2842 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 10025] 

RIN 1545–BR26 

Guidance on Clean Electricity LowIncome Communities Bonus Credit 

Amount Program 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations concerning the program to 

allocate clean electricity low-income 

communities bonus credit amounts 

established pursuant to the Inflation 

Reduction Act of 2022 for calendar 

years 2025 and succeeding years. 

Applicants investing in certain clean 

electricity generation facilities that 

produce electricity without combustion 

and gasification may apply for an 

allocation of capacity limitation to 

increase the amount of the clean 

electricity investment credit for the 

taxable year in which the facility is 

placed in service. This document 

provides definitions and requirements 

that are applicable for the program. The 

final regulations affect taxpayers seeking 

allocations of capacity limitation to 

claim an increased clean electricity 

investment credit. 

DATES: These regulations are effective 

on January 13, 2025. 

FOR FURTHER INFORMATION CONTACT: 

Concerning these final regulations, 

Whitney Brady, IRS Office of Associate 

Chief Counsel (Passthroughs & Special 

Industries) at (202) 317–6853 (not a tollfree number). 

SUPPLEMENTARY INFORMATION: 

Authority 

This document amends the Income 

Tax Regulations (26 CFR part 1) by 

adding regulations authorized to be 

issued by the Secretary of the Treasury 

or her delegate (Secretary) under 

sections 48E(i) and 7805(a) of the 

Internal Revenue Code (Code) regarding 

the application of section 48E(h) of the 

Code (final regulations). 

Section 48E(i) provides an express 

delegation of authority to the Secretary 

to provide guidance regarding the 

implementation of section 48E, stating, 

‘‘[n]ot later than January 1, 2025, the 

Secretary shall issue guidance regarding 

implementation of this section.’’ 

The final regulations are also issued 

under the express delegation of 

authority under section 7805(a), which 

provides that ‘‘the Secretary shall 

prescribe all needful rules and 

regulations for the enforcement of [the 

Code], including all rules and 

regulations as may be necessary by 

reason of any alteration of law in 

relation to internal revenue.’’ 

Background 

I. Overview 

Section 13702 of Public Law 117–169, 

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

commonly known as the Inflation 

Reduction Act of 2022 (IRA), added new 

section 48E(h) to the Code to authorize 

the Secretary to establish a program for 

calendar years 2025 and succeeding 

years to award allocations of capacity 

limitation (Capacity Limitation) that 

increase the amount of the new clean 

electricity investment credit determined 

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

with respect to eligible property that is 

part of an applicable facility. This 

document contains final definitions and 

rules relating to the allocation of 

Capacity Limitation for calendar year 

2025 and succeeding years, 

requirements related to claiming the 

increase under section 48E(h), and 

recapture provisions. 

II. Increase to Section 48E Credit 

The amount of section 48E credit for 

a taxable year generally is calculated by 

multiplying the qualified investment for 

such taxable year with respect to any 

qualified facility placed in service 

during that taxable year by the 

applicable percentage (as defined in 

section 48E(a)(2)). If an applicable 

facility is awarded an allocation of 

Capacity Limitation, section 48E(h) 

increases the amount of the section 48E 

credit with respect to the applicable 

facility by increasing the applicable 

percentage used to calculate the amount 

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

Increase). The term applicable facility is 

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

qualified facility that (i) is not described 

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

(relating to combustion and gasification 

facilities); (ii) has a maximum net 

output of less than five megawatts (MW) 

(as measured in alternating current 

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

one of four categories in section 

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

part III of this Background). 

III. Clean Electricity Low-Income 

Communities Bonus Credit Amount 

Program 

A. In General 

Section 48E(h)(4)(A) directs the 

Secretary to establish a program, not 

later than January 1, 2025, to allocate 

amounts of Capacity Limitation to 

applicable facilities. Section 48E(h)(4) 

also provides that in establishing a 

program the Secretary establish 

procedures for an efficient allocation 

process. Section 48E(h)(4) contemplates 

the collection and review of 

applications to consider facilities for an 

allocation. 

B. Facility Categories and Increase 

Amount 

Depending on the category of the 

facility, an allocation of Capacity 

Limitation may result in a section 

48E(h) Increase equal to either 10 

percentage points or 20 percentage 

points. Section 48E(h)(1)(A)(i) provides 

for a section 48E(h) Increase of 10 

percentage points for eligible property 

that is located in a low-income 

community, as defined in section 45D(e) 

of the Code (Category 1 facility), or on 

Indian land, as defined in section 

2601(2) of the Energy Policy Act of 1992 

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

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

section 48E(h) Increase of 20 percentage 

points for eligible property that is part 

of a qualified low-income residential 

building project (Category 3 facility) or 

a qualified low-income economic 

benefit project (Category 4 facility). 

C. Capacity Limitation 

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

annual Capacity Limitation that may be 

allocated is 1.8 gigawatts of direct 

current capacity for each of the calendar 

years during the period beginning on 

January 1, 2025, and ending on 

December 31 of the applicable year (as 

defined in section 45Y(d)(3)), and zero 

thereafter. Under section 48E(h)(4)(D)(i), 

if the annual Capacity Limitation for 

any calendar year exceeds the aggregate 

amount allocated for such year, the 

excess is carried forward to the next 

year. No amount of Capacity Limitation 

may be carried to any calendar year after 

the third calendar year following the 

applicable year (as defined in section 

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

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

Limitation for calendar year 2024 under 

section 48(e)(4)(D) of the Code exceeds 

the aggregate amount allocated for such 

year, the excess amount may be carried 

over and applied to the annual Capacity 

Limitation under section 48E(h) for 

calendar year 2025. The annual 

Capacity Limitation for calendar year 

2025 shall be increased by the amount 

of such excess. 

D. Allocation Amount 

Section 48E(h)(1)(B) provides that any 

section 48E(h) Increase for any taxable 

year with respect to all eligible property 


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Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2843 

that is part of a facility shall not exceed 

the amount which bears the same ratio 

to the amount of such increase as the 

amount of the Capacity Limitation 

allocated to such facility bears to the 

total megawatt nameplate capacity of 

such facility, as measured in direct 

current. Therefore, if an allocation is 

made to a particular applicable facility, 

the Capacity Limitation amount 

allocated is based on the nameplate 

capacity of that applicable facility. 

E. Claiming the Section 48E(h) Increase 

Taxpayers that own an applicable 

facility which received an allocation 

may claim the section 48E(h) Increase 

once the applicable facility has been 

placed in service, as part of its claim for 

the section 48E credit. For a taxpayer to 

claim the section 48E(h) Increase for any 

property which is part of the applicable 

facility, section 48E(h)(4)(E)(i) requires 

that the eligible property be placed in 

service within 4 years after the date of 

allocation. 

IV. Notice of Proposed Rulemaking 

On September 3, 2024, the 

Department of the Treasury (Treasury 

Department) and the IRS published in 

the Federal Register (89 FR 71193) a 

notice of proposed rulemaking (REG– 

108920–24, 2024–38 I.R.B. 607), 

corrected in 89 FR 77467 on September 

23, 2024, under section 48E(h) 

(Proposed Regulations) relating to the 

Program. Comments were requested in 

response to the Proposed Regulations by 

October 3, 2024, and a public hearing on 

the Proposed Regulations was held on 

October 17, 2024. On September 27, 

2024, the Treasury Department held a 

consultation with Tribal leaders on the 

Proposed Regulations. 

The areas of comment and the 

revisions to the Proposed Regulations 

are discussed in the following Summary 

of Comments and Explanation of 

Revisions section of this preamble. 

Other minor, editorial, and clarifying 

revisions made to the Proposed 

Regulations as adopted in these final 

regulations are not discussed in the 

Summary of Comments and Explanation 

of Revisions section of this preamble. 

V. Additional Guidance 

As announced in the Proposed 

Regulations, the Treasury Department 

and the IRS are also providing 

procedural guidance applicable to the 

Program opening in calendar year 2025 

and future Program years which will be 

provided in guidance published in the 

Internal Revenue Bulletin. 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. Many 

of the procedural aspects of the Program 

will be similar to the Low-Income 

Communities Bonus Credit Program 

established under section 48(e) available 

for calendar years 2023 and 2024. 

Summary of Comments and 

Explanation of Revisions 

I. Overview 

The Treasury Department and the IRS 

received 45 written comments in 

response to the Proposed Regulations. 

The comments are available for public 

inspection at https://

www.regulations.gov or upon request. 

After full consideration of all comments 

received, the testimony heard at the 

public hearing, and the consultation 

with Tribal leaders, these final 

regulations adopt the Proposed 

Regulations with modifications in 

response to the comments and 

testimony as described in this Summary 

of Comments and Explanation of 

Revisions. 

Comments summarizing the statute or 

the Proposed Regulations, 

recommending statutory revisions, 

grammatical edits, and addressing 

issues that are outside the scope of this 

rulemaking (such as revising other 

Federal regulations, recommending 

changes to tax forms, website portals, or 

procedural guidance published in the 

Internal Revenue Bulletin) are generally 

not addressed in this Summary of 

Comments and Explanation of Revisions 

or adopted in these final regulations. In 

addition to addressing the comments 

received in response to the Proposed 

Regulations, the final regulations also 

include non-substantive grammatical or 

stylistic changes to the Proposed 

Regulations. Unless otherwise indicated 

in this Summary of Comments and 

Explanation of Revisions, provisions of 

the Proposed Regulations with respect 

to which no comments were received 

are adopted without substantive change. 

II. General Rules 

A. In General 

Consistent with section 48E(h)(1), 

proposed § 1.48E(h)–1(a)(1) would 

provide that for purposes of section 46 

of the Code, if an allocation of Capacity 

Limitation is made with respect to 

eligible property (as defined in 

proposed § 1.48E(h)–1(c)) that is part of 

any applicable facility (as defined in 

proposed § 1.48E(h)–1(b)) placed in 

service in connection with low-income 

communities under the Program 

established under section 48E(h)(4), the 

applicable percentage used to calculate 

the amount of the section 48E credit is 

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

final regulations adopt this rule. 

B. Certain Terms 

Proposed § 1.48E(h)–1(a)(2) would 

describe certain terms used in the 

Proposed Regulations. Proposed 

§ 1.48E(h)–1(a)(2)(i) would explain that 

the term applicant would be used 

interchangeably with taxpayer in 

accordance with the context of a 

particular rule. Proposed § 1.48E(h)– 

1(a)(2)(ii) would explain that the term 

Internal Revenue Bulletin has the 

meaning provided in § 601.601. The 

final regulations adopt these terms and 

descriptions with certain additions to 

define the term applicant. Section 

1.48E(h)–1(a)(2)(i) of the final 

regulations adds language to clarify that 

the owner of the facility, and the 

taxpayer which intends to claim the 

section 48E credit, is the applicant. The 

final regulations further clarify that 

disregarded entities are not eligible 

applicants and may not apply for an 

allocation. Instead, the regarded 

taxpayer that owns the disregarded 

entity is the applicant for purposes of 

the Program. 

III. Applicable Facility 

A. Definition of Applicable Facility 

The term applicable facility is defined 

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

qualified facility (as defined in section 

48E(b)(3)) that (i) is not described in 

section 45Y(b)(2)(B) (related to 

combustion and gasification facilities); 

(ii) has a maximum net output of less 

than 5 MW (as measured in AC); and 

(iii) is described in at least one of the 

four categories described in section 

48E(h)(2)(A)(iii). Consistent with section 

48E(h)(2)(A), proposed § 1.48E(h)– 

1(b)(1) would define an applicable 

facility to mean any qualified facility (as 

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

a non-combustion and gasification 

facility for which the Secretary has 

determined has a greenhouse gas (GHG) 

emissions rate of not greater than zero 

in guidance published either in the 

Federal Register or in the Internal 

Revenue Bulletin as of the opening date 

for a Program year; (ii) has a maximum 

net output of less than 5 MW (as 

measured in AC); and (iii) is described 

in at least one of the four categories 

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

and proposed § 1.48E(h)–1(b)(2). 

Several commenters requested the 

final regulations revise the definition of 

applicable facility to include additional 

types of technologies that do not 

otherwise meet the definition of an 

applicable facility as defined under 


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

48E(h)(2)(A) defines applicable facility 

by referencing the section 48E(b)(3) 

definition of qualified facility. Section 

48E(h)(2)(A) provides that a qualified 

facility that is a combustion and 

gasification (C&G) facility is not eligible 

for the Program. However, whether a 

qualified facility is a C&G facility or not 

is beyond the scope of these regulations 

under section 48E(h). On June 3, 2024, 

the Treasury Department and the IRS 

published in the Federal Register (89 

FR 47792) a notice of proposed 

rulemaking (REG–119283–23) under 

sections 45Y and 48E (48E Proposed 

Regulations) that would provide 

definitions and rules for section 48E 

generally, including the types of 

qualified facilities that are C&G and the 

types of qualified facilities that are nonC&G. The 48E Proposed Regulations 

requested comments on types of 

qualified facilities, and such comments 

will be addressed in the final 

regulations under section 48E. A facility 

must first be a qualified facility that is 

eligible to claim the investment credit 

under section 48E for the facility to be 

considered an applicable facility under 

the Program. Information and rules for 

qualified facilities and the types of 

categories of non-C&G-facilities will be 

included in other guidance, under 

section 48E, published in the Federal 

Register or the Internal Revenue 

Bulletin. Consistent with the statute, 

final § 1.48E(h)–1(b)(1) adopts the 

proposed rule without revision. 

B. Four Categories of Applicable 

Facilities 

Section 48E(h)(2)(A)(iii) establishes 

four categories of applicable facilities as 

facilities that are located in a lowincome 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))), 

or facilities that are part of a qualified 

low-income residential building project 

or a qualified low-income economic 

benefit project. The amount of the 

section 48E(h) Increase is 10 percentage 

points for facilities located in a lowincome community or on Indian land, 

and 20 percentage points for facilities 

which are part of a qualified lowincome residential building project or 

part of a qualified low-income economic 

benefit project. 

Proposed § 1.48E(h)–1(b)(2) would 

generally adopt the statutory language to 

define each of the four facility 

categories, with minimal modifications 

to shorten references to the categories as 

Category 1, 2, 3, or 4, and to clarify 

specific category requirements. 

Proposed § 1.48E(h)–1(b)(2)(i) would 

provide that a facility is a Category 1 

facility if it is located in a low-income 

community (as defined in section 

45D(e)). Proposed § 1.48E(h)–1(b)(2)(i) 

would also provide clarifying language 

to explain the term low-income 

community generally is defined under 

section 45D(e)(1) as any population 

census tract for which the poverty rate 

for such tract is at least 20 percent, or, 

in the case of a tract not located within 

a metropolitan area, the median family 

income for such tract does not exceed 

80 percent of statewide median family 

income, or in the case of a tract located 

within a metropolitan area, the median 

family income for such tract does not 

exceed 80 percent of the greater of 

statewide median family income or the 

metropolitan area median family 

income. 

Proposed § 1.48E(h)–1(b)(2)(i) 

additionally would explain that the 

term low-income community also 

includes the modifications in sections 

45D(e)(4) and (5) for tracts with low 

population and modification of the 

income requirement for census tracts 

with high migration rural counties. 

Proposed § 1.48E(h)–1(b)(2)(i) also 

would provide that low-income 

community information for the New 

Markets Tax Credit (NMTC) can be 

found at the U.S. Department of 

Treasury, Community Development 

Financial Institutions (CDFI) Fund 

website and its web page mapping tool, 

https://www.cdfifund.gov/cims. 

Proposed § 1.48E(h)–1(b)(2)(i) then 

would clarify that the poverty rate for a 

census tract generally is based on the 

most recently released ACS low-income 

community data for the NMTC. 

Proposed § 1.48E(h)–1(b)(2)(i) would 

provide, however, if updated data is 

released, a taxpayer, in its application, 

can choose to base the poverty rate for 

any population census tract on either 

the prior version of the ACS low-income 

community data or the updated ACS 

low-income community data for a 

period of 1 year following the date of 

the release of the updated data. 

Proposed § 1.48E(h)–1(b)(2)(i) would 

provide that after the 1-year transition 

period, the updated ACS low-income 

community data must be used. 

Additionally, proposed § 1.48E(h)– 

1(b)(2)(i) would provide that population 

census tracts that satisfy the definition 

of low-income community at the time of 

application are considered to continue 

to meet the definition of low-income 

community for the duration of the 

recapture period unless the location of 

the facility changes. 

