Several commenters opposed to the
reservation of capacity in Category 1 for
BTM residential facilities. Generally,
these commenters requested that the
560 MW capacity reserved for BTM
residential facilities be eliminated
(leaving a general 700 MW reservation)
or that the amounts should be revised.
The main concern of commenters is that
the proposed 140 MW will provide very
limited eligibility for FTM projects,
including community solar projects that
would otherwise qualify under the
statute. One commenter strongly
recommended against subdividing the
Category 1 Capacity Limitation into
BTM and FTM MW blocks. This
commenter stated that a BTM project
typically requires a credit review and/or
a long-term financial commitment from
the customer, which the commenter
believes is antithetical to the objective
of a Program intended to ease financial
burdens on low-income households, not
impose them. The commenter suggested
to instead require that a certain
percentage of all generating facilities’
capacity be allocated to low-income,
residential subscribers. Another
commenter pointed out that location is
the only requirement in Category 1
under the statute, and that the focus on
BTM residential facilities does not fit
with the statute.
Other commenters have noted that
this focus on BTM residential facilities
limits the potential of other applicants
to benefit from Category 1. For example,
at least two commenters have noted that
the prioritization of residential facilities
limits the potential for non-profit
organizations and municipalities from
obtaining an allocation for facilities
built to power schools, libraries, food
pantries, shelters, houses of worship,
education facilities, local communitybased non-profits, assisted living
facilities, performing arts centers, and
community development corporations.
One of these commenters explains that
these organizations play crucial roles in
their communities, providing necessary
services and support to the residents of

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the surrounding area, and the subreservation overlooks the fact that
commercial and industrial scale solar
benefits may be more impactful. In
arguing against the sub-reservation,
another commenter noted the belief that
Category 1 should be reserved
specifically for facilities that are
‘‘Located in a Low-Income
Community,’’ which directly benefit the
residents of that community. As an
alternative, the commenter asks that
non-profits, public facilities, and
municipalities be included in the larger
sub-reservation. Another commenter, in
its suggestion to revisit this subreservation, stated their view that
community facilities represent the
‘‘highest and best use’’ of the 10 percent
low-income adder from the standpoint
of ensuring meaningful community
benefit. Similarly, another commenter
stated that the reservation of 560 MW
exclusively for residential BTM ignores
the fact that most agrivoltaic and
agribusiness BTM projects that benefit
farmers (and thus consumers) would
also benefit from Category 1. This
commenter states that the benefit of
using renewable energy solar and
storage is an emerging renewable
agribusiness industry that would benefit
America significantly by lowering
energy input costs and lowering food
prices for the nation by extension.
One commenter suggested to amend
the requirements from focusing on FTM
versus BTM to instead distinguish ‘‘onsite usage of credits’’ from ‘‘off-site
usage of credits’’ to more accurately
prioritize residential projects. Similarly,
another commenter had concerns with
the limitation of defining residential
rooftop solar as BTM. The commenter
appreciated the efforts to set aside an
allocation for residential rooftop solar,
but the commenter believed that the
Proposed Rules go too far by defining
residential rooftop solar as solely BTM.
This commenter explained that
Connecticut’s regulated utilities offer a
FTM solar tariff for residential and
commercial solar projects and that FTM
residential solar projects, though
somewhat rare in Connecticut, are
particularly attractive for projects in
low-income communities. Therefore,
this commenter suggested an updated
definition that accounted for single
family or multi-family residential that
does not qualify under Category 3 and
has a maximum net output (and is not
limited as BTM). Another commenter
noted that BTM arrangements are not
achievable in States like Vermont and
offered suggestions for redefining BTM.
Commenters had other suggestions on
how to handle the sub-reservations in
Category 1. One commenter

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recommended expanding the criteria for
qualifying Category 1 projects to allow
600 MW (85 percent) of the allocated
MW for FTM facilities. Another
commenter noted that if the concern is
that the 700 MW capacity allocation
will be monopolized by businesses in
low-income areas, the rules could
reserve a portion of the total allocation
for businesses, but that the rules should
consider a larger reservation for
commercial and industrial scale solar
projects for non-profit community
organizations, public entities, and other
impactful entities that play a key role in
these low-income communities. This
commenter suggests considering, in
addition to the 140 MW reservation for
businesses, a 280 MW carve out for
residential solar and a separate 280 MW
carve out for community-based not-forprofit organizations. Another
commenter suggested a sub-allocation of
at least 400 MW for BTM installations
at community facilities.
One commenter suggested that if the
560 MW amount cannot be changed, the
rules should allow any facility that
serves at least 50 percent residential
customers to qualify. This commenter
noted that the goal of the subreservation is a laudable intent, but that
community solar, though predominantly
deployed FTM, is also positioned to
serve residential customers, especially
low-income customers. Another
commenter recommended altering the
sub-reservations by providing a third
sub-reservation in Category 1 of at least
150–200 MW for eligible community
solar projects that are located on (nonresidential) rooftops or parking lots in
low-income communities, are less than
1 MW, reserve at least 50 percent of offtake for low-income households, and
offer a minimum 20 percent discount to
low-income subscribers.
Two commenters had additional
concerns with Category 1, particularly
related to consumer protections for
residential customers. While this
commenter is opposed to prioritization
of residential rooftop solar over other
types of solar installations within
Category 1, the comment implied this is
because of serious consumer protection
issues associated with how these
allocations are being implemented by
the private marketplace. This
commenter provided an example of
solar installers telling potential
customers that the IRS will send them
a check for 70 percent of the cost of the
solar installation if they sign up with
the installer. Therefore, this commenter
encourages the Treasury Department
and the IRS to be vigilant and to ensure
that companies awarded these credits
are held accountable within the scope of

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Federal Register / Vol. 88, No. 156 / Tuesday, August 15, 2023 / Rules and Regulations

the Treasury Department and the IRS’s
authority.
After consideration of the comments
recommending elimination or
significant modification of the rules
regarding the Category 1 subreservation, the comments are not
adopted. The purpose of the residential
BTM sub-reservation is to preserve
capacity for projects that directly benefit
residential customers and would not
otherwise be eligible for Category 3 or
Category 4, while also recognizing the
large and established market share of
companies using the TPO single-family
residential business model.
Additionally, residential BTM (of which
the majority is expected to be singlefamily) have faster development
timelines, allowing this capacity to be
efficiently allocated. Moreover, a
separate set-aside allows like-projects to
compete for capacity and will allow for
more streamlined application
processing.
Accordingly, the final regulations
provide that the Program includes a subreservation for eligible BTM residential
facilities but clarifies that the specific
amount of the sub-reservation for a
Program year will be provided in
guidance published in the Internal
Revenue Bulletin. The final regulations
also clarify that the amount of the subreservation is established based on
factors such as promoting efficient
allocation of Capacity Limitation and
allowing like-projects to compete for an
allocation. Revenue Procedure 2023–27
provides the Category 1 sub-reservation
for eligible BTM residential facilities for
the 2023 Program year.
In response to the commenters’
concerns about restrictions on FTM
facilities and the ability of community
facilities to apply for Category 1, FTM
community facilities serving residential
customers may apply for an allocation
of the remaining Capacity Limitation in
Category 1 and receive a section 48(e)
Increase of 10 percentage points,
assuming they do not meet Category 4
requirements, or apply for an allocation
under Category 4 if they meet all of the
requirements of Category 4 and receive
a section 48(e) Increase of 20 percentage
points. The Treasury Department and

the IRS note that the rules do not
impose additional requirements on
Category 1 beyond the statutory location
requirement, given the importance of
creating an objective and administrable
process that will allow taxpayers to
quickly receive feedback on their
applications. However, the Treasury
Department and the IRS seek to
encourage community solar projects to
apply in Category 4 as opposed to
Category 1 because, although Category 1
facilities must be located in low-income
communities, they do not necessarily
have to serve low-income customers and
do not have to comply with Category 4
financial benefits requirements.
Therefore, directing more community
solar projects to Category 4 where there
is a protected set aside of 700 MW better
promotes programmatic goals.
In response to comments, the
Treasury Department and the IRS agree
that the 560 MW carve-out for
residential BTM limits the potential for
community organizations such as nonprofit organizations and municipalities
that serve communities from obtaining
an allocation, and they will need to
compete for limited capacity with forprofit nonresidential businesses (and all
other projects that are located in a lowincome community). As a result, the
Treasury Department and the IRS
modified the Category 1 sub-reservation
for BTM residential in Revenue
Procedure 2023–27 to reduce this subreservation to 490 MW for the 2023
Program. Therefore, a larger portion of
the Capacity Limitation in Category 1
(210 MW) will be available to FTM and
non-residential BTM projects. The
Treasury Department and the IRS may
change this sub-reservation amount for
future years.
The Proposed Rules defined a FTM
facility as a facility that is directly
connected to a grid, and its sole purpose
is to provide electricity to one or more
offsite locations via such grid;
alternatively, FTM is defined as a
facility that is not BTM.
The Proposed Rules defined an
eligible residential BTM facility as
single-family or multi-family residential
qualified solar or wind facility that does
not meet the requirements for Category

3 and is BTM. A qualified wind and
solar facility is 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.
Commenters requested clarification on
the meaning of ‘‘residential.’’
The final regulations generally adopt
the definition of BTM from the
proposed rules, but the final regulations
clarify that a qualified solar or wind
facility is residential if it generates
electricity for use in a dwelling unit
used as a residence. The final
regulations also clarify that a facility is
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 the purposes of Category 4, a
qualified solar or wind 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.
X. Application Process
A. Documentation and Attestations
The Proposed Rules provided the
general framework for evaluating
applications for Capacity Limitation,
including that applicants would be
required to submit with each
application certain information,
documentation, and attestations
specified in Program guidance.
The Proposed Rules described the
following required documents and
attestations.

ddrumheller on DSK120RN23PROD with RULES2

DOCUMENTATION AND ATTESTATIONS TO BE SUBMITTED FOR ALL FACILITIES
FTM

BTM ≤1 MW
AC

BTM >1 MW
AC

No ................

Yes ..............

Yes.

Yes ..............

No ................

Yes.

Proposed Document Requirement
An executed contract to purchase the facility, an executed contract to lease the facility, or an executed PPA for the facility.
A copy of the final executed interconnection agreement, if applicable 9 ............................................

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Federal Register / Vol. 88, No. 156 / Tuesday, August 15, 2023 / Rules and Regulations
DOCUMENTATION AND ATTESTATIONS TO BE SUBMITTED FOR ALL FACILITIES—Continued
FTM

BTM ≤1 MW
AC

BTM >1 MW
AC

Yes ..............

No ................

No.

Yes ..............

Yes ..............

Yes.

Yes ..............

Yes ..............

Yes.

No ................

Yes ..............

Yes.

Yes ..............

No ................

No.

Yes ..............

Yes ..............

Yes.

Proposed Attestation Requirement
The applicant has site control through ownership, an executed lease contract, site access agreement or similar agreement between the property owner and the applicant.
The facility has obtained all applicable Federal, State, Tribal, and local non-ministerial permits, or
that the facility is not required to obtain such permits.
The applicant is in compliance with all Federal, State, and Tribal laws, including consumer protection laws (as applicable).
The applicant has appropriately sized the facility (to meet no more than 110 percent of historical
customer load).
The applicant has appropriately sized the customer’s facility output share and has based facility
output share on historical customer load.
The applicant has inspected installation sites for suitability (for example, roofs) ..............................

DOCUMENTATION AND ATTESTATIONS TO BE SUBMITTED FOR CERTAIN FACILITIES DEPENDING ON CATEGORY AND ASC
Category 1

Category 2

Category 3

Category 4

No ...............

No ................

Yes .......................

No.

No ................
Yes ..............

No ...............
Yes ..............

Yes .......................
Yes .......................

No.
Yes.

Yes ..............
Yes ..............

Yes ..............
Yes ..............

No ........................
Yes (provided to
tenants).

No.
Yes.

No ................

No ................

No ........................

Yes.

Yes ..............

No ...............

Yes .......................

Yes.

Proposed Document Requirement
Documentation demonstrating property will be installed on an eligible residential building.
Plans to ensure tenants receive required financial benefits ............................
If applying under ASC: Documentation demonstrating applicant meets Ownership Criteria.

Proposed Attestation Requirement
Facility location is eligible 10

.............................................................................
Consumer disclosures informing customers of their legal rights and protections have been provided to customers that have signed up and will be
provided to future customers.
The applicant will ensure at least 50 percent of the facility’s total output will
be provided to qualifying low-income households and that each receive at
least a 20 percent bill credit discount rate.
If applying under ASC: Facility location is eligible based on PPC/CEJST ......

