Energy Community Map. Courtesy Department of Energy.
Energy Communities (EC) are special census tracts designated by the Department of Treasury as a result of the 2022 Inflation Reduction Act (IRA). All renewable energy projects sited in an EC can obtain a 10% additional tax credit or a form of Production Tax Credit on the CAPEX or output of the project. Under the IRA, tax credits are transferrable.
At Open Doors Management, we acquire sites in Energy Communities that qualify from the retirement of a coal mine or plant. We do not acquire sites in Energy Communities that qualify under the fossil-fuel employment criteria. Why? Tracts in one year are an EC and then in the next year may be disqualified. We not plan around this criteria. The other two, coal mine and plant retirements are deemed immutable criteria for an Energy Community designation. See this Guidance from the US Treasury:
A7. Yes. An MSA or non-MSA that has had 0.17 percent or greater direct employment at any time after December 31, 2009, or 25 percent or greater local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas may qualify as an energy community if its unemployment rate for the previous year is at or above the national average. Because an MSA’s or non-MSA’s status as an energy community depends on its unemployment rate for the previous year, an MSA or non-MSA that qualifies as an energy community in one period might not qualify as an energy community in a later period if its unemployment rate for the previous year falls below the national average. The list of MSAs and non-MSAs that qualify as an energy community for the period beginning on January 1, 2023, may be found in Appendix 2 to Notice 2023-47.
A8. The MSAs and non-MSAs listed in Appendix B to Notice 2023-29 have met the 0.17% or greater direct fossil fuel employment requirement in one or more years after 2009. MSAs and non-MSAs that meet this criterion will remain on this list. New MSAs and non-MSAs that meet this criterion in later years will be added to this list, for example, see Appendix 1 to Notice 2023-47. To qualify as an energy community, the MSAs and non-MSAs listed in Appendix B to Notice 2023-29 and Appendix 1 to Notice 2023-47 must also have an unemployment rate that is at or above the national average unemployment rate for the previous year (see Can an MSA or non-MSA that was qualified as an energy community lose its qualified status?).
A9. MSAs and non-MSAs must meet two thresholds to qualify as energy communities starting on January 1, 2023. The MSAs and non-MSAs must have had:
- for at least one year after 2009, 0.17% or greater direct employment related to extraction, processing, transport, or storage of coal, oil, or natural gas (the fossil fuel employment (FFE) threshold), and
- an unemployment rate for 2022 that is equal to or greater than the national average unemployment rate for 2022.
These MSAs and non-MSAs that meet the 2022 unemployment rate requirement are energy communities as of January 1, 2023, and will maintain that status until the unemployment rates for 2023 become available and a new list of MSAs and non-MSAs that qualify as energy communities is provided. The guidance that determines the MSAs and non-MSAs that are energy communities based on 2023 unemployment rates will likely be released in May 2024.
New annual unemployment rates are released in approximately May of each year. Therefore, the listing of MSAs and non-MSAs that qualify as energy communities will be updated each year. Generally, an MSA’s or non-MSA’s energy community status in future years will last from May of the initial year through April of the following year.