One commenter opposed reliance on 

the NMTC definitions to identify 

communities. This commenter 

cautioned that the NMTC definition 

may inadvertently exclude certain 

disadvantaged areas due to changes in 

census tracts and reliance on outdated 

data. This commenter suggested that, 

instead, the Program should use 

alternative metrics to identify lowincome communities like the Climate 

and Economic Justice Screening Tool 

(CEJST) and allowing for case-by-case 

evaluations for community-level 

qualifications. 

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

that a Category 1 facility be located in 

a low-income community census tract 

as defined under section 45D(e) for 

purposes of the NMTC. Therefore, the 

section 45D(e) definition of low-income 

community census tracts must be used 

to determine whether a facility is 

located in a low-income community 

census tract for purposes of determining 

Category 1 eligibility under this 

Program. The statute does not permit 

another metric to identify communities 

as low-income that have not been 

identified as low-income community 

census tracts by the CDFI Fund, for 

purposes of NMTC. Finally, the Program 

includes the use of CEJST data under 

the Additional Selection Criteria 

Geographic Criteria. These comments 

are not adopted and final § 1.48E(h)– 

1(b)(2)(i) retains the language from the 

proposed rule. 

One commenter expressed support for 

the ability of a developer to choose to 

base the poverty rate for any population 

census tract on either the prior version 

of the ACS low-income community data 

or the updated ACS low-income 

community data. The CDFI Fund uses 

the ACS five-year data to determine the 

low-income community census tracts 

for purposes of the NMTC. When the 

CDFI Fund updates the low-income 

census tract determination based on the 

most recent 5-year ACS data, the CDFI 

Fund allows for a one-year transition 

period for reliance purposes. The final 

regulations adopt the CDFI Fund’s oneyear transition period to allow for the 

same reliance; however, the final 

regulations clarify that § 1.48E(h)– 

1(b)(2)(i) does not provide a blanket 

ability for applicants to select between 

prior and current official ACS data. The 

last update to the low-income 

community census tracts for the NMTC 

occurred on September 1, 2023. The 

transition period, and, therefore, the 

ability to utilize either the prior or 

updated data to claim that a facility is 

located in a low-income area also ended 

on September 1, 2024. The Treasury 

Department anticipates the next update 

will occur in 2028. When a subsequent 

update occurs, the transition period will 


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Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2845 

again allow for taxpayers to use either 

the prior or updated data to determine 

whether their facility is located in a 

low-income community census tract. 

Proposed § 1.48E(h)–1(b)(2)(ii) would 

provide that, consistent with section 

48E(h)(2)(A)(iii)(I), a facility is a 

Category 2 facility if it is located on 

Indian land as defined in section 

2601(2) of the Energy Policy Act of 1992 

(25 U.S.C. 3501(2)). No comments were 

received on this rule, and, accordingly, 

the final regulations adopt this rule 

without modification. 

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

applicable facility in part to include a 

qualified facility that is part of a 

qualified low-income residential 

building project. Section 48E(h)(2)(B) 

further describes a facility as part of a 

‘‘qualified low-income residential 

building project’’ if it is installed on a 

residential 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 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 requires that the financial 

benefits of the electricity produced by 

such facility are allocated equitably 

among the occupants of the dwelling 

units of such building. 

Consistent with the statute, proposed 

§ 1.48E(h)–1(b)(2)(iii) would define a 

facility as a Category 3 facility if it is 

part of a qualified low-income 

residential building project, and further 

would provide that a facility will be 

treated as part of a qualified low-income 

residential building project if such 

facility is installed on a residential 

rental building that participates in a 

covered housing program or other 

affordable housing program described in 

section 48E(h)(2)(B)(i) and the financial 

benefits of the electricity produced by 

such facility are allocated equitably 

among the occupants of the dwelling 

units of such building as provided in 

proposed § 1.48E(h)–1(e). Proposed 

§ 1.48E(h)–1(b)(2)(iii) also would 

include the term Qualified Residential 

Property to separately refer to the 

residential rental building (as opposed 

to the Category 3 facility). Proposed 

§ 1.48E(h)–1(b)(2)(iii) additionally 

would clarify that the Qualified 

Residential Property, and not just its 

tenants, must participate in a covered 

housing program or other affordable 

housing program described in section 

48E(h)(2)(B)(i). Proposed § 1.48E(h)– 

1(b)(2)(iii) would further clarify that a 

Qualified Residential Property could 

either be a multifamily rental property 

or single-family rental property. 

Additionally, proposed § 1.48E(h)– 

1(b)(2)(iii) would clarify that a facility 

does not need to be installed directly on 

the building to be considered installed 

on a Qualified Residential Property if 

the facility is installed on the same or 

an adjacent parcel of land as the 

Qualified Residential Property and the 

other requirements to be a Category 3 

facility are satisfied. No comments were 

submitted on this definition. These final 

regulations adopt the proposed rule 

without modification. 

The preamble to the Proposed 

Regulations would include an 

illustrative list of eligible Federal 

housing programs for Category 3. The 

Treasury Department and the IRS, in 

consultation with other Federal 

agencies, developed the illustrative list 

of Federal housing programs and 

policies that meet the requirements in 

section 48E(h)(2)(B)(i) of being covered 

under section 41411(a) of VAWA, 

administered by the Department of 

Agriculture under title V of the Housing 

Act of 1949, or administered by a 

tribally designated housing entity (as 

defined in section 4(22) of the Native 

American Housing Assistance and SelfDetermination Act of 1996). The eligible 

Federal housing program list will be 

included in guidance published in the 

Internal Revenue Bulletin, and the list 

may be updated in future guidance 

published in the Internal Revenue 

Bulletin. 

Section 48E(h)(2)(B)(i) also authorizes 

the Secretary to add other affordable 

housing programs to the list of eligible 

programs. The Proposed Regulations 

requested comment on whether other 

affordable housing programs should be 

added to the list of eligible programs, 

and specifically whether and under 

what conditions certain state programs 

should be added to the list. 

Several commenters named specific 

state housing programs and requested 

addition of those programs as eligible 

Category 3 housing programs. However, 

those commenters did not explain why 

the specific program should be included 

and what comprehensive set of criteria 

warrant the inclusion of these specific 

programs over others. One commenter 

suggested that any property with a 100 

percent affordability covenant that has a 

minimum of 10 years remaining should 

be included as an eligible program. 

Similarly, another commenter 

recommended that state-subsidized 

affordability restricted housing 

programs that have affordability 

restrictions equal to or greater than 

federal programs listed in the Proposed 

Regulations, should qualify for Category 

3. As an additional recommendation, 

this commenter suggested guidelines for 

Naturally Occurring Affordable Housing 

(NOAH), and provided an example 

stating that eligibility could be 

considered if the housing is owned by 

a non-profit or a LLC with a non-profit 

as the single member and the property 

is located in a Justice 40 community or 

where the average rent does not exceed 

Department of Housing and Urban 

Development (HUD) fair market rent. 

Another commenter urged expansion of 

the list of affordable housing programs 

eligible to include state and local 

programs that provide rental assistance 

and/or capital investments in affordable 

housing. This commenter also suggested 

that state and local programs with 

affordability and compliance 

requirements like the Federal programs 

currently qualifying for Category 3 

should be eligible. Similarly, another 

commenter suggested the inclusion of 

any state-funded low-income housing or 

transitional housing program where 

eligibility for assistance under such 

program is equivalent to eligibility 

criteria for any of the enumerated 

federal covered housing programs. 

At this time, the Treasury Department 

and the IRS have determined that the 

list of eligible housing programs should 

only include Federal housing programs, 

not State and local programs. The 

statute requires the building participate 

in a covered hosing program or other 

affordable housing program; it is not 

sufficient that the building has certain 

characteristics, such as being owned by 

a tax-exempt entity. Additionally, the 

statute enumerates programs that are 

eligible based only on their inclusion 

under VAWA or because the programs 

are administered by the USDA or a 

Tribally designated housing entity. 

There are no standard criteria across 

these eligible programs which can be 

applied to objectively consider other 

programs. Additionally, comments did 

not provide a comprehensive set of 

criteria that could be used to determine 

what additional affordable housing 

programs should be included. The 

Treasury Department, under the 

authority granted under section 

48E(h)(2)(B)(i), may decide in the future 

to include additional programs for 

Category 3. If additional, specific 

housing programs are deemed eligible, 

or if a process is later developed to 

consider housing programs for 

inclusion, that information will be 


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2846 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

announced through guidance published 

in the Internal Revenue Bulletin. 

Regarding Federal housing programs, 

commenters recommended additional 

housing programs, including programs 

administered by the Department of 

Hawaiian Home Lands, Native Hawaiian 

Organizations, and Hawaiian 

Homestead Associations. In 

consultation with HUD, the Treasury 

Department and the IRS have adopted 

changes to the list of eligible housing 

programs for Category 3. For the 

Program year beginning in calendar year 

2025, HUD project based vouchers 

under Section 8 of the United States 

Housing Act of 1937 and housing 

programs administered by the 

Department of Hawaiian Home Lands as 

defined in Title VIII of the Native 

American Housing Assistance and SelfDetermination Act of 1996 (24 CFR 

1006.10), Hawaiian Homestead 

Associations (HHA) as defined in 43 

CFR 48.6, and DHHL or HHA lands 

administered by Native Hawaiian 

Organizations as defined in 13 CFR 

124.3, have been added to the list of 

eligible housing programs. Guidance 

published in the Internal Revenue 

Bulletin, as updated, will contain the 

complete list of eligible housing 

programs for Category 3. 

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

applicable facility in part to include a 

qualified facility that is part of a 

qualified low-income economic benefit 

project. Section 48E(h)(2)(C) provides 

that a facility will be treated as part of 

a qualified low-income economic 

benefit project if at least 50 percent of 

the financial benefits of the electricity 

produced by such facility are provided 

to households with income of less than 

200 percent of the poverty line (as 

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

Consistent with section 

48E(h)(2)(A)(iii)(II), proposed 

§ 1.48E(h)–1(b)(2)(iv), would define a 

Category 4 facility as a facility that is 

part of a qualified low-income economic 

benefit project. Proposed § 1.48E(h)– 

1(b)(2)(iv) would further provide 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 the facility are provided to 

households with income of less than 

200 percent of the poverty line (as 

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

applicable to a family of the size 

involved, or 80 percent of area median 

gross income (as determined under 

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

No comments were submitted 

regarding proposed § 1.48E(h)– 

1(b)(2)(iv). The final regulations adopt 

the proposed rule without modification. 

C. Less Than Five Megawatts 

Requirement 

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

an applicable facility have a maximum 

net output of less than 5 megawatts (as 

measured in AC), referred to in this 

preamble as the less than five megawatts 

requirement. Proposed § 1.48E(h)– 

1(b)(3)(i) would provide that the less 

than five megawatts requirement is 

measured at the level of the applicable 

facility in accordance with section 

48E(h)(2)(A)(ii). Proposed § 1.48E(h)– 

1(b)(3)(i) additionally would clarify that 

the maximum net output of an 

applicable facility is measured only by 

nameplate generating capacity of the 

applicable facility, which includes only 

functionally interdependent 

components of the applicable facility, at 

the time the applicable facility is placed 

in service. Proposed § 1.48E(h)–1(b)(3)(i) 

would provide that components of 

property are functionally 

interdependent if the placing in service 

of each component is dependent upon 

placing in service other components to 

produce electricity. 

Proposed § 1.48E(h)–1(b)(3)(ii) would 

further provide that the determination 

of whether an applicable facility has a 

maximum net output of less than 5 

megawatts (MW) (as measured in AC) is 

based on the nameplate capacity of the 

applicable facility. Proposed § 1.48E(h)– 

1(b)(3)(ii) would additionally state that 

the nameplate capacity for purposes of 

the less than five megawatts 

requirement is the maximum electrical 

generating output in MW that the 

applicable facility is capable of 

producing on a steady state basis and 

during continuous operation under 

standard conditions, as measured by the 

manufacturer and consistent with the 

definition of nameplate capacity 

provided in 40 CFR 96.202. Proposed 

§ 1.48E(h)–1(b)(3)(ii) would also state 

that if applicable, the International 

Standard Organization conditions 

should be used to measure the 

maximum electrical generating output 

of an applicable facility. 

The Proposed Regulations requested 

comments on other approaches to 

address this statutory requirement that 

would further the purpose of efficient 

allocation of a Federal tax credit 

program with a national impact and 

would advance the goals of the Program 

to incentivize additional deployment of 

qualified facilities in low-income 

communities. The preamble to the 

Proposed Regulations stated that these 

approaches could include rules that 

would aggregate the capacity of 

qualified facilities with integrated 

operations (that is, qualified facilities 

that are owned by the same taxpayer, 

placed in service in the same taxable 

year, and transmit electricity generated 

by the facilities through the same point 

of interconnection or, if the facilities are 

not grid-connected, to the same end 

user(s)) solely for the purposes of 

whether an application meets the less 

than five megawatts requirement under 

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

Further, the preamble to the Proposed 

Regulations explained that the Treasury 

Department and the IRS intended to 

deprioritize review of applications for 

an applicable facility that together with 

other qualified facilities (1) share a 

point of interconnection, (2) produce 

electricity using the same technology, 

(3) are owned by the same taxpayer, and 

(4) have an aggregate total maximum net 

output (as determined by the sum of the 

maximum net output of the applicable 

facility and each qualified facility under 

proposed § 1.48E(h)–1(b)(3)(ii)) equal to 

or greater than five megawatts (as 

measured in AC). Deprioritized 

applications would be considered after 

other applications in the current 

allocation round, or a subsequent 

allocation round at the Secretary’s 

discretion. 

One commenter stated that the 

proposed less than 5 MW requirement 

may allow larger projects to be 

deceptively segmented into smaller ones 

to manufacture a false qualification for 

the bonus credit. This commenter 

supported the inclusion of stricter 

aggregation rules to prevent developers 

from dividing larger projects to 

monopolize allocations intended for 

genuinely small facilities. Another 

commenter expressed support for the 

proposal to aggregate capacity of 

qualified facilities with integrated 

operations. This commenter, however, 

recommended using only one factor to 

aggregate facilities, a common point of 

interconnection. Another commenter 

suggested that, in evaluating related 

qualified facilities, the final regulations 

should consider whether an application 

is for a project where the developer and 

its affiliates have multiple 

interconnection agreements on the same 

property. 

Section 48E(h)(4)(A) provides that 

‘‘[i]n establishing such program and to 

carry out the purposes of this 

subsection, the Secretary shall provide 

procedures to allow for an efficient 

allocation process.’’ To further the aims 

of an efficient allocation process, the 

Treasury Department and the IRS agree 

with commenters that the final 


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1See proposed § 1.48E–2(d), as proposed in the 

notice of proposed rulemaking (REG–119283–23) 

published in the Federal Register (89 FR 47792) on 

June 3, 2024, and corrected on July 18, 2024 at 89 

FR 58305, for more information regarding the 

definition of ‘‘qualified investment.’’ 

regulations should include an 

aggregation rule to clarify the scope of 

applications. Clear parameters of what 

constitutes an ‘‘applicable facility’’ for 

purposes of an application to the 

Program provides certainty for 

applicants preparing and submitting 

applications and for the IRS in its 

review of applications. For example, the 

definition of a qualified facility, as 

defined under the 48E Proposed 

Regulations, may give the impression to 

the taxpayer that they must submit 

multiple applications for a 3 MW solar 

facility with multiple inverters. Such a 

result would not create an efficient 

allocation process. Furthermore, 

because section 48E(h) is subject to a 

finite annual Capacity Limitation, the 

Treasury Department and the IRS 

believe allocating amounts of Capacity 

Limitation to a group of related 

qualified facilities with an aggregate 

total maximum net output equal to or 

greater than 5 MW (as measured in AC) 

could concentrate allocations (and the 

benefits of clean energy development) in 

a smaller number of communities, 

rather than making them more broadly 

available, which would not further the 

purpose of an efficient allocation of a 

Federal tax credit. Accordingly, the final 

regulations revise the nameplate 

capacity measurement test to determine 

whether an applicable facility has a 

maximum net output of less than 5 MW 

(as measured in AC). 

Solely for the purposes of the less 

than five megawatts requirement for the 

Program, if an applicable facility has 

integrated operations with one or more 

other qualified facilities of the same 

technology type, then the aggregate 

nameplate capacity of the applicable 

facility and other qualified facility must 

be used to determine the maximum net 

output of an applicable facility, 

including in determining eligibility for 

an allocation of Capacity Limitation. 