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The final regulations adopt the
requirement that applicants must
submit specified information,
documentation, and attestations to
demonstrate Program eligibility and
project viability but clarify that the
specific information, documentation,
and attestations will be provided in
guidance published in the Internal
Revenue Bulletin. For the 2023 Program
year, Revenue Procedure 2023–27
provides the application requirements.
The specific information,
9 If an interconnection agreement is not
applicable to the facility (for example, due to utility
ownership), this requirement is satisfied by a final
written decision from a Public Utility Commission,
cooperative board, or other governing body with
sufficient authority that financially authorizes the
facility. If the facility is located in a market where
the interconnection agreement cannot be signed
prior to construction of the facility or
interconnection facilities, this requirement is
satisfied by a signed conditional approval letter
from the jurisdictional utility and an affidavit from
a senior corporate officer of the applicant (or
someone with authority to bind the applicant)
stating that an interconnection agreement cannot be
executed until after construction of the facility.
10 Facility location would be reviewed using
latitude and longitude coordinates when possible.

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documentation, and attestations that
applicants are required to submit may
get updated in future Program guidance
for Program years following 2023.
In developing the application
requirements for the 2023 Program year
provided in Revenue Procedure 2023–
27, the Treasury Department and the
IRS carefully considered the comments
submitted in response to the Proposed
Rules.
One commenter requested that the
Treasury Department and the IRS design
the application intake mechanism to
allow for bulk application submissions,
including attestations. For example, the
commenter stated that applicants could
potentially be allowed to submit a
spreadsheet for many projects at one
time, along with required attestations.
The commenter also cited to the
efficient allocation language at section
48(e)(4)(A), which states ‘‘. . . the
Secretary shall provide procedures to
allow for an efficient allocation process,
including, when determined
appropriate, consideration of multiple
projects in a single application if such

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projects will be placed in service by a
single taxpayer.’’
One commenter cited to the language
in the Proposed Rules that states a
Category 1 or Category 2 facility that
also qualifies as a Category 3 or Category
4 facility is considered a Category 3 or
Category 4 facility, and requested that
these facilities be automatically
reviewed under Category 1 if their
application is denied for an allocation
in Category 4. As provided in Revenue
Procedure 2023–27, the Treasury
Department and the IRS will not move
applications from the category and subreservation under which the facility
owner applied for an allocation. The
statement the commenter cited was
intended to remind applicants that if
their facility meets the requirements
under Category 1 or 2 and under
Category 3 or 4, the applicant should
apply under Category 3 or 4, as
applicable, to be considered for the
section 48(e) Increase of 20 percentage
points. Additionally, as provided in
Notice 2023–17 and Revenue Procedure
2023–27 each applicant may only apply

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for consideration of its facility, or for
each facility if the applicant owns
multiple facilities, under one category
in 2023. If the facility is not awarded an
allocation under the category in which
the applicant applies, the facility will
not be considered for an allocation in
another category.
1. Permits
Several commenters were concerned
with the required attestation that the
facility has obtained all applicable
Federal, State, Tribal, and local nonministerial permits, or that the facility is
not required to obtain such permits. A
few commenters suggested alternatively
that the rule instead require applicants
to provide sufficient documentation that
the project ‘‘expects to receive’’ or has
received all necessary permits to
comply with and Federal, State, or local
requirements. Another commenter uses
the phrase ‘‘proof of initiating’’ in its
suggestion.
Commenters provided reasons for
their concerns about the required
permits. For example, a commenter
stated that the requirement to have all
necessary permits in place as a
requirement for application (given the
limited application window) as out of
their direct control and not necessary
given the other requirements of the
guidelines. Another commenter
considering the same issue noted that
because there is tremendous variation in
the scope and applicability of State and
local permit requirements that eligible
projects may be subject to depending on
their geographic location, a completed
permit requirement would serve to
disqualify projects in locations that have
suitable and appropriate permitting
requirements and potentially advantage
projects either already advancing
without the benefit of Federal support
or projects in jurisdictions with the
lowest State and local permitting
requirements.
Additionally, commenters requested
guidance on the definition of nonministerial permits. For example, a
commenter requested clarity on whether
‘‘local non-ministerial permits’’
includes such things as building and/or
electrical permits. The commenter noted
their agreement with the need to ensure
applications for projects that are likely
to move forward but that obtaining such
permits requires significant expenditure
of funds and investment of time in a
project and that if all permits are
required, many developers will be
unlikely to invest in projects that need
the low-income community bonus
credit. Other commenters assumed
building permits are required as nonministerial permits and noted their

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disagreement with the requirement.
Another commenter suggested that the
Treasury Department and the IRS
should clarify whether the appeals
period for non-ministerial permits must
have lapsed prior to application
submission. Finally, a commenter noted
that given the uncertainty of a
competitive program, projects should
not be required to secure building
permits. Another commenter said
rooftops particularly should not require
building permits in the application.
Further, one commenter requested that
if a roof is found to be unsuitable for
installation of a facility, after an
inspection, that the application to the
Program allow for the inclusion of a
scope of work contract to make the roof
suitable, in lieu of attesting that the roof
is suitable. The commenter additionally
requested that the cost of such
construction work be allowed to be
included in the cost of the overall
installation.
The Treasury Department and the IRS
considered these comments but
determined that a standard such as
‘‘expects to receive’’ or has ‘‘proof of
initiating’’ with respect to required
permits is not enough to demonstrate
sufficient project maturity to give
assurances of the viability of the project.
As explained in the Proposed Rules,
section 48(e)(4)(A) directs the Secretary
to provide procedures to allow for an
efficient allocation process.
Additionally, section 48(e)(4)(E)(i)
requires that facilities allocated an
amount of Capacity Limitation be
placed in service within four years of
the date of allocation. Therefore, as
explained in the Proposed Rules, the
Treasury Department and the IRS
determined that 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, applicants are required
to submit certain documentation and
attestations when applying for an
allocation. This requirement includes an
attestation that the facility has obtained
all applicable Federal, State, Tribal, and
local non-ministerial permits, or that the
facility is not required to obtain such
permits, which demonstrates
completion of a critical project
milestone.
In response to the concerns
commenters raised regarding the lack of
clarity with respect to the definition of
non-ministerial permits, the Treasury
Department and the IRS included the
following definition of non-ministerial
permits in Revenue Procedure 2023–27,

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clarifying that building and electrical
permits are not considered nonministerial permits. Revenue Procedure
2023–27 provides that non-ministerial
permits are defined as: ‘‘Permits in
which one or more officials or agencies
consider various factors and exercise
some discretion in deciding whether to
issue or deny permits. This does not
include ministerial permits based upon
a determination that the request
complies with established standards
such as electrical or building permits.
Non-ministerial permits typically come
with conditions and usually require
public notice or hearings. Examples of
non-ministerial permits include local
planning board authorization,
conditional use permits, variances, and
special orders.’’ Lastly, on the question
of whether the appeals period for nonministerial permits must have lapsed
prior to application submission, the
lapse of this period is not a requirement
for application submission.
With respect to the comment about
unsuitable roofs, applicants will
continue to be required to attest that the
location of the qualifying facility has
been determined suitable for installation
at application, to give assurances of the
viability of the project. Additionally, the
Treasury Department and the IRS
cannot accommodate the request for the
cost of roof repairs to be includable in
the overall cost of the project,
presumably, so that the repair costs are
eligible costs for determining the bonus
credit amount. The statutory language
provides for the energy percentage
increase with respect to eligible
property that is part of a solar or wind
facility. The roof of a building is not
part of a solar or wind facility, and
therefore, costs associated with building
improvements are not includable in the
basis of the solar or wind facility to
determine the section 48(e) Increase.
2. Interconnection Agreements
Several commenters disagree with the
documentation requirement in the
Proposed Rules that for FTM and BTM
larger than 1 MW, a copy of the final
executed interconnection agreement, if
applicable, is required. Commenters
suggested that requiring negotiated or
approved interconnection agreements is
premature for the first application
period. Some commenters suggested an
interconnection proxy, such as a
submitted interconnection application
or some other documentation from the
utility that acknowledges the
interconnection process has formally
begun.
Many commenters noted practical
considerations. For example, a
commenter pointed out that an executed

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interconnection agreement and all
applicable permits are typically
received up to the date (and often after)
a financial closing on a transaction
occurs; it is not anticipated that a debt
and equity investor will close on
financing without prior receipt of an
award letter by the IRS. Therefore, the
commenter argues that requiring such
documents at time of application will
slow down the development process,
increase the cash requirements of a
developer prior to financial closing, and
lengthen the construction timing. The
commenter instead suggests that these
documents be required when the facility
is placed in service. As an alternative
for the application, this commenter
suggests requiring teaming agreements
be in place and that each of the teaming
parties provide a resume outlining at
least 3 years of experience obtaining
permits and interconnection agreements
within the specified jurisdictions along
with the number of renewable energy
facilities that each of the parties has
placed in service in such jurisdictions.
Echoing that concern, another
commenter suggested that this
requirement of mandating signed
interconnection agreements sets a high
bar and would only make the Program
accessible to those developers with
financing readily available for upgrades
before being accepted into the Program.
Another commenter provided that an
applicant should not be disadvantaged
due to stricter requirements on
permitting and interconnection
agreements in one locality versus
another. Another commenter said that
by requiring eligible projects to submit
final executed interconnection
agreements, the Treasury Department
and the IRS prevent taxpayers in certain
States from being able to apply for
capacity under the Program. The
commenter explained that in California,
Connecticut, North Carolina, and
Washington, DC, utilities often do not
execute or sign interconnection service
agreements until after a project has
received permission to operate (PTO).
The commenter noted that a footnote in
the Proposed Rules elaborates that if a
taxpayer is not able to present a signed
interconnection agreement, the taxpayer
can instead submit a final written
decision from the Public Utilities
Commission or other governing body or
a signed conditional interconnection
approval letter that authorizes the
facility. However, the commenter said
that these alternatives to providing an
executed interconnection agreement are
infeasible in States and regions like
those listed. The commenter suggests as
an alternative to the proposed

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rulemaking, the Treasury Department
and the IRS should allow taxpayers to
submit an unsigned or customer-signed
contingent approval to interconnect for
projects located in utility zones that
don’t provide executed interconnection
agreements until PTO.
Other commenters suggested
additional alternatives. For example,
instead of an executed interconnection
agreement, a commenter suggested
allowing FTM facilities to submit
interconnection applications and
studies. Another commenter also
suggested proof of an interconnection
application stating it should be adequate
given the differing processes across
utilities districts (which reiterates the
comment earlier describing limitations
in certain States and Washington, DC)
Another suggestion for a larger project is
proof that such project has an active
queue position and an attestation from
the applicant that the project is not in
default, payment or otherwise, with the
relevant transmission and distribution
companies. This commenter pointed out
that with the time required, most
applicants with an actual executed
interconnection agreement started their
projects before the IRA was enacted.
This commenter suggested that for
future application rounds for larger
projects, an ‘‘executed interconnection
agreement’’ may be a more feasible
expectation. Another commenter
similarly suggested that projects that are
actively in the queue for
interconnection, and projects with a
proposed timeline for site
interconnection application should
suffice. Lastly, a commenter
recommended that for BTM projects
smaller than 1 MW, a ‘‘limited notice to
proceed’’ with an EPC (engineering,
procurement and construction)
contractor authorizing the EPC to
produce a design for a renewable energy
facility and apply for interconnection
should be considered adequate
documentation in lieu of an executed
contract to purchase the energy facility.
The Treasury Department and the IRS
considered these comments but
ultimately decided not to make a change
to the interconnection agreement
requirements, and the proposed
requirements are included in Revenue
Procedure 2023–27. For the same
reasons explained earlier under part
X.A1. of this Summary of Comments
and Explanation of Revisions section,
the interconnection agreement
documentation requirements are
necessary to achieve Program goals
including ensuring applications
represent mature, viable projects. In
response to the comment that these
projects with executed interconnection

