Treasury Department and IRS Release Initial Guidance on the New Low-Income Communities Bonus Credit Program

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The low-income communities bonus credit (the LIC Bonus), which was introduced by the Inflation Reduction Act of 2022 (the IRA), provides an enhanced tax credit for renewable energy projects located in designated low-income communities. The LIC Bonus is available for wind and solar projects that qualify for the investment tax credit (ITC) under Section 48 of the Internal Revenue Code of 1986, as amended (the Code). Notably, eligibility for the LIC Bonus requires an allocation of a portion of the annual “environmental justice solar and wind capacity limitation” (Capacity Limitation) prescribed by newly enacted Section 48(e) of the Code, as further described below, to the applicable project.