This approach provides clarity to 

applicants, creates a more efficient 

allocation process relative to other 

approaches because it streamlines 

application intake and processing, and 

helps address commenters’ concerns 

about fairness in the allocation process. 

The final regulations provide at newly 

added § 1.48E–1(b)(3)(iv) that solely for 

the purposes of the less than five 

megawatts requirement for the Program, 

an applicable facility is treated as 

having integrated operations with one 

or more other qualified facilities of the 

same technology type, if the facilities 

are: (i) owned by the same or related 

taxpayers; (ii) placed in service in the 

same taxable year; and (iii) transmit 

electricity generated by the facilities 

through the same point of 

interconnection or, if the facilities are 

not grid-connected or are delivering 

electricity directly to an end user 

behind a utility meter, are able to 

support the same end user. The final 

regulations also provide a definition for 

related taxpayers in newly added 

§ 1.48E–1(b)(4). For purposes of the less 

than five megawatts requirement, the 

term related taxpayers means members 

of a group of trades or businesses that 

are under common control (as defined 

in § 1.52–1(b)). Related taxpayers are 

treated as one taxpayer in determining 

whether an applicable facility has 

integrated operations. 

One commenter requested 

clarification as to whether facilities with 

exactly 5 MW are eligible for the 

Program, or whether projects must 

restrict their inverter output to 4.99 MW 

(as measured in AC) to qualify. The 

statutory language requires that an 

applicable facility have a maximum net 

output of less than 5 MW (as measured 

in AC), and the final regulations provide 

a nameplate capacity test to determine 

whether an applicable facility satisfies 

the statutory requirement. Accordingly, 

facilities with a maximum net output of 

5 MW (as measured in AC) or greater are 

not applicable facilities and are not 

eligible. Furthermore, derating or 

restricting an inverter to get below 5 

MW (as measured in AC) would only 

change the output of the facility but 

would not change the maximum net 

output (or nameplate capacity) of the 

facility. 

The Treasury Department and the IRS 

are aware that certain technologies 

generate electricity in direct current, not 

alternating current, and therefore, it is 

unclear how to determine whether an 

applicable facility has a maximum net 

output of less than 5 MW (as measured 

in AC). 

For applicable facilities that generate 

electrical output in direct current, the 

final regulations provide an alternative 

nameplate capacity measurement at 

newly added § 1.48E–1(b)(3)(iii). Only 

for qualified facilities that generate 

electricity in direct current, the taxpayer 

may choose to determine the maximum 

net output (in alternating current) of the 

applicable facility by using the lesser of: 

(i) nameplate generating capacity of the 

applicable facility in direct current, 

which is deemed the nameplate 

generating capacity of the applicable 

facility in alternating current; or (ii) the 

nameplate capacity of the first 

component of property that inverts the 

direct current electricity into alternating 

current. 

D. Eligible Property 

Section 48E(h)(3) defines eligible 

property as a qualified investment with 

respect to any applicable facility. 

Section 48E(b) describes a qualified 

investment with respect to a qualified 

facility. Generally, for purposes of 

section 48E(a), section 48E(b)(1)(A) and 

(b)(1)(B) provide that the qualified 

investment with respect to a qualified 

facility for any taxable year is the sum 

of the basis of any qualified property 

placed in service by the taxpayer during 

such taxable year that is part of a 

qualified facility, plus the amount of 

expenditures that are paid or incurred 

by the taxpayer for qualified 

interconnection property. 

Consistent with section 48E(h)(3), 

proposed § 1.48E(h)–1(c) would define 

eligible property as a qualified 

investment (as defined in section 

48E(b)) 1 with respect to any applicable 

facility. The preamble to the Proposed 

Regulations explained that pursuant to 

section 48E(h)(3), eligible property does 

not include any qualified investment 

with respect to energy storage 

technology. 

Several commenters objected to the 

exclusion of energy storage technology 

as eligible property for purposes of the 

section 48E(h) Increase. Some 

commenters requested that the final 

regulations should include energy 

storage technology as eligible property 

for purposes of the Program. These 

commenters cited to the inclusion of colocated energy storage technology as 

eligible property for purposes of the 

predecessor program under section 

48(e). One commenter asserted that the 

proposed rule was wrong, and that 

certain energy storage technology 

should be includable as a qualified 

investment by distinguishing between 

stand-alone energy storage technology 

and energy storage technology 

associated with a qualified facility. This 

commenter asserted that associated 

energy storage technology is an integral 

part of the qualified facility and should 

be includable as a qualified investment. 

Another commenter similarly requested 

that the final regulations under sections 

48E and 45Y classify energy storage 

technology as an integral part of the 

qualified facility, and therefore, further 

requested that energy storage technology 

be eligible for the section 48E(h) 

Increase. Alternatively, this commenter 

suggested that the final regulations 


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clarify that facilities that include energy 

storage technology remain eligible for 

the bonus credit for the portion of the 

system that is a qualified facility. 

Section 48E(a) defines and provides 

an investment credit for energy storage 

technology distinct and separate from a 

credit for a qualified facility. Eligible 

property under section 48E(h) only 

includes a qualified investment with 

respect to an applicable facility, and 

therefore, the statute does not support 

inclusion of energy storage technology 

in the section 48E(h) Program. If an 

applicant has a system that includes 

both an applicable facility and energy 

storage technology, the applicable 

facility would still be eligible for a 

credit under section 48E and the section 

48E(h) Increase. Accordingly, the final 

regulations do not adopt these 

comments. 

E. Location 

Proposed § 1.48E(h)–1(d)(1) would 

treat an applicable facility as located in 

a low-income community or on Indian 

land under section 48E(h)(2)(A)(iii)(I) or 

located in a geographic area under the 

Additional Selection Criteria (see part 

VI.B. of this Summary of Comments and 

Explanation of Revisions) if the facility 

satisfies the nameplate capacity test 

(Nameplate Capacity Test for Location) 

provided in proposed § 1.48E(h)–1(d)(2). 

Proposed § 1.48E(h)–1(d)(2) would 

describe the Nameplate Capacity Test 

for Location, which provides that an 

applicable facility would be considered 

located in or on the relevant geographic 

area described in proposed § 1.48E(h)– 

1(d)(1) if 50 percent or more of the 

applicable facility’s nameplate capacity 

is in a qualifying area. The purpose of 

this proposed rule is to provide 

applicants that have an applicable 

facility that is not entirely located in a 

qualifying area a means to evaluate 

eligibility. For example, if an applicant’s 

applicable facility is sited on the 

boundary of a qualifying area, the 

Nameplate Capacity Test for Location is 

used to determine if the applicable 

facility is deemed located in the 

qualifying area. 

One commenter recommended that 

devices that are offshore but are eligible 

for section 48E and can attribute their 

nameplate capacity to where their 

power conditioning equipment is 

onshore should be able to satisfy the 

Nameplate Capacity Test for Location. 

This commenter noted that this 

recommendation is consistent with the 

Nameplate Capacity Attribution Rule 

found in Notice 2024–30, 16 I.R.B. 878. 

The final regulations do not adopt this 

comment because it is not in accordance 

with the Program’s requirements. The 

commenter’s suggestion stems from 

guidance issued for an increased credit 

rate for qualifying facilities located in 

specific energy communities. The 

statutory requirements for the location 

of an applicable facility eligible for the 

Program are different than for a 

qualifying facility eligible for the energy 

communities bonus. Moreover, the 

Treasury Department and the IRS do not 

expect applicable facilities to be located 

offshore outside of the boundaries of a 

qualifying area. Accordingly, for the 

purposes of the Program, the Nameplate 

Capacity Test for Location requires that 

an applicable facility be located in a 

qualifying area. The final regulations 

adopt § 1.48E(h)–1(d)(1) as proposed. 

IV. Financial Benefits for Category 3 

and Category 4 Allocations 

A. In General 

Section 48E(h)(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 

Regulations would propose definitions 

and requirements related to the term 

financial benefit under section 

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

apply such definitions and 

requirements, appropriately, to qualified 

low-income residential building projects 

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

(section 48E(h)(2)(C)). The proposed 

definitions and requirements for 

financial benefits were different for an 

allocation under Category 3 (section 

48E(h)(2)(B)) and Category 4 (section 

48E(h)(2)(C)) and these definitions 

remain different for each respective 

category in the final regulations, 

because the statutory language provides 

distinct financial benefit requirements 

for these categories. A Summary of 

Comments and Explanation of Revisions 

for financial benefits for Category 3 

facilities is presented below in section 

IV.C. and for Category 4 in section IV.D. 

B. Renewable Energy Certificates (RECs) 

For both Category 3 and Category 4, 

commenters requested clarity on 

whether RECs are included in the 

determination of financial benefits. 

Commenters generally opposed 

including RECs as part of the financial 

benefits determination. Section 

48E(h)(2)(B)(ii) and (C) both require 

distribution of the ‘‘financial benefits of 

the electricity produced’’ by a facility. 

The Treasury Department and the IRS, 

understand that accessibility and 

inclusion of RECs vary across the U.S. 

depending on the relevant region or 

state’s regulations and overall market. 

RECs represent environmental or 

renewable ‘‘attributes’’ or ‘‘benefits’’ 

associated with renewable energy 

generation and RECs are environmental 

commodities that can be traded 

separately from wholesale electricity 

markets. RECs are issued in situations 

when electricity is generated from a 

renewable facility and the ability of the 

owner of the renewable facility to sell 

RECs has the potential to generate 

revenue and a financial benefit for the 

owner. For this reason, any revenue 

generated by the sale of RECs should be 

included in determining financial 

benefits for both Category 3 and 

Category 4. Similarly, any other 

certificates or credits (excluding Federal 

tax credits) that are related to electricity 

production and that yield revenue to the 

owner as a result of electricity generated 

should be included in determining 

financial benefits. This clarification 

does not impact any of the Proposed 

Regulations under Category 3. There 

were additional comments regarding 

RECs and the manner by which RECs 

must be included in determining the bill 

credit discount rate for Category 4. 

These comments are summarized and 

addressed in section IV.D. of this 

Summary of Comments and 

Explanations of Revisions. 

C. Financial Benefits for Qualified LowIncome Residential Building Projects 

For a facility to be treated as part of 

a qualified low-income residential 

building project (Category 3 facility), 

section 48E(h)(2)(B)(ii) provides that the 

financial benefits of the electricity 

produced by such facility must be 

allocated equitably among the 

occupants of the dwelling units of a 

Qualified Residential Property. 

Consistent with the statute, proposed 

§ 1.48E(h)–1(e)(1) would provide that, to 

satisfy the requirements of a Category 3 

facility, the financial benefits of the 

electricity produced by the facility must 

be allocated equitably among the 

occupants of the dwelling units of the 

Qualified Residential Property. 

Proposed § 1.48E(h)–1(e)(1) would also 

clarify that the same rules for financial 

benefits for Category 3 facilities apply to 

both multi-family and single-family 

Qualified Residential Property. No 

comments were submitted regarding 

this proposed rule, and the final 

regulations adopt this proposed rule for 

Category 3 financial benefits without 

modification. 

Proposed § 1.48E(h)–1(e)(2) would 

require that at least 50 percent of the 

financial value of the electricity 

produced by the facility (as defined in 

proposed § 1.48E(h)–1(e)(3)) must be 

equitably allocated to the Qualified 

Residential Property’s occupants that 


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are designated as low-income occupants 

under the housing program. Proposed 

§ 1.48E(h)–1(e)(3) would further define 

the financial value of the electricity 

produced by the applicable facility as 

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

financial value (as defined in proposed 

§ 1.48E(h)–1(e)(4)) of the annual 

electricity produced by the applicable 

facility, or (ii) the net financial value (as 

defined in proposed § 1.48E(h)–1(e)(5)) 

of the annual electricity produced by 

the applicable facility. These 

requirements recognize that not all the 

financial value of the electricity 

produced can be passed on to building 

occupants because a certain percentage 

can be assumed to be dedicated to 

lowering the operational costs of 

electricity consumption for common 

areas, which benefits all building 

occupants. 

Proposed § 1.48E(h)–1(e)(4) would 

then provide that the gross financial 

value of the annual electricity produced 

by the applicable facility is the sum of: 

(i) the total self-consumed kilowatthours produced by the applicable 

facility multiplied by the Qualified 

Residential Property’s metered 

volumetric price of electricity, (ii) the 

total exported kilowatt-hours produced 

by the applicable facility multiplied by 

the Qualified Residential Property’s 

volumetric export compensation rate for 

kilowatt-hours of electricity, and (iii) 

the sale of any attributes associated with 

the applicable facility’s production 

(including, for example, any Federal, 

State or Tribal renewable energy 

certificates or incentives), if separate 

from the metered price of electricity or 

export compensation rate. 

Additionally, the proposed definition 

of net financial value in § 1.48E(h)– 

1(e)(5) would account for the specific 

nature of facilities serving low-income 

residential buildings and facility 

ownership. In the case of common 

ownership, when the facility owner is 

also the Qualified Residential Property 

owner, proposed § 1.48E(h)–1(e)(5)(i) 

would define net financial value as the 

gross financial value of the annual 

electricity produced minus the annual 

average (or levelized) cost of the 

applicable facility over the useful life of 

the facility (including debt service, 

maintenance, replacement reserve, 

capital expenditures, and any other 

costs associated with constructing, 

maintaining, and operating the facility). 

For third-party ownership, when the 

facility and the Qualified Residential 

Property are not commonly owned and 

the facility owner enters into a power 

purchase agreement or other contract for 

electricity services with the Qualified 

Residential Property owner and/or 

building occupants, proposed 

§ 1.48E(h)–1(e)(5)(ii) would define net 

financial value as the gross financial 

value of the annual electricity produced 

minus any payments made by the 

building owner and/or building 

occupants to the applicable facility 

owner for electricity services associated 

with the applicable facility in a given 

year. 

A commenter stated that the proposed 

methodology and calculations 

established to calculate net financial 

value and gross financial value are too 

restrictive and hinder the ability for 

qualified low-income residential 

buildings to participate. This 

commenter also asserted that the 

required financial benefits would 

exceed the value of the credit. Two 

commenters requested that the final 

regulations eliminate the ‘‘greater of’’ 

language in proposed § 1.48E(h)–1(e)(3) 

and replace it with ‘‘either’’ to allow 

applicants to choose between using the 

gross financial value or the net financial 

value. These commenters asserted that 

using either method would still result in 

the 50 percent minimum requirement 

under the Proposed Regulations to be 

met. 

The Treasury Department and the IRS 

do not agree with comment observing 

that the calculations for Category 3 

financial benefits will hinder the ability 

for qualified low-income residential 

buildings to participate. No other 

comments were submitted suggesting 

that the calculations will restrict the 

participation of low-income residential 

buildings. The calculations provide 

clear parameters for applicants and 

financial benefits to residents. This 

comment is not adopted with respect to 

eliminating the ‘‘greater of’’ 

requirement. The ‘‘greater of’’ language 

helps implement the statutory 

requirement for the equitable 

distribution of financial benefits to 

tenants and supports the Program’s 

objectives of providing financial 

benefits directly to households. 

Additionally, while the statute requires 

that the financial benefits of the 

electricity produced be shared with 

occupants, the final regulations already 

recognize that not all the financial value 

of the electricity produced can be 

passed on to building occupants, and 

that a certain portion can be used for 

lowering the operational costs of 

electricity consumption for common 

areas, which benefits all building 

occupants. 

Proposed § 1.48E(h)–1(e)(5)(iii) would 

provide different rules to ensure an 

equitable allocation of financial benefits 

regardless of whether the financial value 

is distributed to building occupants via 

utility bill savings or through some 

other means. If financial value is 

distributed via utility bill savings, 

proposed § 1.48E(h)–1(e)(5)(iii)(A) 

would provide that financial benefits 

will be considered to be allocated 

equitably if at least 50 percent of the 

financial value of the electricity 

produced by the applicable facility is 

distributed as utility bill savings in 

equal shares to each building dwelling 

unit among the Qualified Residential 

Property’s occupants that are designated 

as low-income under the covered 

housing program or other affordable 

housing program (described in section 

48E(h)(2)(B)(i)) or alternatively 

distributed in proportional shares based 

on each low-income dwelling unit’s 

square footage, or each low-income 

dwelling unit’s number of occupants. 