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agreements would have begun prior to
the implementation of the IRA, the
Treasury Department and the IRS
believe that this issue will be mitigated
as the Program progresses.
Additionally, in response to the
commenters who raised scenarios where
interconnection agreements are not
possible or feasible, footnote 9 of the
Proposed Rules explained that if the
facility is located in a market where the
interconnection agreement cannot be
signed prior to construction of the
facility or interconnection facilities, the
interconnection agreement requirement
is satisfied by a signed conditional
approval letter from the jurisdictional
utility and/or an affidavit from a senior
corporate officer of the applicant (or
someone with authority to bind the
applicant) stating that an
interconnection agreement cannot be
executed until after construction of the
facility. The Treasury Department and
the IRS determined that this alternative
provided in the Proposed Rules covers
the scenarios identified by commenters.
Lastly, a commenter requested
clarification if an interconnection
service agreement (ISA) is amended
after submission of the initial
application, whether this amendment
must be submitted to the Treasury
Department and the IRS. Details on
these procedural requirements will be
provided in later Program information.
3. 110 Percent Historical Customer Load
Generally, commenters requested
eliminating the attestation that the
applicant has appropriately sized the
facility (to meet no more than 110
percent of historical customer load).
One commenter stated that many utility
rules for net metering already have a
limit (typically 125 percent), and the
Program rules should defer to those
local rules. The commenter said these
limits can be verified or validated
through the approved interconnection
agreement (or utility approval of rooftop
solar projects). Furthermore, this
commenter, similar to others described
previously, agrees with the idea that
size should be able to increase noting
that if a Tribal housing authority or
Tribal member also implements
electrification efforts, the electric load of
a Tribal residence will increase and that
rooftop solar projects should be allowed
to ‘‘oversize’’ with the expectation that
the load will increase.
At least one commenter recognized
that the purpose of a limitation may be
to prevent abuse or waste in connection
with the ability to claim section 48
credits, but the commenter anticipated
there would also be renewable energy
projects that could feasibly produce and

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benefit from more than 110 percent of
historical customer load. Another
commenter argued that after the IRA,
energy usage is likely to increase with
the adoption of heat pump technology,
electric vehicle chargers, and induction
stoves, for example, so applicants need
to build solar facilities that account for
increased future usage. The commenter
believed that the flexibility to oversize
facilities relative to customers’ current
demand could be a way to provide
direct financial benefits to residents of
affordable housing properties noting
that the commenters’ particular
technology allows facilities to maximize
the size of the roof to produce net
energy metering credit beyond the host
properties’ consumptions. The
commenter explained the credits can
then be allocated to qualifying lowincome customers in the surrounding
neighborhood including those who live
in buildings that cannot support solar
facilities. Similarly, focusing on
arguments that the limitation prevents
greater benefits to low-income
individuals, another commenter agreed
that facility sizing requirements should
be set at the local/utility level and not
specified in the Program requirements
because limiting the size of the facility
will reduce the benefits available to
tenants. Another commenter mentioned
the need to expand the limitation due to
the need to accommodate the
installation of defined electrification
projects.
Another commenter gave additional
reasons why it views the limitation as
problematic noting that a Category 3
residential building may have multiple
historical customer loads; this concept
of limiting facility size to historical
customer loads has previously been
proposed to reduce the size of onsite
solar facilities, limit financial benefits,
and hinder overall distributed
generation, which contradicts the intent
of the statute; and that a limit to BTM
facilities creates significant
inconsistencies with other provisions of
guidance referring to the fact that in
certain States a Category 3 facility may
only be allowed to interconnect to the
local utility grid through a BTM
configuration and this rule might be
inconsistent with the requirement on 50
percent financial benefits.
Comments on behalf of Tribal entities
also disagreed with the limitation.
These commenters said that for Tribal
housing clean energy projects that
qualify under Category 3, the rule
should not limit the size of a BTM
project to 110 percent of load.
Additionally, one commenter stated that
many utility rules for net metering
already have a limit (typically 125

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percent of historical load) and another
commenter said that several States
permit facilities of up to 200 percent
historical load, and the rules should
defer to those local rules. The
commenter said these limits can be
verified or validated through the
approved interconnection agreement (or
utility approval of roof top solar
projects). Furthermore, this commenter,
similar to others described previously,
agrees with the idea that size should be
able to increase, noting that if a Tribal
housing authority or Tribal member also
implements electrification efforts the
electric load of a Tribal residence will
increase and that rooftop solar projects
should be allowed to ‘‘oversize’’ with
the expectation that the load will
increase.
While some commenters
recommended removing the limitation,
other commenters suggested
modifications. One commenter
suggested slightly increasing the
historical customer load limitation to
120 percent based on rules in place in
Minnesota for BTM facilities. Another
commenter seemed to agree with
keeping the attestation but removing the
limit, noting that the rules simply
require attestation that the project is
appropriately sized based on applicable
State and local solar program or utility
interconnection rules, which they
generally must already comply with,
and that this would better accommodate
concurrent or future additions of
electrical load. Another commenter
agreed with keeping the attestation and
removing the limitation but noted that
if the 110 percent of historical customer
load requirement is retained, it should
be clarified to allow for reasonable
estimates of customer usage in cases
where the customer does not have a full
12 months of historical usage at the
specific location. Lastly, one of the
commenters suggested as an alternative,
and to maintain a rule that will preclude
gaming, the following attestation
requirement along the lines of the
Category 4 attestation: ‘‘For any facility
that is projected to produce more than
110 percent of the its host property’s
historic annual kWh energy
consumption, the applicant will ensure
that either (A) any exported kWh will be
provided to occupants of a qualified
residential property at a 20 percent or
greater bill credit discount related to the
host property’s volumetric export
compensation rate for solar kWh, or (B)
the applicant has reasonably accounted
for an anticipated increase of the
applicable building’s energy
consumption.’’ Similarly, another
commenter also thought the attestation

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for Category 3 should be similar to that
for Category 4 noting that ‘‘applicants
should not be constrained to ‘‘110
percent of the historical customer load’’
for rooftop projects for Categories 3 and
4. A more reasonable approach would
be to size the ‘‘customer’s facility output
share’’ appropriately as is proposed for
FTM projects.
One commenter asked for clarification
on how the Treasury Department and
the IRS plan to define ‘‘appropriately
sized’’ for purposes of the requirement
applicable to FTM projects that the
‘‘applicant has appropriately sized the
customer’s facility output share and has
based facility output share on historical
customer load.’’ This commenter
suggested as an example that their
standard process for determining
subscribers’ allocation sizing is to size
allocations at 85–90 percent of the
customer’s 12-month historical average
kWh usage. The final regulations will
not adopt a more detailed standard on
this term and will use a reasonableness
approach on whether an output share is
appropriately sized.
In response to these comments, the
Treasury Department and the IRS
believe that the attestation for BTM
facilities related to the host properties’
historic energy usage should be retained
to prevent Capacity Limitation
allocations from going to facilities that
are oversized. However, the Treasury
Department and the IRS recognize the
need to modify the attestation
requirement to account for future load
projections and to not limit sizing to 110
percent where State and local
requirements may allow for more.
Accordingly, Revenue Procedure 2023–
27 includes the following revised
attestation requirement: ‘‘The applicant
has appropriately sized the facility, or
the customer/offtaker subscriptions will
be sized to meet the customer’s energy
needs, considering historical customer
load and/or reasonable future load
projections, in accordance with
applicable State and local
requirements.’’
4. Tribal Documentation Requirements
Some Tribal commenters requested
modifications specifically regarding
Tribal documentation requests.
Commenters stated that development on
certain Category 2 Indian land are
subject to Tribal approval and
regulatory authority and involve the comanagement of the Department of
Interior. To ensure applicants on Indian
land understand documentation
requirements, these commenters
requested that the attestation
requirements reflect a Tribal approval or
a Tribal resolution for projects on lands

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subject to Tribal civil jurisdiction under
25 U.S.C. 3501(2)(A)–(B).
The United States has a trust
relationship with Tribal governments
whereby the Federal government
manages certain Indian land for Tribal
governments and Tribal citizens as the
beneficial owners based on the cessation
of Tribal lands.11 As a component of
this relationship, Tribal governments
are recognized as nations with inherent
sovereignty and the ability to exercise
criminal and civil jurisdiction over
lands classified as Indian Country,
which includes all lands identified in
25 U.S.C. 3501(2)(A)–(B).12 This civil
authority includes the right to regulate
activities on their lands including
taxation, and the ability to condition
consent for development on Indian land
via regulatory processes that might
include approvals, permitting, and the
right of exclusion.13 With regard to land
described in 25 U.S.C. 3501(2)(C),
Alaska Native Corporations have
management and regulatory authority
over their lands under the Alaskan
Native Claims Settlement Act.14
Because Tribal governments and Alaska
Native Corporations must approve
development on Indian land described
in 25 U.S.C. 3501(2)(A)–(C) under
existing legal authorities, the comment
to include Tribal approval as an
attestation requirement for applications
for a Category 2 allocation on such lands
is adopted.
One commenter also suggested that
Tribally owned qualified solar or wind
facilities have priority [for an allocation]
over other third-party facility owners
with respect to Category 2. Another
commenter stated that Category 2
allocation should be fully reserved (not
50 percent reserved) for projects that
meet the Tribal Ownership Criteria.
Commenters provided that projects
owned directly by a Tribe, Tribal
enterprise, Tribal utility, or Tribal
housing authority, regardless of the
category, should not have to comply
with certain documentation and
attestation requirements, such as site
control, customer disclosures, benefit
sharing agreement requirements, leases,
contracts to purchase, PPAs (which
should only be required if the project is
structured to include a third-party
owner), permits, and compliance with
Tribal law. Another commenter agreed
11 See Johnson v. M’Intosh, 21 U.S. 543 (1823);
Cherokee Nation v. Georgia, 20 U.S. 1 (1831);
Worcester v. Georgia, 31 U.S. 515 (1832) (setting
forth foundational principles of Federal Indian
law).
12 Merrion v. Jicarilla Apache Tribe, 455 U.S. 130,
147 (1982).
13 See 25 CFR 169.10 and 25 CFR part 162.
14 See 43 U.S.C. 1601.

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that for transactions not involving third
parties, Tribes should not be required to
provide certain application or
attestation documents, and that Tribes
should be able to self-certify that
qualifying projects are compliant. Other
Tribal commenters support the ability to
self-certify and additionally advised the
Treasury Department and the IRS not to
rely on external census data to track
poverty levels on Indian land. Similarly,
another commenter agreed that
documentation requirements should be
tailored for Category 3 and Tribalenterprise owned projects should be
allowed more flexibility, based on
Tribal recommendations.
The Treasury Department and the IRS
considered these comments but did not
adopt them in Revenue Procedure 2023–
27 because, as explained in the
Proposed Rules, the documentation and
attestation requirements are critical for
all projects to ensure an efficient
allocation process (that is, to ensure that
projects receiving an allocation are
viable and can satisfy Program
requirements). Moreover, some of the
requirements, such as site control,
permits, and compliance with Tribal
laws are attestations that merely require
Tribal entities to attest that the Program
requirements are satisfied, similar to
self-certification.
5. Other Documentation Requirements
A commenter suggested that the
Treasury Department and the IRS
require applicants to submit
documentation that they have received
(or have contracted with a service
provider that will be handling
beneficiary personally identifiable
information and that has received) a
third-party cybersecurity assessment
against a technology industry-standard
framework such as SOC 2 Type II
(sponsored by the American Institute of
Certified Public Accountants), and that
the assessment does not include
unaddressed or unremediated material
findings.
The Treasury Department and the IRS
recognize that the Program requires
information and documentation that
may contain confidential information.
The IRS and DOE are following all
required protocols to protect
information submitted to the IRS or
DOE. However, the Treasury
Department and the IRS think that it
would be administratively impractical
to impose cybersecurity assessment
requirements on applicants, so this
suggestion is not included in Program
guidance.
Another commenter provided that the
final regulations should confirm that
executed contracts and other documents

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containing personally identifying and/or
business confidential information
submitted in connection with the
applications constitute trade secrets
and/or commercial or financial
information that is exempt from
disclosure under the Freedom of
Information Act (FOIA).
After consideration of this comment,
it is not adopted in these final
regulations. Commenting on the IRS,
DOE, or the Treasury’s Department’s
response to any FOIA request is outside
the scope of what can be appropriately
addressed in Program guidance.
In contrast to the commenters who
requested relaxing or eliminating certain
documentation and attestation
requirements, three commenters were
supportive of the project maturity
requirements and some suggested that
the final regulations should impose
additional requirements. One
commenter is pleased that maturity
requirements for all capacity categories
are included and recommends further
strengthening these maturity
requirements by necessitating a
documentation requirement providing
an interconnection agreement or State
approved interconnection process, a
community solar State program capacity
award or a PPA, and proof of nonministerial permits rather than an
attestation. The other commenter
suggested enhancing application
requirements for the initial application
period and subsequent rolling
application process. The commenter
suggests that demonstration of site
control (for example, an executed
contract, lease, or option to lease or
purchase or similar agreement between
the property owner and the developer/
installer) and all non-ministerial
permits should be included as a
‘‘Proposed Document Requirement,’’
rather than a ‘‘Proposed Attestation
Requirement’’ for FTM and BTM that
are smaller than 1 MW. The commenter
says these milestones, as well as an
executed interconnection agreement, are
clearest and most efficient. The final
commenter was supportive as long as
the information submitted was kept
strictly confidential and not subject to
public disclosure as discussed earlier.
For Category 3 specifically, one
commenter suggested that the
Documentation and Attestations table
should be updated to add a line for ‘‘An
executed contract to purchase the
facility, an executed contract to lease
the facility, or an executed power
purchase agreement for the facility.’’
This same commenter also suggested
that for Category 3, there should be a
multifamily building financial benefits
assignment plan to illustrate how the