Proposed § 1.48E(h)–1(e)(5)(iii)(A) also 

would provide that for any occupant(s) 

who chooses to not receive utility bill 

savings, the portion of the financial 

value that would otherwise be 

distributed to non-participating 

occupants must be instead distributed to 

all participating occupants. Proposed 

§ 1.48E(h)–1(e)(5)(iii)(A) would further 

clarify that 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 applicable 

facility to use this method of benefit 

distribution. 

Additionally, proposed § 1.48E(h)– 

1(e)(5)(iii)(A) would provide that in the 

case of a solar facility, applicants must 

follow the HUD guidance on Treatment 

of Financial Benefits to HUD-Assisted 

Tenants Resulting from Participation in 

Solar Programs Notice (Housing Notice 

2023–09), located at https://

www.hud.gov/sites/dfiles/OCHCO/ 

documents/2023-09hsgn.pdf, or future 

HUD guidance, or other guidance or 

notices from the Federal agency that 

oversees the applicable housing 

program identified in section 

48E(h)(2)(B) to ensure that tenants’ 

annual income for rent calculations or 

other requirements impacting total 

tenant payment are not impacted 

negatively by the distribution of 

financial value. In the case of any other 

applicable facility, applicants must 

follow future HUD guidance, or other 

guidance from the Federal agency that 

oversees the applicable housing 

program. In the absence of future 

guidance from a Federal agency, 

applicants should apply principles 

similar to those articulated in the HUD 

guidance in the case of any other 

applicable facility. 

Proposed § 1.48E(h)–1(e)(5)(iii)(B) 

would provide that if financial value is 


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not distributed via utility bill savings, 

financial benefits will be considered to 

be allocated equitably if at least 50 

percent of the financial value of the 

electricity produced by the applicable 

facility is distributed to occupants using 

one or more methods described in 

Housing Notice 2023–09 located at 

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

OCHCO/documents/2023-09hsgn.pdf, or 

future HUD guidance, or other guidance 

or notices from the Federal agency that 

oversees the applicable housing 

program identified in section 

48E(h)(2)(B). In the case of a solar 

facility, applicants must comply with 

HUD guidance, or future HUD guidance, 

for how residents of master-metered 

HUD-assisted housing can benefit from 

owners’ sharing of financial benefits 

accrued from an investment in solar 

electricity generation to ensure that 

tenants’ utility allowances and annual 

income for rent calculations are not 

negatively impacted. Applicants should 

apply principles similar to those 

articulated in the HUD guidance in the 

case of any other applicable facility. 

No comments were submitted 

regarding the required methods of 

delivery of financial benefits for 

Category 3 facilities. The Proposed 

Regulations would cite to specific HUD 

guidance on benefits sharing. In 

consultation with HUD, the Treasury 

Department and the IRS understand that 

HUD’s Office of Multifamily Housing, 

Office of Public and Indian Housing, 

Office of Native American Programs, 

and other offices may publish guidance 

on benefits sharing relevant Category 3 

applicable facilities. Accordingly, the 

final regulations adopt § 1.48E(h)– 

1(e)(5)(iii)(A) and (B) as proposed with 

minor clarifications to reflect HUD 

guidance on benefits sharing. 

To strengthen Program compliance 

and to provide clarity to applicants 

regarding how they can demonstrate 

that statutory requirements are met, 

proposed § 1.48E(h)–1(e)(6)(i) would 

provide that a Category 3 facility owner 

must prepare a Benefits Sharing 

Statement. Proposed § 1.48E(h)– 

1(e)(6)(i) would further state that the 

Benefits Sharing Statement is required 

to include (A) a calculation of the 

facility’s gross financial value using the 

method described in proposed 

§ 1.48E(h)–1(e)(4), (B) a calculation of 

the facility’s net financial value using 

the method described in proposed 

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

the financial value required to be 

distributed to building occupants using 

the method described in proposed 

§ 1.48E(h)–1(e)(3), (D) a description of 

the means through which the required 

financial value will be distributed to 

building occupants, and (E) if the 

facility and Qualified Residential 

Property are separately owned, an 

indication of which entity will be 

responsible for the distribution of 

benefits to the occupants. 

Proposed § 1.48E(h)–1(e)(6)(ii) would 

provide that the Qualified Residential 

Property owner must formally notify the 

occupants of units in the Qualified 

Residential Property of the development 

of the facility and planned distribution 

of benefits. 

No comments were received on the 

Benefits Sharing Statement or the 

requirement to notify. Accordingly, the 

final regulations adopt these rules 

without modification. 

D. Financial Benefits in Qualified LowIncome Economic Benefit Projects 

For a facility to be treated as part of 

a qualified low-income economic 

benefit project, section 48E(h)(2)(C) 

requires that at least 50 percent of the 

financial benefits of the electricity 

produced by the facility be provided to 

qualifying low-income households. 

Proposed § 1.48E(h)–1(f)(1) would add 

the term Qualifying Households to refer 

to households which meet the income 

requirements under section 

48E(h)(2)(C)(i) or (ii) and would provide 

that to satisfy the requirements of a 

Category 4 facility: 

(i) The facility must serve multiple 

Qualifying Households under section 

48E(h)(2)(C)(i) or (ii); 

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

total output in kilowatts (kW) must be 

assigned to Qualifying Households; and 

(iii) Each Qualifying Household must 

be provided a bill credit discount rate 

(as defined in proposed § 1.48E(h)– 

1(f)(2)) of at least 30 percent. 

Proposed § 1.48E(h)–1(f)(2)(i) would 

additionally define a bill credit discount 

rate as the difference between the 

financial benefit provided to a 

Qualifying Household (including utility 

bill credits, reductions in a Qualifying 

Household’s electricity rate, or other 

monetary benefits accrued by the 

Qualifying Household on its utility bill) 

and the cost of participating in the 

energy purchasing program (including 

subscription payments for zero-carbon 

energy and any other fees or charges), 

expressed as a percentage of the 

financial benefit distributed to the 

Qualifying Household. Proposed 

§ 1.48E(h)–1(f)(2)(i) also would clarify 

that the bill credit discount rate can be 

calculated by starting with the financial 

benefit provided to the Qualifying 

Household, subtracting all payments 

made by the Qualifying Household (or 

payments remitted on behalf of the 

Qualifying Household through net 

crediting, consolidated billing, or 

similar arrangements) to the facility 

owner and any related third parties as 

a condition of receiving that financial 

benefit, then dividing that difference by 

the financial benefit distributed to the 

Qualifying Household. 

While several commenters supported 

the proposed bill credit discount rate of 

30 percent, many commenters opposed 

the increase from the 20 percent bill 

credit discount rate under the 

predecessor program. These 

commenters asserted that the market 

and industry have not sufficiently 

evolved to account for a bill credit 

discount rate of 30 percent. Several 

comments stated that an increase in the 

bill credit discount rate would favor 

States with higher utility rates and 

already established solar markets, while 

having a negative impact on States with 

already low electricity prices, or with no 

or emerging clean energy programs. 

Commenters who opposed the 30 

percent bill credit discount rate 

generally supported reinstating the 20 

percent rate from the predecessor 

program. Several commenters stated 

that projects are already in development 

based on the 20 percent bill credit 

discount rate from the predecessor 

program under section 48(e), and the 

commentors contended that the bill 

credit discount rate should remain the 

same. Some commenters also opposed a 

phased-in approach to increasing the 

bill credit discount rate citing a lack of 

Program data to support any increase. 

Two commenters, however, expressed 

support for a phased-in approach. 

Alternatively, some commenters 

suggested a tiered approach to the bill 

credit discount rate within Category 4 

by adjusting the required bill credit 

discount rate based on regional market 

conditions. 

After consideration of the comments, 

the final regulations adopt a bill credit 

discount rate of 20 percent. The 20 

percent bill credit discount rate—as 

opposed to a 30 percent bill credit 

discount rate—supports the Program’s 

goal of national impact by allowing a 

broader range of facilities to apply 

under Category 4. Given the uncertainty 

of how the market will evolve and 

yearslong industry development 

timelines, the final regulations do not 

adjust the bill credit discount rate over 

time. Therefore, as finalized, § 1.48E(h)– 

1(f)(1)(iii) provides ‘‘[e]ach Qualifying 

Household must be provided a bill 

credit discount rate (as defined in 

§ 1.48E(h)–1(f)(2)) of at least 20 

percent.’’ The final regulations adopt 

the rest of the proposed § 1.48E(h)– 

1(f)(1)(i) and (ii) without modification. 


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Proposed § 1.48E(h)–1(f)(2)(ii) would 

provide that in cases in which the 

Qualifying Household has no or only a 

nominal cost of participation, and 

financial benefits are delivered through 

a utility or government body, the bill 

credit discount rate should be 

calculated as the financial benefit 

provided to a Qualifying Household 

(including utility bill credits, reductions 

in a Qualifying Household’s electricity 

rate, or other monetary benefits accrued 

by a Qualifying Household on their 

utility bill) divided by the total value of 

the electricity produced by the facility 

and assigned to the Qualifying 

Household (including any electricity 

services, products, and credits provided 

in conjunction with the electricity 

produced by such facility), as measured 

by the utility, independent system 

operator (ISO), or other off-taker 

procuring electricity (and related 

services, products, and credits) from the 

facility. Proposed § 1.48E(h)–1(f)(2)(iv) 

would clarify that the bill credit 

discount rate is calculated on an annual 

basis. Proposed § 1.48E(h)–1(f)(2)(v) 

would provide examples to clarify the 

application of proposed § 1.48E(h)– 

1(f)(2). 

Proposed § 1.48E(h)–1(f)(2)(iii) would 

provide that if the facility derives 

financial value from the production of 

electricity in a manner such that this 

value cannot be directly applied to the 

Qualifying Household’s utility bill (for 

example, renewable energy certificate 

payments made directly to the facility 

owner), then no less than 30 percent of 

that monetary value must also be 

provided to the Qualifying Household, 

either through a greater bill credit 

discount on the Qualifying Household’s 

utility bill than would otherwise be 

derived from the method described in 

proposed § 1.48E(h)–1(f)(1)(i) or through 

other means. 

As previously addressed in section IV, 

generally, of this Summary of 

Comments and Explanation of 

Revisions, the final regulations clarify 

that RECs are included in the financial 

benefits calculation for both Category 3 

and Category 4. Commenters stated that 

any RECs would already be included in 

the general bill credit discount 

calculation provided for under proposed 

§ 1.48E(h)–1(f)(1). Commenters, 

therefore, questioned why proposed 

§ 1.48E(h)–1(f)(2)(iii) would separate out 

any RECs, when the RECs would 

generally be included in determining 

the pool of financial benefits. The 

Treasury Department and the IRS 

understand commenters’ concern and 

agree that clarity is warranted. The final 

regulations do not adopt proposed 

§ 1.48E(h)–1(f)(2)(iii). Rather, the final 

regulations clarify that the value derived 

from the sale of RECs (if any) are 

included within the financial value 

calculation associated with the 

requirement that at least 50 percent of 

the total financial value of the facility’s 

total production in kilowatts must be 

assigned to Qualifying Households. 

Specifically, § 1.48E(h)–1(f)(1) is revised 

to clarify that the financial value 

calculation associated with the 50 

percent requirement must include other 

values from electricity production 

(including any electricity services, 

products, and credits or certificates such 

as RECs provided in connection with 

the electricity produced by such facility, 

but excluding Federal tax credits), as 

measured by the utility, independent 

system operator, or other off-taker 

procuring electricity (and related 

services, products, and credits of 

certificates) from the facility. 

Notwithstanding that provision, the 

Treasury Department and the IRS agree 

with commenters that any monetary 

value from the sale of RECs (if any) 

would already be included in the 

financial benefits value and general bill 

credit discount described under 

§ 1.48E(h)–1(f)(2)(i). As such, there is no 

reason to separately identify such 

possible REC value in the general bill 

credit discount rate described therein. 

However, the value from the sale of 

RECs is appropriately included under 

§ 1.48E(h)–1(f)(2)(ii) related to the bill 

credit discount requirements when 

there is no or nominal cost of 

participation, in this case focused on the 

total financial value of the electricity 

produced by the facility. Specifically, as 

described in § 1.48E(h)–1(f)(2)(ii), the 

financial value of electricity produced 

by the facility includes the sale of any 

attributes associated with the applicable 

facility’s production (including, for 

example, any Federal, State, Tribal, or 

utility incentives or renewable energy 

certificates but excluding any Federal 

tax credits). In recognition that utilities 

may have incentives associated with the 

production of electricity, the final 

regulations revise proposed § 1.48E(h)– 

1(e)(4) to include utility incentives in 

the parenthetical examples of attributes 

with financial value. The final 

regulations at § 1.48E(h)–1(f)(2) also 

include minor edits for clarity, 

including revisions to § 1.48E(h)– 

1(f)(2)(iv)(C) (Example 3), to clarify the 

calculation of financial benefits for 

Category 4 facilities when there is no or 

nominal cost of participation. 

The preamble to the Proposed 

Regulations also stated that the Treasury 

Department and the IRS were 

considering adding other methods, apart 

from bill credit discounts, for financial 

benefits to be shared with Qualifying 

Households. The Proposed Regulations 

requested comments on alternative 

methods for delivering financial benefits 

in cases in which bill credit discounts 

are not available or are not feasible for 

covered technologies. The Proposed 

Regulations also requested comment on 

how alternative financial benefits could 

be verified and how to limit the 

potential impact of financial benefits on 

potential recipients’ income taxes and 

eligibility for public assistance 

programs. 

Comments were mixed regarding the 

inclusion of alternative financial 

benefits, other than the bill credit 

discount rate in Category 4. Although 

several commenters opposed alternative 

financial benefit delivery methods, 

many commenters supported 

alternatives and requested that the 

framework for other methods allowed 

under Category 3 be applied to Category 

4. A commenter stated that some 

Federally assisted housing is not able to 

apply under Category 3 because the 

housing does not have the proper roof 

or adequate parcel size to support the 

facility. In these situations, the 

commenter stated that households in 

master-metered buildings should be able 

to benefit as a Category 4 project and the 

financial benefits should be applied as 

they are in Category 3. A commenter 

suggested that Category 4 benefits could 

be defined and distributed using the 

same HUD documents, verification 

protocols, and Benefit Sharing 

Statement as used in Category 3. 

Another commenter similarly suggested 

that HUD regulations should be 

promulgated to allow for building 

improvements, and list, as an example, 

adding wi-fi service for tenants. 

Regarding the tax treatment of financial 

benefits for the residents of the 

Qualifying Households, one commenter 

requested that the final regulations 

provide that financial benefits are not 

taxable. 

The statutory requirements for a 

Category 4 facility are distinctly 

different than Category 3 facility 

requirements. For example, the statutory 

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

requires Category 4 financial benefits be 

‘‘provided to households’’ that meet 

specific income limits. An applicant is 

required to demonstrate that the 

participating households meet the 

statutory income limits, and further, 

prove that a minimum of fifty percent of 

the financial benefits of the electricity 

produced by the facility are distributed 

to Qualifying Households. In contrast, 

the statutory language for Category 3 

requires that the financial benefits be 

allocated equitably to the occupants of 


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2852 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

the residential rental building with 

which this energy facility is associated. 

The alternative financial benefit options 

to bill credit discount that are provided 

under Category 3 may be provided 

indirectly to the building as a whole as 

long as the benefit is equitably 

distributed among the occupants of the 

dwelling units of the building. Because 

of this requirement, alternative financial 

delivery methods that serve the whole 

building can be easily distributed for 

Category 3 facilities because all 

occupants must be within the 

residential rental building. 

Further, investments in applicable 

facilities may require other investments, 

such as a new roof that can support a 

solar installation. Whether an applicant 

chooses to make such investments in 

order to be eligible for to apply under 

a certain category is a decision that is 

unique to each applicant and is outside 

the scope of these final regulations. 

Therefore, § 1.48E(h)–1(f) of the final 

regulations do not adopt these 

comments. The final regulations also do 

not adopt the comments related to 

promulgating HUD regulations because 

such regulations are issued pursuant to 

HUD’s authority. Lastly, the final 

regulations do not adopt comments 

regarding the tax treatment of financial 

benefits because that is outside of the 

scope of these regulations. 

Proposed § 1.48E(h)–1(f)(3)(i) would 

require applicants to establish that 

financial benefits are provided to 

Qualifying Households as defined in 

proposed § 1.48E(h)–1(f)(1), by 

submitting documentation in 

accordance with guidance published in 

the Internal Revenue Bulletin. The 

Proposed Regulations also would 

provide that a Qualifying Household’s 

low-income status is determined at the 

time the household enrolls in the 

subscription program and does not need 

to be re-verified. 