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financial benefits will reach the tenants.
Additionally, this commenter said the
rules should implement milestone
requirements along this four-year period
to ensure the complete and efficient
usage of the annual capacity limitation
(speed timeline for placing in service).
Other commenters included
suggestions for documentation
alternatives or requests for clarification
on documentation requirements. One
commenter suggested that for BTM
projects, site control should also be
accepted through other recordable
documents such as ‘‘Option
Agreements’’ or ‘‘Memoranda of
Understanding,’’ including attestation
that such documents exist, similar to
what the transmission and distribution
companies accept for site control. The
commenter stated that the three
documents listed as required in Table 1
for BTM are all proprietary to an
applicant and contain business sensitive
information. In addition, executing
these documents may depend on if the
applicant receives the ‘‘adders (bonus).’’
To clarify, the site control document
attestations are required for FTM; these
attestations are not required for BTM so
this commenter’s particular concerns do
not arise. Another commenter asked for
clarification whether a lease option
agreement satisfies the requirement for
FTM facilities, which requires showing
that the applicant has site control
through ownership, an executed lease
contract, site access agreement or
similar agreement between the property
owner and the applicant. The same
commenter asked also for clarification
that a submitted executed contract may
have an execution date of August 16,
2022, or later. Lastly, a commenter
urged the Treasury Department and the
IRS to consider a guaranteed maximum
price contract or other design/build
contract in lieu of the requirement that
BTM facilities provide documentation
in the form of an executed contract to
purchase the facility, an executed
contract to lease the facility, or an
executed PPA for the facility. This
commenter said that in most cases, the
commenter expects to develop the
project themselves and hire a contractor
to install the solar arrays, and so there
would be no need for a purchase, lease,
or PPA contract.
The Treasury Department and the IRS
considered these comments but decided
not to impose additional requirements.
The Treasury Department and the IRS
view the Proposed Rules as striking the
right balance between requiring
adequate documentation and
attestations to ensure projects are viable
and well defined to allow for a review
for an allocation, and sufficiently

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advanced such that they are likely to
meet the four-year placed in service
deadline, while not being unduly
burdensome for applicants. Additional
documentation and attestations
suggested by these commenters do not
appear necessary to verify compliance
with Program requirements.
On the requests for alternatives (a
lease option agreement requested by one
commenter and guaranteed maximum
price contract or other design/build
contract requested by another), the
Treasury Department and the IRS also
considered these suggestions but believe
the original documents described in the
Proposed Rules are best able to
demonstrate a project is 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,
while not being unduly burdensome for
applicants. Lastly, on the question of
timing and whether a submitted
executed contract may have an
execution date of August 16, 2022, or
later, the rules do not have any date
restrictions on the documentation
required.
B. Lottery
The Proposed Rules also provided a
that a lottery system may be used in
oversubscribed categories to decide
among similarly situated applications.
A few commenters requested that the
lottery process be eliminated, and that
the application process be entirely on a
first-come, first-served basis. One
commenter advised against a lottery
system and advised that in the event the
Program is oversubscribed, the Treasury
Department and the IRS should select
projects based on ‘‘project readiness’’,
which, the commenter states, in most
existing solar markets, uses the earliestin-time date of permit or ISA as a proxy
for project maturity. Other commenters
stated that they understand the purpose
of a lottery in tie-breaker situations, but
caution that a lottery may incentivize
speculative project developers. The
Treasury Department and the IRS made
the decision to retain the lottery to
provide an equitable review process for
similarly situated applications. Due to
the anticipated volume of applications,
it would not be administratively feasible
to select between applications for
similar situated facilities that are
submitted during the same time period
for review without a lottery process that
objectively prioritizes projects for
review. The lottery process will allow
for an efficient allocation process by
ordering applications for review and
allowing applications to be divided

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among reviewers for simultaneous
review.
The final regulations adopt the lottery
system from the Proposed Rules to be
used if a facility category or subreservation is oversubscribed but
clarifies that details regarding how the
lottery procedures will operate are
specified in guidance published in the
Internal Revenue Bulletin. The final
regulations also clarify that a category or
sub-category is oversubscribed if it
receives applications in excess of
Capacity Limitation reserved for the
facility category or reservation within a
facility category. For the 2023 Program
year, Revenue Procedure 2023–27
provides the application review and
selection procedures. The specific
review and selection procedure may be
updated in future Program guidance for
Program year 2024.
C. Application Window
The Treasury Department and the IRS
proposed an approach that includes an
initial application window in which
applications received by a certain time
and date would be evaluated together,
followed with a rolling application
process if Capacity Limitation is not
fully allocated after the initial
application window closes.
Several commenters requested a firstcome, first-served application process,
with a few commenters adding that it
should be first-come, first-served with
respect to projects that are similarly
situated. Additionally, several comment
letters referred to the 60-day application
period previously provided for the
Program under Notice 2023–17. These
comment letters generally state that a
60-day period is too short and request
instead that the Program accept
applications on a rolling basis. The
Proposed Rules already provided for a
change from the 60-day window under
Notice 2023–17. This change was noted
under ‘‘Selection Process’’ in the
Proposed Rules.
As provided in Revenue Procedure
2023–27, for Program year 2023 there
will be an initial 30-day window
followed by a rolling application
process thereafter for any capacity that
remains in a given category or subreservation. At the end of the initial
window, any category or sub-reservation
that is oversubscribed will be subject to
the lottery system. Applications may
still be submitted in oversubscribed
categories or for the Category 1 subreservation after the 30-day period and
until the close of a Program year. Those
applications may be reviewed in the
order received only after DOE’s review
and the IRS’s award determinations
regarding all applications submitted

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within the first 30 days. Applications
submitted will only be reviewed if there
is remaining Capacity Limitation.
Applicants should refer to Revenue
Procedure 2023–27 for additional
details regarding the Program
application process.
A few commenters additionally
suggested that any category that has
remaining capacity at the close of the
Program for a particular capacity year
should enter into a continuous rolling
application process, rather than
requiring a new application window.
One commenter further specified that if
the category remains in a rolling
application process through the end of
the calendar year, then on January 1 of
the following year, new annual capacity
should be allocated to the category and
the rolling application process should
continue. Otherwise, these commenters
state that there will be a backlog of
applications. One of the commenters
also urged the Treasury Department and

the IRS to create a waitlist for the
following year’s capacity allocation,
with applications prioritized in the
order received. This commenter stated
that this would obviate the need for a
lottery system for similarly situated
applications in oversubscribed
categories. Finally, a few commenters
expressed concern about the short
application period for the 2023 Program
year. These commenters generally stated
their belief that the 2023 Program will
close on December 31, 2023 and that
any unallocated Capacity Limitation
will immediately rollover and be added
to the 2024 Capacity Limitation on
January 1, 2024.
The Treasury Department and the IRS
will assess the 2023 Program and initial
applications before determining any
capacity changes to the 2024 Program
and any changes to the application
process. The Treasury Department and
the IRS can also adjust Capacity
Limitation among categories within a

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Program year. Moreover, although the
statute provides for a Capacity
Limitation for each calendar year, with
the ability to rollover unused Capacity
Limitation to the next year, there is no
requirement to close the application and
allocation period for the 2023 Program
year on December 31, 2023. Applicants
should refer to Revenue Procedure
2023–27 for additional details regarding
the Program application process.
XI. Documentation and Attestations To
Be Submitted When Placed in Service
The Proposed Rules also required
facilities that received a Capacity
Limitation allocation to report to DOE
that the facility has been placed in
service, and to submit additional
documentation or complete additional
attestations with this reporting.
The Proposed Rules provided that an
owner must submit documentation or
attest to the following:
Category

Proposed Attestation Requirement
Confirmation of material ownership and/or facility changes from application or that there has been no change from the application.

All.

Proposed Document Requirement

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Permission to Operate (PTO) letter (or commissioning report verifying for off-grid facilities) that the facility has been placed in
service and the location of the facility being placed in service.
Final, Professional Engineer (PE) stamped as-built design plan, PTO letter with nameplate capacity listed, or other documentation from an unrelated party verifying as-built nameplate capacity.
Benefits Sharing Agreement for qualified residential building projects between building owner and tenants (including for facilities that are third- party owned, additional sharing agreement between the facility owner and the building owner).
Final list of households or other entities served with name, address, subscription share, and income status of qualifying lowincome households served, and the income verification method used.
Spreadsheet demonstrating the expected financial benefit to low-income subscribers to demonstrate the 20 percent bill credit
discount rate.

The final regulations adopt the
requirement that the owner of a facility
must report to DOE that the facility has
been placed in service, and to submit
additional documentation or complete
additional attestations with this
reporting but clarify that the specific
information, documentation, and
attestations that applicants are required
to submit will be specified in guidance
published in the Internal Revenue
Bulletin. For the 2023 Program year,
Revenue Procedure 2023–27 provides
the placed in service documentation
procedures. The specific information,
documentation, and attestations that
applicants are required to submit when
a qualified facility is placed in service
may get updated for Program year 2024.
One commenter provided that a final,
PE stamped as-built design plan is
unnecessary. The commenter stated that
applicants should instead be able to rely

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upon the as-built design plan for the
project (without a PE stamp, at least in
jurisdictions where such a stamp is not
required), or other permitting
documentation from the authority
having jurisdiction, demonstrating the
nameplate capacity. This suggestion is
partially adopted in the Revenue
Procedure 2023–27, allowing as-built
design plans to be submitted without a
PE stamp in cases where the local
jurisdiction does not require such a
stamp. The Treasury Department and
the IRS further note that the as-built
design plan is only one of three options
for verifying as-built nameplate
capacity, which provides flexibility for
applicants. A PTO letter with nameplate
capacity listed or other documentation
from an unrelated party verifying asbuilt nameplate capacity are also
reliable and acceptable options.

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All.
All.
3.
4.
4.

Also, as discussed in part V.5 of this
Summary of Comments and Explanation
of Revisions section, the Treasury
Department and the IRS determined that
to better achieve the goal of verifying
Program compliance, the final
regulations will require that facility
owners must prepare a Benefits Sharing
Statement, which must include certain
information, and 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. Therefore, this
Benefits Sharing Statement, instead of a
Benefits Sharing Agreement, will be
required documentation upon placing a
Category 3 property in service.

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XII. Placed in Service Prior to Allocation
Award
The Proposed Rules, consistent with
an earlier statement in section 4.05 of
Notice 2023–17, provided that facilities
placed in service prior to being awarded
an allocation of Capacity Limitation
would not be eligible to receive an
allocation.
Some commenters disagreed with the
proposal that facilities must be placed
in service after being awarded an
allocation of Capacity Limitation to be
eligible to receive an allocation. These
commenters focused on the impact this
will have on the economics of their
projects for the Program as well as
timing issues they argue arise due to
waiting for allocation. For example, one
commenter stated that they will not be
able to complete projects without the
bonus credit because the ‘‘economics’’
of their projects will be ‘‘severely
impacted’’, and if they must apply first
to get an award, that the projects will be
delayed to 2024. Another commenter
noted specifically for Category 3 that
multifamily affordable housing owners
have been relying on the initial
guidance and the February 13, 2023,
statutory due date, and they have been
planning on deploying solar power and
storage that benefits residents of
affordable housing since the day the IRA
became law. The commenter added that
these projects would not be
economically viable without the LowIncome Communities Bonus Credit, and
absent the bonus credit, these same
developers would have planned to
develop significantly smaller solar
installations that offset common area
electric loads only and would not have
planned larger solar and storage
facilities that also provide a direct
economic benefit to low-income
residents. This commenter disagreed
with the statement that facilities placed
in service prior to the allocation process
do not increase adoption of and access
to renewable energy facilities.
Additionally, two commenters noted
that the rationale for not allowing
projects placed into service after January
1, 2023, but before receiving an
allocation, to be eligible for the bonus
allocation is insufficient, and should be
rescinded.
Some commenters expressed concern
over the potential impact that this
proposal would have on low-income
residents, including Tribal members.
Likewise, another commenter suggested
that the Treasury Department and the
IRS should reconsider the placed into
service requirements due to reliance
concerns and negative economic
impacts on Tribes. The commenter

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explained that many new Tribal projects
were planned, developed and started
construction after the IRA passed in
anticipation of qualifying for the bonus
credit. This expectation escalated Tribal
projects that might not otherwise have
been developed—just as the statute
intended. This commenter specifically
suggested that Tribal projects that are
placed in service after January 1, 2023,
should be eligible for this bonus
allocation. Another commenter noted a
particular project for which they would
be able to provide 25 percent energy
savings directly to low-income families
if they receive the allocation, and
without that bonus amount, their
financing costs would rise (due to
increased returns provided to their
equity investor) and consequently they
would have to reduce the economic
savings to 20 percent. In this example,
the commenter believed that providing
an additional 5 percent in direct
economic benefits to low-income
families would increase adoption and
access to renewable energy. Similarly,
another commenter contended that, due
to this requirement that a project must
be placed in service after an allocation
award, it would be more burdensome
and therefore less likely that lowincome communities with
environmental justice concerns will
benefit from the Program.
Two commenters suggested allowing
facilities that were placed in service
after the date of the initial guidance,
February 13, 2023. Another commenter
suggested including facilities for which
construction began after the enactment
of the IRA on August 16, 2022. One
commenter made some specific
recommendations depending on the
type of project. This commenter
suggested allowing all facilities (in
addition to Category 1 facilities) that
have allocations awarded under the
rolling application process to be placed
in service prior to an allocation award.
Alternatively, this commenter suggested
allowing single-family residential
rooftop facilities in Category 1 that have
allocations awarded under the rolling
application process to be placed in
service prior to allocation award. This
commenter also agreed with other
commenters that 2023 capacity
allocations be allowed for any
qualifying Category 3 facility placed in
service after final Program rules are
issued noting that this suggestion is
based on the longer development
timelines and unique cost
considerations for Category 3 projects.
Another commenter suggested
modifying the requirement to instead
provide that projects must be placed in

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service after application, rather than
after allocation.
After consideration of the comments
described herein, the final regulations
adopt the Proposed Rule providing that
projects must be placed in service after
allocation. The Treasury Department
and the IRS considered these comments
but ultimately decided not to make a
change because requiring projects be
placed in service after allocation
provides the best way to promote the
increase of, and access to, renewable
energy facilities that would not be
completed in the absence of the
Program. Although Treasury and IRS
recognize the economic and businessmodel concerns raised by commenters,
these issues are largely the result of
allocations not being readily available
before the Program opens. These issues
are therefore expected to significantly
diminish in the future. Further, section
48(e)(4)(E)(i) provides a lengthy window
of four years to place a facility in service
following an allocation of Capacity
Limitation, supporting that statutory
intent is for allocations to go to new
facilities that have not yet been placed
in service. The Treasury Department
and the IRS therefore believe that this
rule best accomplishes Congress’s intent
of the Program to encourage new
development of renewable energy and
the corresponding benefits to lowincome communities. The Program
cannot encourage additional renewable
energy facilities in connection with lowincome communities if those facilities
were already placed in service without
the Program.
XIII. Disqualification After Receiving an
Allocation
The Proposed Rules provided that a
facility that was awarded a Capacity
Limitation allocation is disqualified
from receiving that 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 nameplate capacity of
the facility increases such that it
exceeds the less than 5 MW AC
maximum net output limitation
provided in section 48(e)(2)(A)(ii) or
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
48(e)(2)(B)(ii) as planned (if applicable)
or cannot satisfy the financial benefits
requirements under section 48(e)(2)(C)
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

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Federal Register / Vol. 88, No. 156 / Tuesday, August 15, 2023 / Rules and Regulations
the applicant was notified of the
allocation of Capacity Limitation to the
facility; or (5) 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 such that the Ownership Criteria
is no longer satisfied, unless (a) the
original applicant retains an ownership
interest in the entity that owns the
facility and (b) the successor owner
attests that after the five year recapture
period, the original applicant that met
the Ownership Criteria will become the
owner of the facility or that this original
applicant will have the right of first
refusal.
Commenters expressed concern over
some of the disqualification factors set
forth in the Proposed Rules. In response
to the proposal that a certain decrease
in nameplate capacity results in a
disqualification, one commenter
suggested increasing the threshold for
disqualification due to a size reduction
from 25 percent to at least 30 percent.
Another commenter recommended that
the 2 kW or 25 percent threshold be
applicable to both increasing and
decreasing the system’s size.
Based on an assessment of other
similar State programs and because this
is an allocated credit with a finite
amount of capacity awarded each year,
the Treasury Department and the IRS
have declined to adopt the comment to
increase the size reduction to 30
percent.
For a different disqualification factor
that would occur when 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,
a commenter suggested that projects
receiving an allocation of bonus credits
be allowed to show alternative forms of
completion within the four-year
window apart from ‘‘placed in service,’’
which commenter says unfairly depends
on the utility’s timeline for signing off
on the project. Another commenter
recommended adding additional
requirements for the topic of placed in
service for Category 1. This commenter
suggested that for BTM projects that are
smaller than 1 MW, these projects be
required to attest that the project is
active and moving forward towards
being placed in service on an annual
basis after receiving an allocation, or
until the eligible property is placed in
service. The commenter proposed that if
the applicant is non-responsive or
declines to attest that the project is
active, then the allocation should be
forfeited and the capacity returned and

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that applicants should also be able to
proactively forfeit an allocation. The
commenter’s reasoning for this is that in
commenter’s view four years is far
beyond the necessary time frame for
smaller projects that can be completed
in months instead of years.
The Treasury Department and the IRS
did not adopt these recommendations.
Section 48(e)(4)(E) sets the placed in
service deadline for the Program by
providing that section 48(e)(1) does not
apply with respect to any property that
is placed in service after the date that is
four years after the date of the allocation
with respect to the facility of which
such property is a part. Therefore,
providing any type of alternative forms
of completion within the four-year
window apart from ‘‘placed in service’’
is inconsistent with the statute and not
allowed. Similarly, additional burdens
(and repercussions for non-compliance)
of annual attestation requirements for
smaller Category 1 projects should not
be imposed.
The Proposed Rules provided that if
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
such that the Ownership Criteria is no
longer satisfied, unless (a) the original
applicant retains an ownership interest
in the entity that owns the facility and
(b) the successor owner attests that after
the five year recapture period, the
original applicant that met the
Ownership Criteria will become the
owner of the facility or that this original
applicant will have the right of first
refusal. Commenters observed that put
options, which are often used in tax
equity structures, were excluded from
the proposed rule. The Treasury
Department and the IRS have modified
this rule to better reflect contractual
arrangements used with tax equity
financing structures and to avoid
unintended complications with other
tax guidance. The final regulations
eliminate the attestation regarding a
call, put, or right of first refusal is that
such contractual rights exist. Rather, the
final regulations provide that if the
facility received a Capacity Limitation
allocation based, in part, on meeting the
ownership criteria and if ownership of
the facility changes prior to the facility
being placed in service the facility is
disqualified, 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

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partnership and is a managing member
or general partner (or similar title) under
State 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.
XIV. Recapture of Section 48(e) Increase
In accordance with section 48(e)(5),
the Proposed Rules provided for
recapturing the benefit of any section
48(e) Increase with respect to any
property that ceases to be property
eligible for such section 48(e) Increase
(but that does not cease to be investment
credit property within the meaning of
section 50(a)). In accordance with
section 48(e)(5), the Proposed Rules
provided that the period and percentage
of such recapture is determined under
rules similar to the rules of section
50(a). In accordance with section
48(e)(5), the Proposed Rules
acknowledged 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 48(e) Increase, the
eligibility of such property for such
section 48(e) Increase is restored. In
accordance with section 48(a)(5), the
Proposed Rules provided that such
restoration of a section 48(e) Increase is
not available more than once with
respect to any facility.
The Proposed Rules provided that the
following circumstances result in a
recapture event if the property ceases to
be eligible for the increased credit under
section 48(e): (1) property described in
section 48(e)(2)(A)(iii)(II) fails to
provide financial benefits over the 5year period after its original placed in
service date; (2) property described
under section 48(e)(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 48(e)(2)(C)
ceases to provide at least 50 percent of
the financial benefits of the electricity
produced to qualifying households as
described under section 48(e)(2)(C)(i) or
(ii), or fails to provide those households
the required minimum 20 percent bill
credit discount rate; (4) for property
described under section 48(e)(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
48(e)(2)(B)(i), if applicable; and (5) a
facility increases its output such that the
facility’s output is 5 MW AC or greater,

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unless the applicant can prove that the
output increase is not attributable to the
original facility but rather is output
associated with a new facility under the
80/20 Rule (the cost of the new property
plus the value of the used property). See
Rev. Rul. 94–31, 1994–1 C.B. 16.
Commenters submitted
recommendations and questions related
to the recapture provisions in the
Proposed Rules. One commenter
suggested stricter rules by requiring
attestations that the owner of the facility
will maintain eligibility under the
Program for a minimum of 15 years, or
the lifetime of the project. This
commenter said if it is not possible to
require this sort of covenant or
attestation, the Treasury Department
and the IRS should instead implement
continual and spontaneous audits of
projects. The Treasury Department and
the IRS did not adopt this suggestion.
Under the recapture provisions of
section 48(e)(5), Congress provided that
the period and percentage of such
recapture must be determined under
rules similar to the rules of section
50(a). Section 50(a) generally provides
that this is a five year period with
differing applicable percentages
depending on when the property ceases
to qualify. Therefore, under section
48(e)(5), stricter restrictions related to
recapture should not be imposed.
Two commenters raised concerns
about the recapture event that occurs
when the property ceases to provide at
least 50 percent of the financial benefits
of the electricity produced to qualifying
households as described under section
48(e)(2)(C). Another commenter raised a
similar issue regarding the Proposed
Rule that projects can only cure an issue
related to low-income verification one
time if the 50 percent financial benefits
threshold is not met. This commenter
stated that, due to the complexity of
subscription management, potential
defaults, and subscription termination,
it is possible that projects will dip
below this 50 percent threshold more
than once due to no fault of the project
owner. This commenter recommended
that the rules be revised to allow
projects to dip below the 50 percent
threshold if there is proven effort to
restore the low-income percentage. The
Treasury Department and the IRS did
not adopt these recommendations
because it is inconsistent with section
48(e)(5). Section 48(e)(5) allows only a
one-time restoration of section 48(e)
eligibility per facility if the facility
ceases to qualify for an allocation of
Capacity Limitation before recapture of
the section 48(e) Increase is triggered.
A different commenter suggested an
additional recapture event that rooftop

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solar lease and PPA providers should
attest that they will adhere to the
provisions of the Consumer Leasing Act
(15 U.S.C. 1667–1667f), and the rules
should make documented violations of
the Consumer Leasing Act an event that
would trigger recapture of the
allocation. While the Treasury
Department and the IRS understand the
commenter’s concern, the statute
provides no requirements related to the
Consumer Leasing Act, and therefore,
the final regulations do not impose this
requirement on the applicants.
The final regulations related to
recapture adopt the requirements from
the Proposed Rules but also include a
clarification that any event that results
in recapture under section 50(a) will
also result in recapture of the benefit of
the section 48(e) Increase. The
exception to the application of recapture
provided in § 1.48(e)–1(n)(2) does not
apply in the case of a recapture event
under section 50(a).
Special Analyses
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 final
regulations contain reporting and
recordkeeping requirements that are
required to obtain the section 48(e)
Increase. This information in the
collections of information would
generally be used by the IRS and 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 final regulation
are considered general tax records under
Section 1.6001–1(e). These records are
required for the IRS to validate that

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taxpayers have met the regulatory
requirements and are entitled to receive
a section 48(e) Increase. For PRA
purposes, general tax records are
already approved by OMB under 1545–
0123 for business filers, 1545–0074 for
individual filers, and 1545–0047 for taxexempt organizations.
The final regulations also describe
reporting requirements for providing
attestations and supporting
documentation for the initial
application, providing supporting
documentation for specific facilities,
and confirming a facility is placed in
service as detailed in these final
regulations.
These attestations and documentation
would allow IRS to allocate Capacity
Limitation and ensure taxpayers
maintain compliance. To assist with the
collections of information, DOE will
provide certain administration services
for the Program. Among other things,
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 1545–2308 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, supporting
documentation, 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 supporting
documentation, and 1 for projects
placed in service.
Estimated total burden hours: 210,000
burden hours.
The IRS solicited feedback on the
collection requirements for the
application, supporting documentation,
and attestations. Although no public
comments received by the IRS were
directed specifically at the PRA or on
the collection requirements, several
commenters generally expressed
concerns about the burdens associated
with the documentation requirements
contained in the Proposed Rules. As
described in the relevant portions of this
preamble, the Treasury Department and
IRS believe that the documentation
requirements are necessary to
administer the Program.