Proposed § 1.48E(h)–1(f)(3)(ii) would 

further provide methods that applicants 

could use to establish that a household 

is a Qualifying Household, including 

the ability to use categorical eligibility 

or other income verification methods. 

Proposed § 1.48E(h)–1(f)(3)(ii)(A) would 

provide that categorical eligibility 

consists of obtaining proof of the 

household’s participation in a needsbased Federal, State, Tribal, or utility 

program with income limits at or below 

the qualifying income level required to 

be a Qualifying Household, and 

included a non-exclusive list of Federal 

programs which could be used for 

categorical eligibility verification. 

Proposed § 1.48E(h)–1(f)(3)(ii)(A) would 

also clarify that the qualifying income 

level for a Qualifying Household is 

based on where such household is 

located. 

Proposed § 1.48E(h)–1(f)(3)(ii)(B) 

would provide other income verification 

methods including paystubs, Federal or 

State tax returns, or income verification 

through crediting agencies and 

commercial data. Proposed § 1.48E(h)– 

1(f)(3)(ii)(C) would provide that a selfattestation from a household is not a 

permissible method to establish a 

household is a Qualifying Household 

but clarified that this prohibition on 

direct self-attestation from a household 

did not extend to categorical eligibility 

for needs-based programs with income 

limits that rely on self-attestation for 

verification of income. 

Commenters requested clarifications 

of and additions to the income 

verification methods. One commenter 

observed that, without clarification or 

modification, the requirements set forth 

in Proposed Regulations will not lead to 

verification methods that demonstrate 

that a particular household necessarily 

meets the income parameters of section 

48(e)(2)(C). 

In response to these comments, the 

documentation requirements have been 

modified in the final regulations for 

Category 4. The predecessor program 

under section 48(e) required taxpayers 

who had been awarded an allocation for 

a Category 4 facility to submit a 

spreadsheet showing a calculation of the 

projected financial benefits for the 

facility and a list of subscribers with the 

method used to verify income for each 

subscriber. The final regulations 

eliminate the subscriber list as a 

Category 4 documentation requirement 

under the section 48E(h) Program and 

modify the spreadsheet documentation 

rule to instead require the submission of 

a statement by the applicant to 

demonstrate how the applicant will 

fulfill the financial benefits distribution 

requirements. 

The final regulations provide at 

§ 1.48E–1(f)(3) that a Demonstration of 

Financial Benefits statement is required, 

which includes certain information to 

demonstrate that the financial benefits 

requirements will be met based on the 

expected annual energy produced by the 

as-built facility at the time it is placed 

in service and during the recapture 

period under section 48E(h)(5) and 

§ 1.48E(h)–1(n). The statement must 

include a calculation of the total 

financial value of annual electricity 

production, the bill credit discount rate 

calculation, and a description of the 

means of distributing the required 

benefits to Qualifying Households. With 

the Demonstration of Financial Benefits 

statement, the taxpayer must provide 

documentation showing the facility is 

enrolled in a utility tariff, program, or 

other arrangement to distribute financial 

benefits to Qualifying Households. 

Additional information regarding the 

Demonstration of Financial Benefits 

statement will be included in guidance 

published in the Internal Revenue 

Bulletin to explain submission 

requirements at application and at 

placed in service reporting. 

Section 1.48E(h)–1(f)(4) of the final 

regulations retains portions of the 

income verification rules as a 

recordkeeping requirement. With the 

decision to exclude the predecessor 

program subscriber list requirement 

from the Program under section 48E(h), 

taxpayers will not be required to 

directly report the method of 

verification used for each household as 

part of placed in service reporting. 

However, to submit an accurate 

application and Demonstration of 

Financial Benefits statements, and to 

appropriately claim the section 48E(h) 

Increase, taxpayers must have a process 

to verify that the requisite percentage of 

their subscribers are Qualifying 

Households, so that the taxpayer will be 

able to fulfill the Category 4 financial 

benefits requirements under section 

48E(h)(2)(C) and § 1.48E(h)–1(f)(1) and 

(2). Moreover, in the event of an audit, 

taxpayers must be able to provide 

documentation to prove, that, for each 

year of the recapture period, the 

taxpayer has fulfilled the financial 

benefits requirements under section 

48E(h)(2)(C) and § 1.48E(h)–1(f)(1) and 

(2), validly claimed the credit, and is 

qualified to retain the section 48E(h) 

Increase. See the recapture rules under 

§ 1.48E(h)–1(n) and section 48E(h)(5). 

Regarding comments requesting more 

clarity and additions to the list of needsbased programs which can be used for 

categorical eligibility verification, the 

final regulations will not provide an 

exhaustive list of Federal or Tribal 

programs and will not provide any list 

regarding State or utility programs. The 

list included in the Proposed 

Regulations was limited to examples 

where it could readily be established 

that the Federal programs have the same 

income limit requirements as this 

Program does for Category 4 Qualifying 

Households. The illustrative list was 

intended to provide examples of types 

of programs which are need-based and 

that would demonstrate that the 

household is a Qualifying Household 

based on participation in that program. 

To prevent further confusion, the 

illustrative list of Federal programs is 

not included in the final regulations. 

For reference purposes, the illustrative 

list of Federal programs from the 

Proposed Regulations will be included 


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in procedural guidance for the Program 

that will be published in the Internal 

Revenue Bulletin. 

Regarding a list of State or utility level 

eligible programs, such programs are too 

numerous and varied for the Treasury 

Department and the IRS to provide a 

list, even just for illustrative purposes. 

Moreover, whether a household meets 

the income limits is dependent on the 

location of that household. Therefore, it 

is the responsibility of the taxpayer 

seeking the section 48E(h) Increase, to 

determine whether a program, Federal 

or otherwise, has the same income 

limitations as required for Qualifying 

Households, and, if documentation 

proving that a member or members of a 

household participate in such is 

sufficient to qualify that household as a 

Qualifying Household. 

The final regulations also do not 

adopt the proposed rule regarding state 

agency documentation. The proposed 

rule was only intended to clarify that 

documentation from State agencies may 

be acceptable provided the program 

associated with the documentation had 

the same income limit requirements. 

However, the general rule already 

provides that State program 

documentation is acceptable for 

categorical eligibility, and therefore this 

additional rule was unnecessary. 

Section 1.48E(h)–1(f)(4)(ii) provides 

that applicants may use categorical 

eligibility verification or direct income 

verification methods to establish that a 

household is a Qualifying Household. 

Section 1.48E(h)–1(f)(4)(ii) provides that 

applicants may use categorical 

eligibility verification or direct income 

verification methods to establish that a 

household is a Qualifying Household. 

Section 1.48E(h)–1(f)(4)(ii)(A) defines 

categorical eligibility consistent with 

the general definition from the Proposed 

Regulations, excluding the illustrative 

list of Federal programs and the 

discussion of state agencies. Section 

1.48E(h)–1(f)(4)(ii) also includes 

language that an individual in the 

household must currently be approved 

for assistance from or participation in a 

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. This 

language was adopted from another 

paragraph in the same section of the 

Proposed Regulations. Finally, the term 

other income verification methods, from 

the Proposed Regulations has been 

revised to direct income verification, but 

otherwise § 1.48E(h)–1(f)(4)(ii) adopts 

the language from the Proposed 

Regulations. 

V. Annual Capacity Limitation 

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

annual Capacity Limitation is 1.8 

gigawatts of DC capacity for each 

calendar year during the period 

beginning on January 1, 2025, and 

ending on December 31 of the 

applicable year (as defined in section 

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

§ 1.48E(h)–1(g)(1) would provide that 

the Capacity Limitation would be 

divided across the four facility 

categories described in section 

48E(h)(2)(A)(iii) and proposed 

§ 1.48E(h)–1(b)(2), and that the 

distribution of the annual Capacity 

Limitation would be announced in 

future guidance published in the 

Internal Revenue Bulletin. 

Some commenters requested that the 

Program retain the Capacity Limitation 

distributions established for the 

predecessor program under section 

48(e). These commenters observed that 

maintaining the distribution will 

encourage facility development in 

categories that were undersubscribed in 

the predecessor program. To promote 

facility development in categories that 

were undersubscribed in the 

predecessor program and to provide 

greater certainty in the Program, the 

Treasury Department and the IRS revise 

proposed § 1.48E(h)–1(g)(1), and 

§ 1.48E(h)–1(g)(1) of the final 

regulations provides, in added Table 1, 

the annual Capacity Limitation 

distribution across facility categories for 

each Program year. Additionally, Table 

2 has been added to new § 1.48E(h)– 

1(g)(2) to provide the distribution of 

Capacity Limitation within Category to 

the Category 1 sub-reservations 

(described in § 1.48E(h)–1(i) of the final 

regulations and Section VII of these 

Summary of Comments and Explanation 

of Revisions). 

Proposed § 1.48E(h)–1(g)(1) would 

also provide that, after the Capacity 

Limitation for each facility category is 

established in guidance published in the 

Internal Revenue Bulletin, it may be 

reallocated later across facility 

categories and sub-reservation in the 

event one category or sub-reservation is 

oversubscribed and another has excess 

capacity. Proposed § 1.48E(h)–1(g)(1) 

would also clarify that a facility 

category or sub-reservation is 

oversubscribed if it receives qualified 

applications in excess of Capacity 

Limitation reserved for the facility 

category or sub-reservation. 

To provide clarity on the 

redistribution process of Capacity 

Limitation during a Program year, the 

final regulations add procedural rules to 

§ 1.48E(h)–1(g)(2)(i) through (iv). These 

procedural rules detail the process by 

which the annual Capacity Limitation 

described in § 1.48E(h)–1(g)(1) will be 

redistributed in the event that some 

categories are undersubscribed and 

others oversubscribed. Additionally, 

§ 1.48E(h)–1(g)(3) includes the 

definition for oversubscribed that was 

proposed in § 1.48E(h)–1(g)(1) and adds 

a coordinating definition for the term 

undersubscribed. 

Proposed § 1.48E(h)–1(g)(2) would 

provide that if the annual Capacity 

Limitation for any calendar year exceeds 

the aggregate amount of annual Capacity 

Limitation allocated for a calendar year 

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

the annual Capacity Limitation for the 

succeeding calendar year shall be 

increased by the amount of such excess. 

No comments were received on this 

proposed rule. The final regulations 

adopt this rule with some clarifications 

at § 1.48E(h)–1(g)(4). The final 

regulations provide that any unallocated 

Capacity Limitation carried over from 

the preceding year will be equally 

distributed across Category 1, 2, 3, and 

4, and further equally distributed across 

non-Additional Selection Criteria and 

Additional Selection Criteria 

reservations. Section 1.48E(h)–1(g)(3) 

also provides that within Category 1, the 

portion distributed from the carried over 

Capacity Limitation will be equally 

distributed across Category 1 subreservations and further across the 

reserves for Additional Selection 

Criteria within those sub-reservations. 

Finally, § 1.48E(h)–1(g)(5) has been 

added to the final regulations to clarify 

how allocations of Capacity Limitation 

in DC, which is stipulated in section 

48E(h)(4)(C), are made to facilities 

which have a nameplate capacity 

measured in AC. Section 1.48E(h)– 

1(g)(5) provides that applicable facilities 

that have a nameplate capacity in AC 

and that are awarded an allocation, will 

be awarded an amount of Capacity 

Limitation in DC that is equal to the 

facility’s reported nameplate capacity in 

AC. 

VI. Additional Selection Criteria 

Proposed § 1.48E(h)–1(h)(1) would 

provide that at least 50 percent of the 

total Capacity Limitation in each facility 

category will be reserved for facilities 

meeting criteria described in proposed 

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

criteria) and proposed § 1.48E(h)–1(h)(3) 

(relating to geographic criteria). In the 

Proposed Regulations and in these final 

regulations the ownership criteria and 

the geographic criteria are collectively 

referred to as Additional Selection 

Criteria. 


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Proposed § 1.48E(h)–1(h)(1) would 

also provide that, after the reservation of 

Capacity Limitation for qualified 

facilities meeting the Additional 

Selection Criteria described in proposed 

§ 1.48E(h)–1(h)(2) and (3) is established 

in guidance published in the Internal 

Revenue Bulletin, it may be reallocated 

later across facility categories and subreservations in the event one category or 

sub-reservation within a category is 

oversubscribed and another has excess 

capacity. 

No comments were submitted directly 

addressing these general Proposed 

Regulations for Additional Selection 

Criteria. However, one commenter 

encouraged consideration of other 

potential Additional Selection Criteria, 

such as facilities that provide increased 

financial benefits to qualifying lowincome households or that are located 

on previously developed sites, such as 

building rooftops, at brownfield sites, 

and co-located with other infrastructure, 

because projects that meet these criteria 

could create greater community impact. 

The final regulations do not adopt this 

recommendation because the 

commenter did not establish how other 

potential Additional Selection Criteria 

could potentially create greater 

community impact. Further, apart from 

Additional Selection Criteria, the 

Program reserves Capacity Limitation 

for BTM facilities located on rooftops. 

The Additional Selection Criteria 

established under proposed § 1.48E(h)– 

1(h) allows applicants to be evaluated 

for eligibility under the Additional 

Selection Criteria, and therefore, an 

increased chance for an allocation 

award based on characteristics of the 

applicant and facility, and without the 

need to compare applicants. 

The final regulations generally adopt 

proposed § 1.48E(h)–1(h)(1) with the 

addition that if eligible applications for 

facilities that meet at least one of the 

two Additional Selection Criteria 

categories received during the initial 30- 

day period total less than 50 percent of 

the Capacity Limitation for a category, 

then additional Capacity Limitation 

would be reserved during the rolling 

application period such that 50 percent 

of the total Capacity Limitation in the 

category would be reserved for these 

facilities. 

However, the final regulations revise 

§ 1.48E(h)–1(h)(1) to account for the 

inclusion of the distribution of annual 

Capacity Limitation across categories 

and the redistribution within a Program 

year in these final regulations under 

§ 1.48E(h)–1(g). The final regulations 

clarify that, at the beginning of an 

application period, the reservation for 

Additional Selection Criteria applicants 

is 50 percent of the Capacity Limitation 

reserved for each category or Category 1 

sub-reservation. The final regulations 

retain the informational language that 

specific procedures under Additional 

Selection Criteria will be provided in 

guidance published in the Internal 

Revenue Bulletin. 

Comments regarding specific criteria 

under either the Ownership Criteria 

category or the Geographic Criteria 

category are summarized and addressed 

where appropriate in the sections 

following this paragraph. 

A. Ownership Criteria 

1. In General 

Proposed § 1.48E(h)–1(h)(2)(i) would 

provide criteria based on ownership 

(Ownership Criteria), stating that the 

Ownership Criteria category is based on 

characteristics of the applicant that 

owns the applicable facility. Proposed 

§ 1.48E(h)–1(h)(2)(i) would provide that 

an applicable facility meets the 

Ownership Criteria if it is owned by a 

Tribal enterprise, an Alaska Native 

Corporation, a Native Hawaiian 

Organization, a renewable energy 

cooperative, or a qualified tax-exempt 

entity. 

No comments were submitted 

regarding this general definition, and, 

therefore, the final regulations adopt 

this general rule without modification. 

2. Indirect Ownership 

Proposed § 1.48E(h)–1(h)(2)(ii)(A) 

would provide that if an applicant 

wholly owns an entity that is the owner 

of an applicable facility, and the entity 

is disregarded as separate from its 

owner for Federal income tax purposes 

(disregarded entity), then the applicant, 

and not the disregarded entity, is treated 

as the owner of the applicable facility 

for purposes of the Ownership Criteria. 

No comments were submitted on this 

proposed rule. Section 1.48E(h)– 

1(h)(2)(ii)(A) of the final regulations 

adopts the proposed rule with a 

clarification that disregarded entities are 

not eligible for an award and may not 

submit an application. The final 

regulations at § 1.48E(h)–1(h)(2)(ii)(A) 

also provide that for entities wholly 

owned and chartered under Tribal law 

and corporations incorporated under the 

authority of either section 17 of the 

Indian Reorganization Act of 1934, 25 

U.S.C. 5124 or section 3 of the 

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

5203, an application may be made as a 

Tribal Enterprise. 