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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 will
not have a significant economic impact
on a substantial number of small
entities, section 604 of the RFA requires
the agency to present a final regulatory
flexibility analysis (FRFA) of the final
regulations. The Treasury Department
and the IRS have not determined
whether the final regulations will have
a significant economic impact on a
substantial number of small entities.
This determination requires further
study and an FRFA is provided in these
final regulations.
Pursuant to section 7805(f) of the
Code, these final regulations were
submitted to the Chief Counsel of
Advocacy of the Small Business
Administration, and no comments were
received.
1. Need for and Objectives of the Rule
The final regulations would provide
guidance for purposes of participation
in the Program to allocate the
environmental justice solar and wind
capacity limitation under section 48(e)
for the Program. The final regulations
are expected to encourage applicants to
invest in solar and wind energy. Thus,
the Treasury Department and the IRS
intend and expect that the final
regulations will deliver benefits across
the economy and environment that will
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2. Significant Issues Raised by Public
Comments in Response to the IRFA
There were no comments filed that
specifically addressed the Proposed
Rules and policies presented in the
IRFA. Additionally, no comments were
filed by the Chief Counsel of Advocacy
of the Small Business Administration.
3. Affected Small Entities
A total of 1800 MW of capacity are
eligible for the section 48(e) bonus
credit annually. Assuming the average
size of each successful application is
near 1 MW, then there will be
approximately 2,000 successful
applications each year. The Treasury
Department and the IRS expect the total
number of applications to be
significantly higher than this. In
addition, the Treasury Department and
the IRS also assume that some

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successful applicants will submit more
than one successful application. The
Treasury Department and the IRS do not
have information on the expected
business entity size distribution of
successful applicants but will continue
to examine this issue when data is
collected during the first round of
allocations.
4. 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
this preamble. In particular, the
Paperwork Reduction Act section of this
preamble contains a summary of
paperwork burden estimates for the
application, supporting documentation,
and submissions when projects are
placed in service. The IRS solicited
feedback on the collection requirements
for the application, supporting
documentation, and attestations.
Although no public comments received
by the IRS were directed specifically at
the PRA or on the collection
requirements, several commenters
generally expressed concerns about the
burdens associated with the
documentation requirements contained
in the Proposed Rule. As described in
the relevant portions of this preamble,
the Treasury Department and IRS
believe that the documentation
requirements are necessary to
administer the Program.
5. Steps Taken To Minimize Impacts on
Small Entities and Alternatives
Considered
The Treasury Department and the IRS
considered alternatives to the final
regulations. For example, the Treasury
Department and the IRS considered
exclusively using a lottery system for all
over-subscribed categories, rather than
creating reservations for facilities
meeting ASC. Although a lottery system
may ultimately need to be used for an
oversubscribed category, the Treasury
Department and the IRS decided that it
was important to propose reserving
Capacity Limitation for facilities that
meet certain ASC that further the policy
goals of the Program.
Additionally, when considering how
to define ‘‘in connection with,’’ the
Treasury Department and the IRS were
mindful that the statute requires the
energy storage technology to be installed

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55539

in connection with a qualifying solar or
wind facility to be eligible for an
increase in the energy percentage used
to calculate the amount of the section 48
credit. Different alternatives were
considered on how to address this
definition. For example, the Treasury
Department and the IRS considered but
ultimately decided not to incorporate
the safe harbor (deeming the energy
storage technology to be charged at least
50 percent by the facility if the power
rating of the energy storage technology
is less than 2 times the capacity rating
of the connected wind or solar) as part
of the general rule to define ‘‘in
connection with.’’ The final regulations
instead generally require the energy
storage technology to have a sufficient
nexus to the other eligible property
because it is part of the single project
and is significantly charged by the
eligible property. The Treasury
Department and the IRS maintain the
safe harbor in the final regulations, but
only as a means of deeming the energy
storage technology charging requirement
to be satisfied.
Another example where different
alternatives were considered was with
respect to application materials. Section
48(e)(4)(A) directs the Secretary to
provide procedures to allow for an
efficient allocation process, and section
48(e)(4)(E)(i) allows an applicant up to
four years after receiving a Capacity
Limitation allocation to place eligible
property into service. Alternatives were
considered on how best to balance these
statutory requirements, considering
practical issues for taxpayers and
residents as well as the traditional
structure and arrangement of these solar
or wind transactions, including
considerations on the type of facility
(BTM or FTM) and the capacity of the
facility. Among other things, the
Treasury Department and the IRS
considered whether an application for
an interconnection agreement or an
executed interconnection agreement
should be required as part of the
application materials. The final
regulations are based on the view that
the executed interconnection agreement,
if applicable, is essential documentation
to demonstrate sufficient project
maturity.
Additionally, the Treasury
Department and the IRS considered a
variety of bill credit discounts for
Category 4 qualified low-income benefit
project facilities. The bill credit
discounts considered included 10
percent, 15 percent, or 20 percent.
Alternatively, the Treasury Department
and the IRS considered the option of a
range of discounts from 10 percent to 20
percent from which applicants could

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choose the discount rate to provide lowincome customers. However, to ensure
that low-income customers are receiving
meaningful financial benefits, the
Treasury Department and the IRS
decided to propose a 20 percent
discount.
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 any Federal mandate that may
result in expenditures in any one year
by a State, local, or Tribal government,
in the aggregate, or by the private sector,
of $100 million in 1995 dollars, updated
annually for inflation. This final rule
does not include any Federal mandate
that may result in expenditures by State,
local, or Tribal governments, or by the
private sector in excess of that
threshold.

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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 regulations do
not have federalism implications and do
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 regulations do not have
substantial direct effects on one or more
federally recognized Indian tribes and
do not impose substantial direct
compliance costs on Indian tribal
governments within the meaning of the
Executive Order.
Nevertheless, on June 26, 2023, the
Treasury Department and the IRS held
a consultation with Tribal leaders
requesting assistance in addressing

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questions related to Low-Income
Communities Bonus Credit Program,
which informed the development of
these regulations.
VII. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs
designated this rule as a major rule as
defined by 5 U.S.C. 804(2).
Statement of Availability of IRS
Documents
Guidance cited in this preamble is
published in the Internal Revenue
Bulletin 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
regulations 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.
Amendments to the Regulations
Accordingly, the Treasury Department
and IRS 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 § 1.48(e)–1 in numerical order to
read in part as follows:
Authority: 26 U.S.C 7805, unless
otherwise noted. 26 U.S.C. 7805, unless
otherwise noted. 26 U.S.C. 7805. 26 U.S.C.
401(m)(9) and 26 U.S.C. 7805.

*

*

*

*

*

Section 1.48(e)–1 issued under 26 U.S.C. 48

*

*

*

*

*

■ Par. 2. Section 1.48(e)–1 is added:

The additions read as follows:
§ 1.48(e)–0

Table of Contents

This section lists the captions
contained in § 1.48(e)–1.
§ 1.48(e)–1 Low-Income Communities
Bonus Credit Program.

(a) In general.
(b) Qualified solar or wind facility
defined.
(1) In general.
(2) Facility categories.
(i) Category 1 Facility.
(ii) Category 2 Facility.
(iii) Category 3 Facility.

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(iv) Category 4 Facility.
(3) Single project treated as single
facility.
(c) Eligible property.
(1) In general.
(2) Energy storage technology installed
in connection with qualified solar
or wind facility.
(3) Safe harbor for requirement of
paragraph (c)(2)(ii) of this section.
(d) Location.
(1) In general.
(2) Nameplate Capacity Test.
(i) Nameplate capacity for purpose of
Nameplate Capacity Test.
(ii) Exclusion of energy storage
technology.
(e) Financial Benefits for a Category 3
Facility.
(1) In general.
(2) Threshold Requirement.
(3) Financial value of the energy
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) Calculation on annual basis.
(iv) Examples.
(A) Example 1.
(B) Example 2.
(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.
(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) Partnership.
(iii) Tribal enterprise.
(iv) Alaska native corporation.
(v) Renewable energy cooperative.
(vi) Qualified renewable energy
company.
(vii) Qualified Tax-Exempt Entity.
(3) Geographic criteria.

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(i) In general.
(A) Persistent Poverty County.
(B) Certain census tracts.
(ii) Applicable terms for certain census
tracts.
(A) Energy burden or cost.
(B) Exposure.
(C) Energy cost.
(D) PM2.5.
(E) 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) Eligible 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 recission.
(m) Disqualification.
(n) Recapture of section 48(e) increase to
the section 48(a) credit.
(1) In general.
(2) Exception to application of
recapture.
(3) Recapture events.
(4) Section 50(a) Recapture.
(o) Applicability date.

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§ 1.48(e)–1 Low-Income Communities
Bonus Credit Program.

(a) In general. For purposes of section
48 of the Internal Revenue Code (Code),
the energy percentage used to calculate
the amount of the energy investment
credit determined under section 48(a)
(section 48 credit) is increased under
section 48(e)(1) in the case of eligible
property (as defined in paragraph (c) of
this section) that is part of any qualified
solar or wind facility (as defined in
paragraph (b) of this section) placed in
service in connection with low-income
communities with respect to which an
allocation of the environmental justice
solar and wind capacity limitation
(Capacity Limitation) is made under the
Low-Income Communities Bonus Credit
Program (Program) established under
section 48(e)(4) of the Code on February
13, 2023. See Notice 2023–17, 2023–10
I.R.B. 505. In this section, the terms
applicant and taxpayer are used

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interchangeably as the context may
require.
(b) Qualified solar or wind facility
defined—(1) In general. A qualified
solar or wind facility means any facility
that—
(i) Generates electricity solely from a
wind facility (described in section
45(d)(1) of the Code) for which an
election to treat the facility as energy
property was made under section
48(a)(5) (wind facility), solar energy
property (described in section
48(a)(3)(A)(i)) (solar energy property), or
small wind energy property (described
in section 48(a)(3)(A)(vi)) (small wind
energy property);
(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
48(e)(2)(A)(iii) and paragraph (b)(2) of
this section.
(2) Facility categories—(i) Category 1
Facility. A facility is a Category 1
Facility if it is located in a low-income
community. The term low-income
community is generally defined under
section 45D(e)(1) of the Code as any
population census tract if the poverty
rate for such tract is at least 20 percent
based on the 2011–2015 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 2011–2015 ACS lowincome community data for the NMTC
program or the updated ACS lowincome 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

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must be used to determine the poverty
rate for any population census tract.
Populations census tracts that satisfy the
definition of low-income community at
the time of application are considered to
continue to meet the definition of lowincome 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
qualified 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 48(e)(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 facility
is considered installed on a Qualified
Residential Property even if not on the
building 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) Single project treated as single
facility. Multiple solar or wind facilities
or energy properties that are operated as
part of a single project are aggregated
and treated as a single facility or energy
property for purposes of determining if
it is a qualified solar or wind facility
under paragraph (b)(1) of this section.
Any facility or energy property treated
as part of a single facility under this
paragraph (b)(3) will also be treated as
a single facility for all other purposes

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under this section and all other
guidance applicable to section 48(e)
published in the Internal Revenue
Bulletin. See § 601.601 of this chapter.
Whether multiple facilities or energy
properties are operated as part of a
single project will depend on the
relevant facts and circumstances and a
single factor may not be dispositive.
Factors indicating that multiple
facilities or energy properties are
operated as part of a single project may
include—
(i) The facilities or energy properties
are owned by a single legal entity;
(ii) The facilities or energy properties
are constructed on contiguous pieces of
land;
(iii) The facilities or energy properties
are described in a common power
purchase agreement (PPA) or more than
one common power purchase
agreements (PPAs);
(iv) The facilities or energy properties
have a common interconnection;
(v) The facilities or energy properties
share a common substation;
(vi) The facilities or energy properties
are described in one or more common
environmental or other regulatory
permits;
(vii) The facilities or energy properties
were constructed pursuant to a single
master construction contract; or
(viii) The facilities or construction of
the energy properties was financed
pursuant to the same loan agreement.
(c) Eligible property—(1) In general.
Eligible property is energy property that
is part of a qualified solar or wind
facility described in paragraph (b) of
this section. Eligible property also
includes energy storage technology (as
described in section 48(a)(3)(A)(ix))
installed in connection with such
qualifying energy property.
(2) Energy storage technology
installed in connection with qualified
solar or wind facility. Energy storage
technology is installed in connection
with other eligible property if the
requirements of both paragraph (c)(2)(i)
of this section and paragraph (c)(2)(ii) of
this section (including by reason of
paragraph (c)(3) of this section) are
satisfied.
(i) The requirements of this paragraph
(c)(2)(i) are satisfied if the energy storage
technology and other eligible property
are considered part of a single qualified
solar or wind facility based on the
energy storage technology and other
eligible property being:
(A) Owned by a single legal entity,
(B) Located on the same or contiguous
pieces of land,
(C) Having a common interconnection
point, and