3. Partner Qualifying Partnership 

Proposed § 1.48E(h)–1(h)(2)(ii)(B) 

would provide that if an applicant is an 

entity classified as a partnership for 

Federal income tax purposes, and an 

entity described in proposed § 1.48E(h)– 

1(h)(2)(i)(A) through (E) owns at least a 

one percent interest (either directly or 

indirectly) in each material item of 

partnership income, gain, loss, 

deduction, and credit and is a managing 

member or general partner (or similar 

title) under State or Tribal law of the 

partnership (or directly owns 100 

percent of the equity interests in the 

managing member or general partner) at 

all times during the existence of the 

partnership, the applicable facility will 

be deemed to meet the ownership 

criteria. Proposed § 1.48E(h)– 

1(h)(2)(ii)(B) would provide that if the 

partnership becomes the owner of the 

facility after an allocation is made to an 

entity described in proposed § 1.48E(h)– 

1(h)(2)(i)(A) through (E), the transfer of 

the facility to the partnership is not a 

disqualification event for purposes of 

proposed § 1.48E(h)–1(m)(5), so long as 

the requirements of proposed 

§ 1.48E(h)–1(m)(5) are satisfied. 

Proposed § 1.48E(h)–1(h)(2)(ii)(B) would 

provide that 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. 

No comments were received on this 

proposed rule. The final regulations 

adopt the proposed rules without 

modification at § 1.48E(h)–1(h)(2)(ii)(B). 

4. Definitions 

i. Tribal Enterprise 

Proposed § 1.48E(h)–1(h)(2)(iii) would 

provide that a ‘‘Tribal enterprise’’ for 

purposes of the Ownership Criteria is an 

entity that is (1) owned at least 51 

percent directly by an Indian Tribal 

government (as defined in section 

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

51 percent indirectly through an entity 

that is wholly owned by the Indian 

Tribal government and is created either 

under the Tribal laws of the Indian 

Tribal government or through a 

corporation incorporated under the 

authority of either section 17 of the 

Indian Reorganization Act of 1934, 25 

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

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

5203, and (2) subject to Tribal 

government rules, regulations, and/or 

codes that regulate the operations of the 

entity. 

ii. Alaska Native Corporation 

Proposed § 1.48E(h)–1(h)(2)(iv) would 

provide that an ‘‘Alaska Native 

Corporation’’ for purposes of the 


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Ownership Criteria is defined in section 

3 of the Alaska Native Claims 

Settlement Act, 43 U.S.C. 1602(m). 

iii. Native Hawaiian Organization 

Proposed § 1.48E(h)–1(h)(2)(v) would 

provide that a ‘‘Native Hawaiian 

Organization’’ for purposes of the 

Ownership Criteria is defined in 13 CFR 

124.3. 

iv. Renewable Energy Cooperative 

Proposed § 1.48E(h)–1(h)(2)(vi) would 

provide that a ‘‘renewable energy 

cooperative’’ for purposes of the 

Ownership Criteria is an entity that 

develops applicable facilities and is 

either (1) a consumer or purchasing 

cooperative controlled by its members 

with each member having an equal 

voting right and with each member 

having rights to profit distributions 

based on patronage as defined by 

proportion of volume of energy or 

energy credits purchased (kWh), volume 

of financial benefits delivered ($), or 

volume of financial payments made ($), 

and in which at least 50 percent of the 

patronage in the qualified facility is by 

cooperative members who are lowincome households (as defined in 

section 48E(h)(2)(C)); or (2) a worker 

cooperative controlled by its workermembers with each member having an 

equal voting right. 

v. Qualified Tax-Exempt Entity 

Proposed § 1.48E(h)–1(h)(2)(vii) 

would provide that a ‘‘qualified taxexempt entity’’ for purposes of the 

Ownership Criteria is: 

(1) An organization exempt from the 

tax imposed by subtitle A of the Code 

by reason of being described in section 

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

(2) Any State, the District of 

Columbia, or political subdivision 

thereof, or any agency or 

instrumentality of any of the foregoing; 

(3) An Indian Tribal government (as 

defined in section 30D(g)(9)), a political 

subdivision thereof, or any agency or 

instrumentality of any of the foregoing; 

or 

(4) Any corporation described in 

section 501(c)(12) operating on a 

cooperative basis that is engaged in 

furnishing electric energy to persons in 

rural areas. 

No comments were submitted 

regarding the proposed definitions of 

Tribal Enterprise, Alaska Native 

Corporation, Native Hawaiian 

Organization, and Renewable Energy 

Cooperative. The final regulations adopt 

the proposed definitions without 

change, except that corporation in the 

definition of Tribal enterprise is 

replaced with ‘‘entity.’’ 

However, several commenters 

representing the low-income housing 

credit (commonly referred to as LIHTC) 

industry stated that the definition of 

qualified tax-exempt entity should be 

revised to reflect LIHTC partnership 

structure. According to these 

commenters, a LIHTC partnership 

generally has an investor with a 99.9 

percent ownership interest and the taxexempt or nonprofit entity has an 0.01 

percent ownership interest. Because the 

Proposed Regulations require that a 

qualified tax-exempt entity own a one 

percent interest in each material item of 

the partnership to qualify the 

partnership for Additional Selection 

Criteria, these commenters asserted that 

this requirement is incompatible with 

the ownership structure commonly used 

for LIHTC financed developments. 

These commenters alternatively 

requested the final regulations clarify 

that a special allocation of depreciation 

and any associated credits would not be 

considered to be a ‘‘material item’’ in 

determining one percent ownership. 

The Treasury and the IRS understand 

commenters’ concerns and the 

unintended impacts to LIHTC 

applicants that are seeking to install 

clean energy facilities on their qualified 

low-income residential building 

projects. Accordingly, the final 

regulations at § 1.48E–1(h)(2)(ii)(C) 

revise the Ownership Criteria to allow 

an applicant to include any partnership 

that (1) owns an applicable facility 

connected to a residential building to 

which credits under section 42 of the 

Code are reasonably anticipated or have 

been determined and (2) has a partner 

for Federal income tax purposes that is 

a qualified tax-exempt (or another 

eligible entity identified § 1.48E(h)– 

1(h)(2)(i)(A) through (E)) to qualify the 

partnership for the purposes of 

Ownership Criteria. Section 1.48E– 

1(h)(2)(ii)(C) of the final regulations 

provides that the transfer of the facility 

to the partnership is not a 

disqualification event for purposes of 

§ 1.48E(h)–1(m)(5) or subject to 

recapture for purposes of § 1.48E(h)– 

1(m), so long as the requirements of 

§ 1.48E(h)–1(m)(5) are satisfied. This 

modification is limited only to 

applicable facilities that are part of a 

section 42 LIHTC building. 

5. Emerging Market Business 

The preamble to the Proposed 

Regulations indicated that the Treasury 

Department and the IRS were proposing 

not to carry over to the Program under 

section 48E(h), the qualified renewable 

energy company (QREC) category of 

Ownership Criteria described in 

§ 1.48(e)–1(h)(2)(vi) from the 

predecessor program under section 

48(e). However, the preamble further 

stated that the Treasury Department and 

the IRS considered including a category 

for emerging market businesses, defined 

as those businesses that do not have 

large market shares that could be 

demonstrated by the number of 

employees, annual revenue, and other 

factors, similar to the QREC category 

from the predecessor Program under 

section 48(e). The Proposed Regulations 

requested comment on options to 

include an Ownership Criteria category 

for emerging market businesses, similar 

to the former QREC category. This 

request specifically asked for comments 

on how an administrable emerging 

market business Ownership Criteria 

category could be structured, including 

what thresholds a definition should 

include to define market share and size, 

age of business, the number of 

employees (both minimum and 

maximum) and/or annual gross receipts 

generated by an emerging market 

business, and the supporting 

documentation that could be provided 

as part of the application to verify an 

applicant meets such criteria. 

Some commenters expressed general 

support for including an emerging 

market business category but offered no 

further detail or advice. Several other 

commenters noted that they qualified as 

QRECs under the section 48(e) program 

and asked that the final regulations use 

the same criteria for ‘‘emerging market 

business’’ Ownership Criteria. One 

commenter stated that they understood 

that this particular Ownership Criteria 

might be more burdensome than the 

other criteria in the Ownership Criteria 

category but asked that the QREC 

criteria be retained in the section 48E(h) 

Program and final regulations. This 

commenter seemed focused on burden 

to the potential applicants by stating 

that the QREC requirements for majority 

ownership by individuals and company 

size thresholds were workable, and that 

it would not be an undue burden for 

companies in the QREC size range to 

provide tax returns, financial 

statements, operating agreements, and 

other business organizational 

documents. 

The QREC category, as with all 

Additional Selection Criteria, was 

intended to help create a more efficient 

allocation process and help ensure that 

allocations were made to the types of 

applicants and projects that support the 

purposes of the Program. However, the 

QREC criteria instead resulted in a 

disproportionate administrative burden. 

Applicants frequently applied as QRECs 

that did not meet the criteria or failed 

to submit complete information, causing 


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2https://www.ers.usda.gov/data-products/countytypology-codes/. 3https://screeningtool.geoplatform.gov/en/#3/ 

33.47/-97.5, or a successor website such as IRS.gov. 

delays in the allocation process across 

the program. In response to these 

comments and in part based on their 

administration of the predecessor 

program under section 48(e), the 

Treasury Department and the IRS have 

clarified and streamlined the QREC 

definition used in the predecessor 

section 48(e) program to make this 

criterion more administrable. 

Specifically, the QREC definition was 

revised to provide more detail on 

affiliated entities so as to provide 

taxpayer certainty and promote sound 

tax administration. Section 1.48E(h)– 

1(h)(2)(i)(F) has been added to the final 

regulations to include QREC as an 

eligible Ownership Criteria category, 

and § 1.48E(h)–1(h)(2)(viii) has been 

added to the final regulations to define 

QREC. The final regulations provide 

several changes from the section 48(e) 

program QREC definition. 

First, the definition provided in the 

final regulations clarifies that QRECs 

must have a general business purpose to 

serve low-income communities or lowincome households. Second, the final 

regulations remove the option that at 

least 51 percent of the entity’s 

ownership interest are owned or 

controlled by a Community 

Development Corporation (as defined in 

13 CFR 124.3), an agricultural or 

horticultural cooperative (as defined in 

section 199A(g)(4)(A) of the Code), an 

Indian Tribal government (as defined in 

section 30D(g)(9)), an Alaska Native 

corporation (as defined in section 3 of 

the Alaska Native Claims Settlement 

Act, 43 U.S.C. 1602(m)), or a Native 

Hawaiian organization (as defined in 13 

CFR 124.3). These entities are removed 

from the definition because they are 

eligible for Additional Selection Criteria 

as other Ownership criteria. Therefore, 

the final regulations provide that at least 

51 percent of the entity’s equity 

interests are owned and controlled by 

one or more individuals. Third, the final 

regulations clarify that entity affiliation 

for the purposes of determining both the 

number of full-time equivalent 

employees and annual gross receipts is 

defined as: (1) 25 percent or more of an 

entity’s board seats, voting rights, or 

equity interests, are cumulatively held 

by another entity and related entities (as 

described in described in sections 

267(b) or 707(b)(1) of the Code); or (2) 

one or more of an entities’ officers, 

directors, managing members or 

partners with authority over the board 

of directors or management and 

operations also have authority over the 

board of directors or management and 

operations of another entity. Lastly, the 

final regulations remove the 

requirement included in the section 

48(e) program that a QREC must have 

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). 

Proposed § 1.48E(h)–1(h)(2)(ii)(B), 

regarding a partner qualifying a 

partnership for purposes of the 

Ownership Criteria, has also been 

revised to note that this paragraph is not 

applicable to QREC applicants. Under 

the regulations for the predecessor 

program under section 48(e), a partner 

that qualified as a QREC and held the 

requisite interest amount in the 

partnership could qualify the 

partnership as a QREC. Moreover, a 

QREC that received an allocation was 

permitted to transfer the allocation to a 

partnership without triggering 

disqualification if the original applicant 

that qualified as a QREC remained in 

the partnership and met the requisite 

interest requirements in the partnership. 

This inclusion of QRECs under 

§ 1.48(e)–1(h)(2)(ii)(B) (the regulations 

for the predecessor program under 

section 48(e)), at times, proved to be 

incompatible with the purpose of 

establishing QRECs as an Ownership 

Criteria category, which was to 

prioritize small, emerging market 

businesses for an allocation. Instead, 

some applicants utilized the presence of 

a small business partner to then qualify 

a partnership that is not a small 

business. Moreover, the inclusion of 

QRECs to qualify a partnership was 

often in conflict with the QREC 

affiliated entities threshold 

requirements. Therefore, to eliminate 

confusion and any conflict between the 

Ownership Criteria provision, these 

final regulations for the program under 

section 48E(h) exclude QRECs from the 

partner qualifying a partnership 

provisions under § 1.48E(h)– 

1(h)(2)(ii)(B). 

B. Geographic Criteria 

Proposed § 1.48E(h)–1(h)(3) would 

provide criteria based on geography 

(Geographic Criteria). As described in 

the preamble of the Proposed 

Regulations, the Geographic Criteria 

category is based on where the facility 

will be placed in service. Geographic 

Criteria do not apply to Category 2 

facilities. To meet the Geographic 

Criteria, a facility needs to be located in 

a Persistent Poverty County (PPC) 2 as 

described in proposed § 1.48E(h)– 

1(h)(3)(ii) or in certain census tracts 

identified on the CEJST3 and as 

described in proposed § 1.48E(h)– 

1(h)(3)(iii). 

Proposed § 1.48E(h)–1(h)(3)(ii) would 

describe a PPC as any county where 20 

percent or more of residents have 

experienced high rates of poverty over 

the past 30 years. Proposed § 1.48E(h)– 

1(h)(3)(ii) would provide that for 

purposes of the Program, the Proposed 

Regulations would use the PPC measure 

adopted by the United States 

Department of Agriculture (USDA) to 

make this determination. 

No comments were received 

recommending modification of these 

rules, and the Proposed Regulations 

related to Geographic Criteria are 

adopted in the final regulations at 

§ 1.48E(h)–1(h)(3)(ii) without 

modification. 

VII. Sub-Reservations of Allocation for 

Facilities Located in a Low-Income 

Community 

Proposed § 1.48E(h)–1(i)(1) would 

subdivide the Capacity Limitation 

reservation for facilities seeking a 

Category 1 allocation with a portion of 

the Capacity Limitation specifically 

reserved for eligible residential behind 

the meter (BTM) facilities, including 

rooftop solar. This is because the subreservation of a substantial portion of 

the allocation in Category 1 for eligible 

residential BTM facilities would help 

ensure that allocations predominantly 

are awarded to facilities serving 

residences and consumers, rather than 

facilities serving businesses. Proposed 

§ 1.48E(h)–1(i)(1) would reserve the 

remaining Capacity Limitation in 

Category 1 for applicants with front of 

the meter (FTM) facilities as well as 

non-residential BTM facilities. Proposed 

§ 1.48E(h)–1(i)(1) would clarify that the 

specific amounts of the Category 1 subreservations will be provided in future 

guidance published in the Internal 

Revenue Bulletin that is applicable to a 

Program year based on factors such as 

promoting efficient allocation of 

Capacity Limitation and allowing likeprojects to compete for an allocation. 

Proposed § 1.48E(h)–1(i)(1) would 

provide that after the sub-reservation is 

established in guidance published in the 

Internal Revenue Bulletin, it may be 

reallocated later in the event it has 

excess capacity. 

One commenter generally supported 

the proposal contained in the Proposed 

Regulations to create a sub-reservation 

of Category 1 Capacity Limitation for 


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residential BTM facilities under 

proposed § 1.48E(h)–1(i). No other 

comments were submitted on this 

proposal. The final regulations under 

§ 1.48E(h)–1(i) adopt the proposed rule 

without modification. 

VIII. Application and Selection Process 

Section 48E(h)(4)(A) provides that 

‘‘[i]n establishing such program and to 

carry out the purposes of this 

subsection, the Secretary shall provide 

procedures to allow for an efficient 

allocation process.’’ In part based on 

their administration of the predecessor 

program under section 48(e), the 

Treasury Department and the IRS 

anticipate that the number of eligible 

applicants within any given category 

seeking an allocation may exceed the 

total Capacity Limitation allocation 

available to be allocated. Accordingly, 

the Treasury Department and the IRS 

are designing an application process 

that both ensures that allocations are 

awarded to facilities that advance the 

program goals and facilitates an efficient 

allocation process. 

Proposed § 1.48E(h)–1(j)(1) would 

provide that applications for a Capacity 

Limitation allocation will be evaluated 

according to the procedures specified in 

guidance published in the Internal 

Revenue Bulletin. Based on feedback 

received with respect to the section 

48(e) predecessor program and an 

assessment of operational capabilities 

set up to administer the Program under 

section 48E(h), the preamble to the 

Proposed Regulations explained that the 

expected process would include one or 

more initial application windows in 

which applications received by a certain 

time and date would be evaluated 

together, followed by a rolling 

application process. The final 

regulations add § 1.48E(h)–1(j)(4) to 

establish the annual application period. 

Section 1.48E(h)–1(j)(4) also adds 

certain procedural rules to explain the 

initial 30-day application window in 

which applications received by a certain 

time and date would be evaluated 

together, followed by a rolling 

application process. Additionally, 

§ 1.48E(h)–1(j)(4) explains the process 

by which Additional Selection Criteria 

applications are prioritized for review 

and allocations from a particular 

reservation of Capacity Limitation. 

Section 48E(h)(4)(A) directs the 

Secretary to provide procedures to allow 

for an efficient allocation process. 

Additionally, section 48E(h)(4)(E)(i) 

requires that facilities allocated an 

amount of Capacity Limitation be 

placed in service within four years of 

the date of allocation. To promote 

efficient allocation, and to ensure that 

allocations will be awarded to facilities 

that are sufficiently viable and well 

defined to allow for a review for an 

allocation, and sufficiently advanced 

such that they are likely to meet the 

four-year placed in service deadline, 

proposed § 1.48E(h)–1(j)(2) would 

require applicants, when applying for 

an allocation, to submit certain 

information, documentation, and 

attestations that demonstrate project 

eligibility and viability. Proposed 

§ 1.48E(h)–1(j)(2) would clarify that the 

specific information, documentation, 

and attestations to be submitted will be 

provided in guidance published in the 

Internal Revenue Bulletin that is 

applicable to a Program year. 

Several comments discussed 

documentation requirements and 

related procedural requirements. These 

comments specifically requested 

exemptions from having to provide 

documentation or requested the ability 

to provide alternate documentation due 

to circumstances specific to that 

commenter or specific to a State or 

utility. Comments regarding specific 

documentation or procedural 

requirements are outside the scope of 

these regulations. State and local rules 

for energy-generating facilities and lowincome clean energy programs vary 

considerably, and procedures for those 

rules may not be relevant to or 

compatible with the requirements under 

section 48E(h). Consistent with the 

statute, the Treasury Department and 

the IRS seek to establish an efficient 

application and allocation process, as 

well as promote certainty for applicants 

as to how their application is being 

reviewed. To do so, documentation and 

procedural requirements must be 

standardized to the extent appropriate 

and possible, and it would not promote 

sound tax administration to create 

separate requirements for each applicant 

based on their specific circumstances. 

The Treasury Department and the IRS 

will periodically assess the Program to 

determine whether to make any changes 

to the Program’s application process. 

Specific information related to 

documentation and procedural 

requirements will be provided in 

guidance published in the Internal 

Revenue Bulletin. The Treasury 

Department and the IRS expect that the 

specific application information, 

documentation, and attestation 

requirements provided in procedural 

guidance applicable to the Program 

published in the Internal Revenue 

Bulletin will be substantially similar to 

requirements applicable the section 

48(e) Low-Income Communities Bonus 

Program provided in Revenue Procedure 

2024–19, 2024–16 I.R.B. 899. Like the 

section 48(e) program, some 

requirements may differ for FTM and 

BTM facilities and other requirements 

may differ by facility category and 

Additional Selection Criteria. The final 

regulations under § 1.48E(h)–1(j)(1) 

through (2) adopt the proposed rules 

without modification. 

Although no specific comments were 

submitted in response to the Proposed 

Regulations regarding recordkeeping, 

the Treasury Department and the IRS 

determined that, in the interest of sound 

tax administration, a record retention 

rule is necessary in addition to the 

specific information, documentation, 

and attestation requirements set forth in 

the Proposed Regulations. Consistent 

with the current applicable periods of 

limitations under section 6501 of the 

Code on assessment and collection of 

tax under chapter 1 with respect to the 

applicable taxpayer’s return filed for the 

taxable year, § 1.48E(h)–1(o) of the final 

regulations provide that the applicant is 

required to retain records and materials 

related to the application for the 

following periods: (1) for at least 6 years 

after the due date (with extensions) for 

filing the Federal income tax return after 

the tax year that return is filed to claim 

the increase in the section 48E credit; 

and (2) for at least 6 years after the due 

date (with extensions) for filing the 

Federal income tax return for the last 

year that the applicant could be subject 

to recapture as described in § 1.48E(h)– 

1(n). These records are considered 

general tax records under § 1.6001–1(e), 

and they are required for the IRS to 

validate that taxpayers have met the 

regulatory requirements and are entitled 

to receive the section 48E(h) Increase. 

Proposed § 1.48E(h)–1(j)(3) would 

provide that there is no administrative 

appeal of Capacity Limitation allocation 

decisions. No comments were submitted 

on this provision, and the final 

regulations at § 1.48E(h)–1(j)(3) adopt 

this rule without modification. 

IX. Placed in Service 

A. Documentation and Attestations To 

Be Submitted When Facility Is Placed in 

Service 

Proposed § 1.48E(h)–1(k)(1) would 

require facilities that received a 

Capacity Limitation allocation to report 

to the Department of Energy (DOE) the 

date the applicable facility was placed 

in service. Proposed § 1.48E(h)–1(k)(2) 

would require facilities that received a 

Capacity Limitation to submit 

additional documentation or complete 

additional attestations with this 

reporting. At the time of application, 

applicants would not necessarily be able 


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to demonstrate compliance with certain 

eligibility requirements, as the facility 

would not yet be operating at that time. 

Requiring placed in service reporting 

will allow for final verification that the 

facilities that were awarded a Capacity 

Limitation Allocation have met certain 

eligibility requirements under the 

Program. Therefore, proposed 

§ 1.48E(h)–1(k)(2) would require 

facilities awarded a Capacity Limitation 

to submit final eligibility information at 

the time of placed in service. 

Proposed § 1.48E(h)–1(k)(3) would 

provide that the DOE will review the 

placed in service documentation and 

attestations to determine if the facility 

meets the eligibility criteria for the 

owner to claim an increased applicable 

percentage. Proposed § 1.48E(h)–1(k)(3) 

would provide that the 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 proposed § 1.48E(h)–1(m)). 

Proposed § 1.48E(h)–1(k)(3) would 

generally provide that the IRS reviews 

recommendations, and if deemed 

appropriate, issues the final eligibility 

letter. 

No comments were submitted 

regarding documentation and 

attestations to be submitted when 

placed in service. The final regulations 

adopt proposed § 1.48E(h)–1(k) with 

minor edits to clarify technical 

procedures. 

B. Placed in Service Prior to Allocation 

Award 

Proposed § 1.48E(h)–1(l)(1) would 

provide that facilities that are placed in 

service prior to being awarded an 

allocation of Capacity Limitation will 

not be eligible to receive an allocation. 

Proposed § 1.48E(h)–1(l)(2) would 

provide that 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. 

Several commenters recommend that 

§ 1.48E(h)–1(l)(2) be modified so that an 

award is not rescinded if a Category 1 

facility is placed in service after 

submitting an application but prior to 

receiving the allocation award. These 

commenters asserted that this rule is 

problematic and disruptive in practice 

for residential-serving rooftop solar 

projects that have shorter development 

timelines. 

The Treasury Department and the IRS 

do not adopt this recommendation, and 

§ 1.48E(h)–1(l)(2) is adopted without 

modification. Awarding an allocation to 

facilities that have already been placed 

in service would be inconsistent with 

the statute and the goal of the Program 

to promote investment in new clean 

electricity facilities. Section 

48E(h)(4)(E)(i) provides that a facility 

must be placed in service within four 

years of receiving an allocation of 

Capacity Limitation, indicating that 

allocations should be made to new 

facilities that have not yet been placed 

in service. Accordingly, facilities placed 

in service prior to being awarded an 

allocation of Capacity Limitation are 

ineligible to receive an allocation. The 

final regulations maintain the use of a 

Category 1 sub-reservation for facilities 

that serve BTM facilities to support 

timely review of applications serving 

residential-serving rooftop solar projects 

that have shorter development 

timelines. 

X. Post-Allocation Compliance 

A. Disqualification After Receiving an 

Allocation 

Proposed § 1.48E(h)–1(m) would 

provide that a facility that was awarded 

a Capacity Limitation allocation is 

disqualified and loses its allocation if 

prior to or upon the facility being placed 

in service: (1) the location where the 

facility will be placed in service 

changes; (2) the maximum net output of 

the facility increases such that it 

exceeds the less than five megawatt 

requirement provided in section 

48E(h)(2)(A)(ii) or the nameplate 

capacity decreases by the greater of 2 

kW or 25 percent of the Capacity 

Limitation awarded in the allocation; (3) 

the facility cannot satisfy the financial 

benefits requirements under section 

48E(h)(2)(B)(ii) and proposed 

§ 1.48E(h)–1(e) as planned (if 

applicable) or cannot satisfy the 

financial benefits requirements under 

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

§ 1.48E(h)–1(f) as planned (if 

applicable); (4) the eligible property that 

is part of the facility that received the 

Capacity Limitation allocation is not 

placed in service within four years after 

the date the applicant was notified of 

the allocation of Capacity Limitation to 

the facility or the facility that received 

the Capacity Limitation allocation is 

placed in service ahead of allocation of 

award; 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, unless the original applicant 

transfers the facility to an entity 

classified as a partnership for Federal 

income tax purposes and retains at least 

a one percent interest (either directly or 

indirectly) in each material item of 

partnership income, gain, loss, 

deduction, and credit of such 

partnership and is a managing member 

or general partner (or similar title) under 

State or Tribal law of the partnership (or 

directly owns 100 percent of the equity 

interests in the managing member or 

general partner) at all times during the 

existence of the partnership. No 

comments were received related to 

proposed § 1.48E(h)–1(m), and this rule 

is adopted without modification. 

B. Recapture of Section 48E(h) Increase 

Section 48E(h)(5) requires the 

Secretary, by regulations or other 

guidance, to provide rules for 

recapturing the benefit of any section 

48E(h) Increase with respect to any 

property that ceases to be property 

eligible for such section 48E(h) Increase 

(but that does not cease to be investment 

credit property within the meaning of 

section 50(a) of the Code). The period 

and percentage of such recapture is 

determined under rules similar to the 

rules of section 50(a). To the extent 

provided by the Secretary, such 

recapture may not apply with respect to 

any property if, within 12 months after 

the date the applicant becomes aware 

(or reasonably should have become 

aware) of such property ceasing to be 

property eligible for such section 48E(h) 

Increase, the eligibility of such property 

for such section 48E(h) Increase is 

restored. Such restoration of a section 

48E(h) Increase is not available more 

than once with respect to any facility. 

Proposed § 1.48E(h)–1(n)(1) would 

provide that if, at any time during the 

five year recapture period beginning on 

the date that an applicable facility under 

section 48E(h) is placed in service, there 

is a recapture event under proposed 

§ 1.48E(h)–1(n)(3) with respect to such 

property, then the Federal income tax 

imposed on the taxpayer by chapter 1 of 

the Code for the taxable year in which 

the recapture event occurs is increased 

by the recapture percentage of the 

benefit of the increase in the section 48E 

credit. Proposed § 1.48E(h)–1(n)(1) 

would provide that the recapture 

percentage is determined according to 

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

Proposed § 1.48E(h)–1(n)(2) would 

provide that recapture under proposed 

§ 1.48E(h)–1(n)(1) may not have applied 

with respect to any property if, within 

12 months after the date the applicant 

becomes aware (or reasonably should 

have become aware) of such property 

ceasing to be property eligible for such 

increase in the credit allowed under 

section 48E(a), the eligibility of such 

property for such increase pursuant to 

section 48E(h) is restored. Proposed 


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§ 1.48E(h)–1(n)(2) would provide that 

such restoration of an increase pursuant 

to section 48E(h) is not available more 

than once with respect to any facility. 

Proposed § 1.48E(h)–1(n)(3) would 

describe that the following 

circumstances result in a recapture 

event if the property ceases to be 

eligible for the increased credit under 

section 48E(h): (1) property described in 

section 48E(h)(2)(A)(iii)(II) fails to 

provide financial benefits over the 5- 

year period after its original placed in 

service date; (2) property described 

under section 48E(h)(2)(B) ceases to 

allocate the financial benefits equitably 

among the occupants of the dwelling 

units, such as not passing on to 

residents the required net energy 

savings of the electricity; (3) property 

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

ceases to provide at least 50 percent of 

the financial benefits of the electricity 

produced to Qualifying Households as 

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

or (ii), or fails to provide those 

households the required minimum 30 

percent bill credit discount rate; (4) for 

property described under section 

48E(h)(2)(B), the residential rental 

building the facility is a part of ceases 

to participate in a covered housing 

program or any other housing program 

described in section 48E(h)(2)(B)(i), if 

applicable; and (5) a facility increases 

its maximum net output such that the 

facility’s maximum net output is 5 MW 

AC or greater. 

Proposed § 1.48E(h)–1(n)(4) would 

provide that any event that results in 

recapture under section 50(a) also will 

result in recapture of the benefit of the 

increase in the section 48E credit by 

reason of section 48E(h). Proposed 

§ 1.48E(h)–1(n)(4) would provide that 

the exception to the application of 

recapture provided in proposed 

§ 1.48E(h)–1(n)(2) did not apply in the 

case of a recapture event under section 

50(a). 

No comments were received related to 

the recapture provisions contained in 

the Proposed Regulations. Accordingly, 

these recapture provisions are adopted 

in the final regulations without 

modification. 

Applicability Date 

The final regulations set forth apply to 

applicable facilities that are placed in 

service after December 31, 2024, and 

during taxable years ending on or after 

January 13, 2025. 

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 48E(h) 

Increase. This information in the 

collections of information would 

generally be used 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 

§ 1.6001–1(e). These records are 

required for IRS to validate that 

taxpayers have met the regulatory 

requirements and are entitled to receive 

the section 48E(h) 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 provide 

reporting requirements related to 

providing attestations and supporting 

documentation for initial application, 

supplemental documentation for 

specific facilities, and to confirm a 

facility is placed in service as detailed 

in these final regulations. These 

attestations and documentation would 

allow IRS to allocate Capacity 

Limitation and ensure taxpayers keep 

and maintain compliance for the credits. 

To assist with the collections of 

information, the IRS will procure 

certain administration services for the 

Program. Among other things, these 

administration services will include 

establishing a website portal to review 

the applications for eligibility criteria 

and providing 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 1545–2327 for review and 

approval in accordance with 5 CFR 

1320.11. The likely respondents are 

business filers, individual filers, and 

tax-exempt organization filers. A 

summary of paperwork burden 

estimates for the application and 

attestations is as follows: 

Estimated number of respondents: 

70,000. 

Estimated burden per response: 60 

minutes. 

Estimated frequency of response: 1 for 

initial applications, 1 for follow-up 

documentation, and 1 for projects 

placed in service. 

Estimated total burden hours: 210,000 

burden hours. 

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 Regulations. 

As described in the relevant portions of 

this preamble, the Treasury Department 

and the IRS believe that the 

documentation requirements are 

necessary to administer the Program. 

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 likely 

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. 


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1. Need for and Objectives of the Rule 

The final regulations provide 

guidance to potential applicants to 

determine eligibility to apply for an 

allocation of Capacity Limitation under 

section 48E(h), and, in general, to 

taxpayers awarded an allocation of 

Capacity Limitation to understand the 

requirement to claim the section 48E(h) 

Increase. The final regulations are 

expected to encourage applicants to 

invest in applicable facilities. Thus, the 

Treasury Department and the IRS intend 

and expect that the final rule will 

deliver benefits across the economy and 

environment that will beneficially 

impact various industries. 

2. Significant Issues Raised by Public 

Comments in Response to the IRFA 

There were no comments filed that 

specifically addressed the Proposed 

Regulations 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 

The Small Business Administration 

estimates in its 2018 Small Business 

Profile that 99.9 percent of United States 

businesses meet its definition of a small 

business. The applicability of the final 

regulations does not depend on the size 

of the business, as defined by the Small 

Business Administration. As described 

more fully in the preamble to this final 

regulation and in the FRFA, these rules 

may affect a variety of different 

businesses across serval different 

industries. 