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(D) Described in one or more common
environmental or other regulatory
permits.
(ii) The requirement of this paragraph
(c)(2)(ii) is satisfied if the energy storage
technology is charged no less than an
annual average of 50 percent by the
other eligible property.
(3) Safe harbor for requirement of
paragraph (c)(2)(ii) of this section. For
purposes of paragraph (c)(2)(ii) of this
section, energy storage technology is
deemed to be charged at least 50 percent
by the facility if the power rating of the
energy storage technology (in kW) is less
than 2 times the capacity rating of the
connected wind facility (in kW AC) or
solar facility (in kW direct current (DC)).
(d) Location—(1) In general. A
qualified solar or wind facility is treated
as located in a low-income community
or located on Indian land under section
48(e)(2)(A)(iii)(I) if the qualified solar or
wind facility satisfies the Nameplate
Capacity Test of paragraph (d)(2) of this
section. Similarly, a qualified solar or
wind 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.
(2) Nameplate Capacity Test. A
qualified solar or wind 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 facility’s nameplate capacity
is in a qualifying area. The percentage
of a facility’s nameplate capacity (as
defined in paragraph (d)(2)(i) of this
section) that is in a qualifying area is
determined by dividing the nameplate
capacity of the facility’s energygenerating units that are located in the
qualifying area by the total nameplate
capacity of all the energy-generating
units of the facility.
(i) Nameplate capacity for purpose of
Nameplate Capacity Test. Nameplate
capacity for an electricity generating
unit means the maximum electricity
generating output that the unit 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 provided in 40 CFR
96.202. Where applicable, the
International Standard Organization
conditions are used to measure the
maximum electricity generating output
or usable energy capacity. For purposes
of assessing the Nameplate Capacity
Test, qualified solar facilities use the
nameplate capacity in DC and qualified
wind facilities use the nameplate
capacity in AC.
(ii) Exclusion of energy storage
technology. The nameplate capacity of

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any energy storage technology installed
in connection with the qualified solar or
wind facility is disregarded in applying
the Nameplate Capacity Test.
(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. A
Qualified Residential Property could
either be a multifamily rental property
or single-family rental property. The
same rules for financial benefits for
Category 3 Facilities apply to both types
of Qualified Residential Property.
(2) Threshold requirement. At least 50
percent of the financial value of the
energy produced by the facility (as
defined in paragraph (e)(3) of this
section) must be equitably allocated to
the Qualified Residential Property’s
occupants that are designated as lowincome occupants under the covered
housing program or other affordable
housing program.
(3) Financial value of the energy
produced by the facility. For purposes of
this paragraph (e), the financial value of
the energy produced by the facility is
defined as the greater of:
(i) Twenty-five percent of the gross
financial value (as defined in paragraph
(e)(4) of this section) of the annual
energy produced by the energy property,
or
(ii) The net financial value (as defined
in paragraph (e)(5) of this section) of the
annual energy produced by the energy
property.
(4) Gross financial value. For
purposes of this paragraph (e), gross
financial value of the annual energy
produced by the facility is calculated as
the sum of:
(i) The total self-consumed kilowatthours produced by the qualified solar or
wind facility multiplied by the
applicable building’s metered
volumetric price of electricity,
(ii) The total exported kilowatt-hours
produced by the qualified solar or wind
facility multiplied by the applicable
building’s volumetric export
compensation rate for solar or wind
kilowatt-hours, and
(iii) The sale of any attributes
associated with the facility’s production
(including, for example, any Federal,
State, or Tribal renewable energy tax
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

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Federal Register / Vol. 88, No. 156 / Tuesday, August 15, 2023 / Rules and Regulations
Qualified Residential Property are
commonly owned, net financial value is
defined as the gross financial value of
the annual energy produced minus the
annual average (or levelized) cost of the
qualified solar or wind 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 PPA or
other contract for energy services with
the Qualified Residential Property
owner and/or building occupants, net
financial value is defined as the gross
financial value of the annual energy
produced minus any payments made by
the building owner and/or building
occupants to the facility owner for
energy 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 benefits depending on whether
or not financial value is distributed to
building occupants via utility bill
savings or through different means.
(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 equitably allocated if at least 50
percent of the financial value of the
energy 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
48(e)(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 nonparticipating occupants must be instead
distributed to all participating
occupants. No less than 50 percent of
the Qualified Residential Property’s
occupants that are designated as lowincome must participate and receive
utility bill savings for the facility to
utilize this method of benefit
distribution. In the case of a solar
facility, applicants must follow the

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Department of Housing and Urban
Development (HUD) guidance on the
Treatment of Community Solar Credits
on Tenant Utility Bills (July 2022),
located at https://www.hud.gov/sites/
dfiles/Housing/documents/MF_Memo_
Community_Solar_Credits_signed.pdf,
Community Solar Credits in PIH
Programs (August 2022), located at
https://www.hud.gov/sites/dfiles/
documents/Solar%20Credits_PH_
HCV.pdf, or future HUD guidance, or
other guidance or notices from the
Federal agency that oversees the
applicable housing program identified
in section 48(e)(2)(B) 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
a wind 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 equitably allocated if at least 50
percent of the financial value of the
energy produced by the facility is
distributed to occupants using one of
the methods described in HUD guidance
on the Treatment of Solar Benefits in
Master-metered Building (May 2023)
located at https://www.hud.gov/sites/
dfiles/Housing/documents/MF_Memo_
re_Community_Solar_Credits_in_MM_
Buildings.pdf, or future HUD guidance,
or other guidance or notices from the
Federal agency that oversees the
applicable housing program identified
in section 48(e)(2)(B). In the case of a
solar facility, applicants must comply
with HUD guidance, or future HUD
guidance, for how residents of mastermetered HUD-assisted housing can
benefit from owners’ sharing of financial
benefits accrued from an investment in
solar energy 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
a wind 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,

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(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, indication of which entity 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.
(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 48(e)(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 20 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 renewable
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 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 where the
Qualifying Household has no or only a
nominal cost of participation, 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

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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.
(iii) Calculation on annual basis. In
all instances, the bill credit discount
rate is calculated on an annual basis.
(iv) 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 that (1) requires the facility
owner to cause a portion of the
electricity generated (or its value) to be
assigned to the utility bill of the
Qualifying Household on a monthly
basis, and (2) requires the Qualifying
Household to pay the facility owner the
equivalent of 80 percent of the monetary
value of the assigned generation (that is,
80 percent of the value of bill credits
provided to the Qualifying Household’s
utility bill) on a monthly basis. 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 Qualifying Household pays $160,
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, cause $220 in
bill credits to be provided to the
Qualifying Household’s bill and the
household pays $176. In each year of
facility operation described within this
example, a bill credit discount rate of 20
percent is maintained.
(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 ‘‘netcrediting’’ mechanism, or other reason,
the Qualifying Household does not
make a direct payment to the facility
owner. Assume that the total value of
the electricity produced by the facility
and assigned to the household, as
measured by the utility, ISO, or other
off-taker procuring the electricity, is
$500 in the first year and $600 in the
second year. Assume further that the
Qualifying Household receives a ‘‘net’’
bill credit of $100 in the first year and
$120 in the second year. In this case, the
bill credit discount rate is 20 percent in

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each year ($500 × .2 = $100) and ($600
× .2 = $120), 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 (see
§ 601.601 of this chapter), submit
documentation upon placing the
qualified solar or wind facility in
service that identifies each Qualifying
Household, the output from the facility
allocated to each Qualifying Household
in kW, and the method of income
verification utilized for each Qualifying
Household. 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
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
Department of Agriculture (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 can also
provide verification that a household is

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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.
(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.
Under section 48(e)(4)(C), the total
annual capacity limitation is 1.8
gigawatts of DC capacity for the
calendar year 2023 and 2024 Program.
The annual Capacity Limitation for each
Program year is divided across the four
facility categories described in section
48(e)(2)(A)(iii) and paragraph (b)(2) of
this section as provided in guidance
published in the Internal Revenue
Bulletin. See § 601.601 of this chapter.
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 later be reallocated 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 subreservation is oversubscribed if it
receives applications in excess of
Capacity Limitation reserved for the
facility category or sub-reservation.
(h) Reservations of Capacity
Limitation allocation for facilities that
meet certain additional selection
criteria—(1) In general. At least 50
percent of the total Capacity Limitation
in each facility category described in
paragraph (b) of this section will be
reserved for qualified facilities meeting

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the additional selection criteria
described in paragraph (h)(2) of this
section (relating to ownership criteria)
and paragraph (h)(3) of this section
(relating to geographic criteria) as
provided in guidance published in the
Internal Revenue Bulletin. See § 601.601
of this chapter. Revenue Procedure
2023–27, 2023–35 I.R.B. provides the
specific amounts reserved for 2023 and
future guidance published in the
Internal Revenue Bulletin will provide
the amounts reserved for future years.
The procedure for utilizing these
additional selection criteria is provided
in guidance published in the Internal
Revenue Bulletin. After the reservation
of Capacity Limitation for qualified
facilities meeting the additional
selection criteria described in
paragraphs (h)(2) and (3) of this section
is established in guidance published in
the Internal Revenue Bulletin, it may
later be re-allocated across facility
categories and sub-reservations in the
event one category or sub-reservation
within a category is oversubscribed and
another has excess capacity.
(2) Ownership criteria—(i) In general.
The ownership criteria is based on
characteristics of the applicant that
owns the qualified solar or wind
facility. A qualified solar or wind
facility will meet the ownership criteria
if it is owned by one of the following:
(A) A Tribal enterprise (as defined in
paragraph (h)(2)(iii) of this section),
(B) An Alaska native corporation (as
defined in paragraph (h)(2)(iv) of this
section),
(C) A renewable energy cooperative
(as defined in paragraph (h)(2)(v) of this
section),
(D) A qualified renewable energy
company meeting certain characteristics
(as defined in paragraph (h)(2)(vi) of this
section), or
(E) A qualified tax-exempt entity (as
defined in paragraph (h)(2)(vii) of this
section).
(ii) Indirect ownership—(A)
Disregarded entities. If an applicant
wholly owns an entity that is the owner
of a qualified solar or wind facility, and
the entity is disregarded as separate
from its owner for Federal income tax
purposes (disregarded entity), the
applicant, and not the disregarded
entity, is treated as the owner of the
qualified solar or wind facility for
purposes of the ownership criteria.
(B) Partnership; ownership of a
partnership for purposes of ownership
criteria. If an applicant is an entity
treated as a partnership for Federal
income tax purposes, and an entity
described in paragraphs (h)(2)(i)(A)
through (E) of this section owns at least
a one percent interest (either directly or

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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 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 qualified solar or wind 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
paragraphs (h)(2)(i)(A) through (E) of
this section, the transfer of the facility
to the partnership is not a
disqualification event for purposes of
paragraph (m)(5) of this section, so long
as the requirements of paragraph (m)(5)
of this section 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.
(iii) Tribal enterprise. A Tribal
enterprise for purposes of the ownership
criteria is an entity that is:
(A) Owned at least 51 percent directly
by an Indian Tribal government (as
defined in section 30D(g)(9) of the
Internal Revenue Code (Code)), or
owned at least 51 percent indirectly
through a corporation that is wholly
owned by the Indian Tribal government
and is created under either 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
(B) Subject to Tribal government
rules, regulations, and/or codes that
regulate the operations of the entity.
(iv) 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).
(v) Renewable energy cooperative. A
renewable energy cooperative for
purposes of the ownership criteria is an
entity that develops qualified solar and/
or wind facilities and is either:
(A) 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

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patronage in the qualified facility is by
cooperative members who are lowincome households (as defined in
section 48(e)(2)(C)), or
(B) A worker cooperative controlled
by its worker-members with each
member having an equal voting right.
(vi) Qualified renewable energy
company. A qualified renewable energy
company for purposes of the ownership
criteria is an entity that serves lowincome communities and provides
pathways for the adoption of clean
energy by low-income households. In
addition to its general business purpose,
a qualified renewable energy company
must satisfy the ownership
requirements described in one of
paragraphs (h)(2)(vi)(A) through (F) of
this section and each of the
requirements in paragraphs (h)(2)(vi)(G),
(H), and (I) of this section.
(A) At least 51 percent of the entity’s
equity interests are owned and
controlled by one or more individuals.
(B) At least 51 percent of the entity’s
equity interests are owned and
controlled by a Community
Development Corporation (as defined in
13 CFR 124.3).
(C) At least 51 percent of the entity’s
equity interests are owned and
controlled by an agricultural or
horticultural cooperative (as defined in
section 199A(g)(4)(A)).
(D) At least 51 percent of the entity’s
equity interests are owned and
controlled by an Indian Tribal
government (as defined in section
30D(g)(9)).
(E) At least 51 percent of the entity’s
equity interests are owned and
controlled by an Alaska Native
corporation (as defined in section 3 of
the Alaska Native Claims Settlement
Act, 43 U.S.C. 1602(m)).
(F) At least 51 percent of the entity’s
equity interests are owned and
controlled by a Native Hawaiian
organization (as defined in 13 CFR
124.3).
(G) Has less than 10 full-time
equivalent employees (as determined
under section 4980H(c)(2)(E) and (c)(4))
and less than $20 million in annual
gross receipts in the previous calendar
year; this must include the employees or
receipts of all affiliates when
determining the size of a business.
Affiliation with another business is
based on the power to control, whether
exercised or not. The power to control
exists when an external party has 50
percent or more ownership. It may also
exist with considerably less than 50
percent ownership by contractual
arrangement, or when one or more
parties own a large share compared to
other parties.

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(H) First installed and/or operated a
qualified solar or wind facility as
defined in section 48(e)(2)(A) two or
more years prior to the date of
application; or
(I) Has provided solar services as a
contractor or subcontractor to qualified
solar or wind facilities as defined in
section 48(e)(2)(A) with at least 100 kW
of cumulative nameplate capacity
located in one or more low-income
communities as defined in section
48(e)(2)(A)(iii)(I).
(vii) Qualified tax-exempt entity. A
qualified tax-exempt entity for purposes
of the ownership criteria is:
(A) An organization exempt from the
tax imposed by subtitle A by reason of
being described in section 501(c)(3) or
section 501(d);
(B) Any State, the District of
Columbia, or political subdivision
thereof, or any agency or
instrumentality of any of the foregoing;
(C) 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
(D) 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.
(3) Geographic criteria—(i) In general.
Geographic criteria does not apply to
Category 2 Facilities. To meet the
geographic criteria, a facility must be
located in a county or census tract that
is described in paragraph (h)(3)(i)(A) or
(B) of this section. 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, unless
the location of the facility changes.
(A) Persistent Poverty County. A
Persistent Poverty County (PPC for
which information can be found at
https://www.ers.usda.gov/dataproducts/poverty-area-measures/),
which is generally defined as any
county where 20 percent or more of
residents have experienced high rates of
poverty over the past 30 years. For the
purposes of the Program, the PPC
measure is that adopted by the USDA to
make this determination. The most
recent measure, which would apply for
the 2023 Program year, incorporates
poverty estimates from the 1980, 1990,
and 2000 censuses, and 2007–11 ACS 5year average. If updated data is released
by USDA, a taxpayer will have a 1-year
period following the date of the release
of the updated data to be eligible under
the previous data. After the 1-year
transition period, the updated data must
be used to determine eligibility.

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Applicants who satisfy the definition of
PPC community at the time of
application are considered to continue
to meet the definition of PPC for the
duration of the recapture period
described in paragraph (n)(1) of this
section, unless the location of the
facility changes.
(B) Certain census tracts. A census
tract that is designated in the Climate
and Economic Justice Screening Tool
(CEJST), which can be found at https://
screeningtool.geoplatform.gov/en/#3/
33.47/-97.5, as disadvantaged based on
whether the tract is described in
paragraph (h)(3)(ii)(A) or (B) of this
section. The CEJST website provides
further detail on the terms described in
paragraphs (h)(3)(ii)(C) through (E) of
this section, which are used in
identifying census tracts described in
paragraphs (h)(3)(ii)(A) and (B) of this
section. See CEJST, Methodology & data,
https://screeningtool.geoplatform.gov/
en/methodology.
(ii) Applicable terms for certain
census tracts. The following terms are
applicable to this paragraph (h)(3):
(A) Energy burden or cost. The census
tract is greater than or equal to the 90th
percentile for energy burden (or energy
cost) and is greater than or equal to the
65th percentile for low income.
(B) Exposure. The census tract is
greater than or equal to the 90th
percentile for PM2.5 exposure and is
greater than or equal to the 65th
percentile for low income.
(C) Energy cost. Energy cost is defined
as average household annual energy cost
in dollars divided by the average
household income.
(D) PM2.5. PM2.5 is defined as fine
inhalable particles with 2.5 or smaller
micrometer diameters. The percentile is
the weight of the particles per cubic
meter.
(E) Low-income. Low income is
defined as the percent of a census tract’s
population in households where
household income is at or below 200
percent of the Federal poverty level, not
including students enrolled in higher
education.
(i) Sub-reservations of allocation for
Category 1 Facilities—(1) In general.
Capacity Limitation reserved for
Category 1 Facilities will be subdivided
each Program year for facilities seeking
a Category 1 allocation with Capacity
Limitation reserved specifically for
eligible residential behind the meter
(BTM) facilities, including rooftop solar.
The remaining Capacity Limitation is
available for applicants with front of the
meter (FTM) facilities as well as nonresidential BTM facilities. The specific
sub-reservation for eligible residential
BTM facilities in Category 1 is provided

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in guidance published in the Internal
Revenue Bulletin and is established
based on factors such as promoting
efficient allocation of Capacity
Limitation and allowing like-projects to
compete for an allocation. After the subreservation is established in guidance
published in the Internal Revenue
Bulletin, it may later be re-allocated in
the event it has excess capacity.
(2) Definitions—(i) Behind the meter
(BTM) facility. For purposes of the
Program, a qualified wind or solar
facility is BTM if:
(A) It is connected with an electrical
connection between the facility and the
panelboard or sub-panelboard of the site
where the facility is located,
(B) 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
(C) 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.
(ii) Eligible residential BTM facility.
For purposes of paragraph (i)(1) of this
section, an eligible residential BTM
facility is defined as a single-family or
multi-family residential qualified solar
or wind facility that does not meet the
requirements for a Category 3 Facility
and is BTM. A qualified solar or wind
facility is residential if it is uses solar or
wind energy to generate electricity for
use in a dwelling unit that is used as a
residence.
(iii) Eligible FTM facility. For
purposes of the Program, a qualified
solar or wind facility is 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 the
purposes of Category 4 Facilities, a
qualified solar or wind 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.
(j) Process of application evaluation—
(1) In general. Applications for a
Capacity Limitation allocation will be
evaluated according to the procedures
specified in guidance published in the
Internal Revenue Bulletin. See § 601.601
of this chapter. If a facility category is
oversubscribed, a lottery system may be

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used to allocate Capacity Limitation to
similarly situated applicants.
(2) Information required as part of
application. Applicants are required to
submit with each application for a
Capacity Limitation allocation
information, documentation, and
attestations to demonstrate eligibility for
an allocation and project viability as
specified in guidance published in the
Internal Revenue Bulletin. See § 601.601
of this chapter.
(3) No administrative appeal of
capacity limitation allocation decisions.
An applicant may not administratively
appeal decisions regarding Capacity
Limitation allocations.
(k) Placed in service—(1) Requirement
to report date placed in service. For any
facility that received an allocation of
Capacity Limitation the owner of the
facility must report to DOE the date the
eligible property was placed in service.
This report is done through the same
portal by which the original application
for allocation was submitted.
(2) Requirement 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 energy percentage under
section 48(e)(1) as specified in guidance
published in the Internal Revenue
Bulletin. See § 601.601 of this chapter.
(3) DOE confirmation. 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 energy percentage. DOE
then provides a recommendation to the
IRS regarding whether the facility
continues to meet the eligibility
requirements for the facility to retain its
allocation or if the facility should be
disqualified (as provided in paragraph
(m) of this section). 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 DOE of its
decision. Each applicant must receive
confirmation from the IRS that 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, if eligible, making a transfer
election under section 6418 of the Code,
or, if eligible, making an elective

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payment election under section 6417 of
the Code.
(4) Definition of placed in service. For
purposes of this section, 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.
(l) Facilities placed in service prior to
an allocation award—(1) In general.
Qualified solar or wind facilities must
be placed in service after being awarded
an allocation of Capacity Limitation.
(2) Rejection or rescission. An
application for a qualified solar or wind
facility that is placed in service prior to
submission of the application will be
rejected. If a facility is placed in service
after the application is submitted, but
prior to the allocation of Capacity
Limitation, and the facility is awarded
an allocation, the allocation will be
rescinded.
(m) Disqualification. A facility will be
disqualified and lose its allocation if
prior to or upon the facility being placed
in service an occurrence described in
one of paragraphs (m)(1) through (5) of
this section takes place.
(1) The location where the facility
will be placed in service changes.
(2) The net output of the facility
increases such that it exceeds the less
than 5 MW AC output limitation
provided in section 48(e)(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 (AC for a wind facility; DC for
a solar facility).
(3) The facility cannot satisfy the
financial benefits requirements under
section 48(e)(2)(B)(ii) and paragraph (e)
of this section as planned, if applicable,
or cannot satisfy the financial benefits
requirements under section 48(e)(2)(C)
or paragraph (f) of this section 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.
(5) 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,

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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 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.
(n) Recapture of section 48(e) Increase
to the section 48(a) credit—(1) In
general. Section 48(e)(5) provides for
recapturing the benefit of any increase
in the credit allowed under section 48(a)
by reason of section 48(e) 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)). Section 48(e) provides
that the period and percentage of such
recapture must be determined under
rules similar to the rules of section
50(a). Therefore, if, at any time during
the five year recapture period beginning
on the date that a qualified solar or
wind facility property under section
48(e) is placed in service, there is a
recapture event under paragraph (n)(3)
of this section 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 48
credit. The recapture percentage is
determined according to the table
provided in section 50(a)(1)(B).
(2) Exception to application of
recapture. 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 increase in the credit allowed
under section 48(a), the eligibility of
such property for such increase
pursuant to section 48(e) is restored.
Such restoration of an increase pursuant
to section 48(e) is not available more
than once with respect to any facility.
(3) Recapture events. Any of the
following circumstances result in a
recapture event if the property ceases to
be eligible for the increased credit under
section 48(e):
(i) Property described in section
48(e)(2)(A)(iii)(II) fails to provide
financial benefits.
(ii) Property described under section
48(e)(2)(B) ceases to allocate the

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Federal Register / Vol. 88, No. 156 / Tuesday, August 15, 2023 / Rules and Regulations

ddrumheller on DSK120RN23PROD with RULES2

financial benefits equitably among the
occupants of the dwelling units, such as
not allocating to residents the required
net energy savings of the electricity, as
required by paragraph (e) of this section.
(iii) Property described under section
48(e)(2)(C) ceases to provide at least 50
percent of the financial benefits of the
electricity produced to qualifying
households as described under section
48(e)(2)(C)(i) or (ii), or fails to provide
those households the required
minimum 20 percent bill credit
discount rate, as required by paragraph
(f) of this section.
(iv) For property described under
section 48(e)(2)(B), the residential rental
building the facility is a part of ceases

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to participate in a covered housing
program or any other affordable housing
program described in section
48(e)(2)(B)(i), as applicable.
(v) A facility increases its output such
that the facility’s output is 5 MW AC or
greater, unless the applicant can prove
that the output increase is not
attributable to the original facility but
rather is output associated with a new
facility under the 80/20 Rule (the cost
of the new property plus the value of
the used property).
(4) Section 50(a) Recapture. Any
event that results in recapture under
section 50(a) will also result in
recapture of the benefit of the increase
in the section 48 credit by reason of

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section 48(e). The exception to the
application of recapture provided in
paragraph (n)(2) of this section does not
apply in the case of a recapture event
under section 50(a).
(o) Applicability date. The rules of
this section will apply to taxable years
ending on or after October 16, 2023.
Douglas W. O’Donnell,
Deputy Commissioner for Services and
Enforcement.
Approved: August 2, 2023.
Lily L. Batchelder,
Assistant Secretary (Tax Policy).
[FR Doc. 2023–17078 Filed 8–10–23; 8:45 am]
BILLING CODE 4830–01–P

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