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 

section II. (Paperwork Reduction Act) of 

the Special Analyses. In particular, 

section II. of the Special Analyses 

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 

the 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 

requests from stakeholders that 

potential applicants be able to place a 

facility in service before applying for or 

receiving an allocation of Capacity 

Limitation. The Treasury Department 

and the IRS determined it would not be 

possible to accommodate this request in 

the final regulations because the 

statutory language under section 

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

be placed in service by a date that is 4 

years after the date of the allocation. 

Moreover, facilities that were placed in 

service prior to the allocation process do 

not increase adoption of and access to 

renewable energy facilities, as compared 

to the absence of the Program, and so do 

not further Program goals. 

Another example is the revisions to 

the list of eligible housing programs that 

can be found in the Summary of 

Comments and Explanation of Revisions 

section of this document. In the 

preamble to Treasury Decision 9979, 

applicable to the Low-Income 

Communities Bonus Credit Program 

established under section 48(e), the 

HUD tenant-based rental assistance 

under section 8 of the United States 

Housing Act of 1937 was included as 

eligible housing program. The Treasury 

Department and the IRS considered 

retaining tenant-based housing 

assistance programs. However, after 

consulting with HUD, it was determined 

that tenant-based assistance is 

assistance that can only be attributed to 

a particular tenant, and not a building. 

Under section 48E(h)(2)(B), for a facility 

to qualify as a being part of a qualified 

low-income residential building project, 

the facility must be installed on a 

residential rental building that 

participates in a covered housing 

program or other affordable housing 

program (that is, a Qualified Residential 

Property). Tenant-based housing 

assistance programs applicable to a 

particular tenant do not qualify the 

building in which the tenant resides as 

participating in a covered housing 

program or other affordable housing 

program. Therefore, because tenantbased assistance under Section 8 does 

not comport with the requirements 

under section 48E(h)(2)(B), tenant-based 

housing assistance programs under 

Section 8 have been removed as an 

eligible housing program for purposes of 

the Program under section 48E(h). 

Additionally, the Treasury 

Department and the IRS considered 

excluding the sub-reservation for 

Category 1 facilities for eligible 

residential BTM facilities but concluded 

that this sub-reservation should be 

included in the Program. The subreservation of a substantial portion of 

the allocation in Category 1 for eligible 

residential BTM facilities would help 

ensure that allocations are 

predominantly awarded to facilities 

serving residences and consumers, 

rather than facilities serving businesses. 

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 Indian Tribal 

government, in the aggregate, or by the 

private sector, of $100 million (updated 

annually for inflation). This final rule 

does not include any Federal mandate 

that may result in expenditures by State, 

local, or Indian Tribal governments, or 

by the private sector in excess of that 

threshold. 

V. Executive Order 13132: Federalism 

Executive Order 13132 (Federalism) 

prohibits an agency from publishing any 

rule that has federalism implications if 

the rule either imposes substantial, 

direct compliance costs on State and 

local governments, and is not required 

by statute, or preempts State law, unless 

the agency meets the consultation and 

funding requirements of section 6 of the 

Executive order. These regulations do 

not have federalism implications and 

does not impose substantial direct 

compliance costs on State and local 

governments or preempt State law 

within the meaning of the Executive 

order. 

VI. Executive Order 13175: 

Consultation and Coordination With 

Indian Tribal Governments 

Executive Order 13175 (Consultation 

and Coordination With Indian Tribal 

Governments) prohibits an agency from 

publishing any rule that has Tribal 

implications if the rule either imposes 

substantial, direct compliance costs on 

Indian Tribal governments, and is not 

required by statute, or preempts Tribal 


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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 

does not impose substantial direct 

compliance costs on Indian Tribal 

governments within the meaning of the 

Executive order. 

Nevertheless, on September 27, 2024, 

the Treasury Department and the IRS 

held a consultation with Tribal leaders 

requesting assistance in addressing 

questions related to Low-Income 

Communities Bonus Credit Amount 

Program, which informed the 

development of these regulations. 

VII. Congressional Review Act 

Pursuant to the Congressional Review 

Act (CRA) (5 U.S.C. 801 et seq.), the 

Office of Information and Regulatory 

Affairs has determined that this rule 

meets the criteria set forth in 5 U.S.C. 

804(2). 

VIII. Immediate Effective Date 

These final regulations have an 

effective date of January 13, 2025. To 

the extent that a good cause statement 

is necessary under any provision of law, 

the Treasury Department and the IRS 

find that there would be good cause to 

make this rule immediately effective 

upon publication in the Federal 

Register. The IRA added the section 48E 

credit to the Code, and provided that the 

section 48E credit applies to property 

placed in service after December 31, 

2024. Pursuant to the IRA, section 

48E(h)(4)(A) directs the Secretary, not 

later than January 1, 2025, to establish 

a program to allocate amounts of 

Capacity Limitation to applicable 

facilities and to ‘‘provide procedures to 

allow for an efficient allocation’’ of 

Capacity Limitation to applicable 

facilities. In addition, the public already 

has been provided notice of the general 

contents of the rules in the proposed 

regulations and their proposed 

applicability to applicable facilities 

placed in service after December 31, 

2024, and during taxable years ending 

on or after the date of publication of 

these final regulations. As provided in 

the IRA, section 48E(h) replaces the 

existing low-income communities bonus 

credit program for applicable facilities 

placed in service after December 31, 

2024. The statute and proposed 

regulations, therefore, provide notice 

that the rules will apply to applicable 

facilities placed in service beginning in 

2025, and provide notice of the 

qualification requirements being 

promulgated in this final rule. 

The Treasury Department and the IRS 

have determined that an expedited 

effective date of the final regulations is 

appropriate here because of the January 

1, 2025, deadline to establish the 

Program and to provide certainty to 

taxpayers. 

Consistent with Executive Order 

14008 (January 27, 2021), and 

commenters’ requests for final rules, the 

Treasury Department and the IRS have 

determined that an expedited effective 

date of the final regulations is 

appropriate here given the statutory 

deadline to establish the Program and to 

provide certainty to taxpayers. The final 

regulations provide needed rules on 

what the law requires for taxpayers to 

begin job-generating construction of 

capital-intensive projects qualifying for 

section 48E(h). Making the final 

regulations effective as soon as possible 

will also prevent delays in enabling 

low-income households to access costsaving clean electricity in 2025 given 

the transition from section 48(e) to 

section 48E(h). Accordingly, to the 

extent that a finding of good cause is 

necessary, the Treasury Department and 

the IRS have found good cause for the 

rules in this Treasury decision to take 

effect on the date of publication in the 

Federal Register. 

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, 26 CFR part 1 is 

amended as follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 is amended by adding an entry 

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

read in part as follows: 

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

* * * * * 

Section 1.48E(h)–1 also issued under 26 

U.S.C. 48E(i). 

* * * * * 

■ Par. 2. Sections 1.48E(h)–0 and 

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

§ 1.48E(h)–0 Table of contents. 

This section lists the captions 

contained in § 1.48E(h)–1. 

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

Program. 

(a) Overview. 

(1) General rule. 

(2) Certain terms used in this section. 

(i) Applicant. 

(ii) Disregarded entity. 

(iii) Internal Revenue Bulletin. 

(b) Applicable facility defined. 

(1) In general. 

(2) Facility categories. 

(i) Category 1 facility. 

(ii) Category 2 facility. 

(iii) Category 3 facility. 

(iv) Category 4 facility. 

(3) Less than five megawatts requirement. 

(i) In general. 

(ii) Nameplate capacity for purposes of the 

less than five megawatts requirement. 

(iii) Nameplate capacity for an applicable 

facility that generates in direct current for 

purposes of the less than five megawatts 

requirement. 

(iv) Integrated operations. 

(4) Related taxpayers. 

(c) Eligible property. 

(d) Location. 

(1) In general. 

(2) Nameplate Capacity Test for Location. 

(3) Nameplate capacity for purpose of 

Nameplate Capacity Test for Location. 

(e) Financial benefits for a Category 3 

facility. 

(1) In general. 

(2) Threshold requirement. 

(3) Financial value of the electricity 

produced by the facility. 

(4) Gross financial value defined. 

(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) With cost to participate. 

(ii) No or nominal cost of participation. 

(iii) Calculation on annual basis. 

(iv) Examples. 

(A) Example 1. 

(B) Example 2. 

(C) Example 3. 

(3) Demonstration of financial benefits 

statement. 

(4) Low-income verification and 

recordkeeping. 


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(i) In general. 

(ii) Methods of verification. 

(A) Categorical eligibility. 

(B) Direct income verification methods. 

(C) Impermissible verification method. 

(g) Annual Capacity Limitation. 

(1) In general. 

(2) Sub-reservations. 

(3) Redistribution within Program year. 

(4) Carryover of unallocated Annual 

Capacity Limitation. 

(5) Allocations to applicable facilities with 

nameplate capacity in alternating current. 

(h) Reservations of Capacity Limitation 

allocation for facilities that meet certain 

Additional Selection Criteria. 

(1) In general. 

(2) Ownership criteria. 

(i) In general. 

(ii) Indirect ownership. 

(A) Disregarded entities. 

(B) Partner qualifying partnership under 

ownership criteria. 

(C) Partner qualifying partnership 

involving low-income housing credit under 

ownership criteria. 

(iii) Tribal enterprise. 

(iv) Alaska Native Corporation. 

(v) Native Hawaiian Organization. 

(vi) Renewable energy cooperative. 

(vii) Qualified tax-exempt entity. 

(viii) Qualified renewable energy company. 

(3) Geographic criteria. 

(i) In general. 

(ii) Persistent Poverty County. 

(iii) Certain census tracts under Climate 

and Economic Justice Screening Tool. 

(A) Energy burden. 

(B) PM2.5. 

(C) Low-income. 

(i) Sub-reservations of allocation for 

Category 1 facilities. 

(1) In general. 

(2) Definitions. 

(i) Behind the meter (BTM) facility. 

(ii) Eligible residential BTM facility. 

(iii) FTM facility. 

(j) Process of application evaluation. 

(1) In general. 

(2) Information required as part of 

application. 

(3) No administrative appeal of Capacity 

Limitation allocation decisions. 

(4) Application period. 

(i) Opening and closing dates. 

(ii) Initial 30-day period. 

(iii) Applications submitted after the initial 

30-day period. 

(A) In general. 

(B) Additional Selection Criteria 

Applications submitted after the initial 30- 

day period. 

(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) Confirmation. 

(4) Definition of placed in service. 

(l) Facilities placed in service prior to an 

allocation award. 

(1) In general. 

(2) Rejection or rescission. 

(m) Disqualification. 

(n) Recapture of section 48E(h) Increase to 

the section 48E(a) credit. 

(1) In general. 

(2) Exception to application of recapture. 

(3) Recapture events. 

(4) Section 50(a) recapture. 

(o) Record retention. 

(p) Applicability date. 

§ 1.48E(h)–1 Clean Electricity Low-Income 

Communities Bonus Credit Amount 

Program. 

(a) Overview—(1) General rule. For 

purposes of section 46 of the Internal 

Revenue Code (Code), if an allocation of 

the capacity limitation (Capacity 

Limitation) is made with respect to 

eligible property (as defined in 

paragraph (c) of this section) that is part 

of any applicable facility (as defined in 

paragraph (b) of this section) placed in 

service in connection with low-income 

communities under the Clean Electricity 

Low-Income Communities Bonus Credit 

Amount Program (Program) established 

under section 48E(h)(4), the applicable 

percentage used to calculate the amount 

of the clean electricity investment credit 

determined under section 48E(a) 

(section 48E credit) is increased under 

section 48E(h)(1). 

(2) Certain terms used in this section. 

In this section: 

(i) Applicant. The terms applicant 

and taxpayer are used interchangeably 

as the context may require. An applicant 

is the taxpayer that owns the applicable 

facility and that intends to claim the 

section 48E credit and will be applying 

for an allocation of Capacity Limitation 

for purposes of the section 48E(h) 

Increase. A disregarded entity is not 

eligible to be an applicant. The regarded 

taxpayer that owns the disregarded 

entity is the owner of the applicable 

facility and, therefore, the applicant, for 

purposes of the Program and this 

section. 

(ii) Disregarded entity. The term 

disregarded entity means an entity that 

is disregarded as separate from its 

owner for Federal income tax purposes. 

(iii) Internal Revenue Bulletin. The 

term Internal Revenue Bulletin has the 

meaning provided in § 601.601 of this 

chapter. 

(b) Applicable facility defined—(1) In 

general. An applicable facility means 

any qualified facility (as defined in 

section 48E(b)(3)) that— 

(i) Is a non-combustion and 

gasification facility for which the 

Secretary of the Treasury or her delegate 

has determined has a greenhouse gas 

(GHG) emissions rate of not greater than 

zero and announced in guidance 

published either in the Federal Register 

or in the Internal Revenue Bulletin as of 

the opening date for a Program year; 

(ii) Has a maximum net output of less 

than five megawatts (MW) (as measured 

in alternating current (AC)); and 

(iii) Is described in at least one of the 

four categories described in section 

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

this section. 

(2) Facility categories—(i) Category 1 

facility. A facility is a Category 1 facility 

if it is located in a low-income 

community. The term low-income 

community is defined under section 

45D(e)(1) of the Code as any population 

census tract for which the poverty rate 

is at least 20 percent based on the most 

recently released American Community 

Survey (ACS) low-income community 

data currently used for the New Markets 

Tax Credit (NMTC) under section 45D, 

or, in the case of a tract not located 

within a metropolitan area, the median 

family income for such tract does not 

exceed 80 percent of statewide median 

family income, or, in the case of a tract 

located within a metropolitan area, the 

median family income for such tract 

does not exceed 80 percent of the 

greater of statewide median family 

income or the metropolitan area median 

family income. The term low-income 

community also includes the 

modifications in section 45D(e)(4) and 

(5) for tracts with low population and 

modification of the income requirement 

for census tracts with high migration 

rural counties. Low-income community 

information for NMTC can be found at 

https://www.cdfifund.gov/cims3. For 

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

updated ACS low-income community 

data is released for the NMTC, a 

taxpayer can choose to base the poverty 

rate for any population census tract on 

either the prior version of the 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 

must be used to determine the poverty 

rate for any population census tract. 

Population census tracts that satisfy the 

definition of low-income community at 

the time of application are considered to 

continue to meet the definition of 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 


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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 as described 

in section 48E(h)(2)(B)(i) (Qualified 

Residential Property) and the financial 

benefits of the electricity produced by 

such facility are allocated equitably 

among the occupants of the dwelling 

units of such building as provided in 

paragraph (e) of this section. A 

Qualified Residential Property could 

either be a multifamily rental property 

or single-family rental property. 

However, the building, and not merely 

the tenants, must participate in a 

covered housing program or other 

affordable housing program described in 

section 48E(h)(2)(B)(i). A facility does 

not need to be installed directly on the 

building to be considered installed on a 

Qualified Residential Property if the 

facility is installed on the same or an 

adjacent parcel of land as the Qualified 

Residential Property, and the other 

requirements to be a Category 3 facility 

are satisfied. 

(iv) Category 4 facility. A facility is a 

Category 4 facility if it is part of a 

qualified low-income economic benefit 

project. A facility will be treated as part 

of a qualified low-income economic 

benefit project if, as provided in 

paragraph (f) of this section, at least 50 

percent of the financial benefits of the 

electricity produced by such facility are 

provided to households with income of 

less than— 

(A) Two-hundred percent of the 

poverty line (as defined in section 

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

a family of the size involved; or 

(B) Eighty percent of area median 

gross income (as determined under 

section 142(d)(2)(B) of the Code). 

(3) Less than five megawatts 

requirement—(i) In general. For 

purposes of this paragraph (b), the less 

than five megawatts requirement in 

paragraph (b)(1)(ii) of this section is 

measured at the level of the applicable 

facility in accordance with section 

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

output of an applicable facility is 

measured only by nameplate generating 

capacity of the applicable facility, 

which includes only functionally 

interdependent components of the 

applicable facility, at the time the 

applicable facility is placed in service. 

Components of property are 

functionally interdependent if the 

placing in service of each component is 

dependent upon placing in service other 

components to produce electricity. 

(ii) Nameplate capacity for purposes 

of the less than five megawatts 

requirement. The determination of 

whether an applicable facility has a 

maximum net output of less than 5 MW 

(as measured in AC) is based on the 

nameplate capacity of the applicable 

facility. If an applicable facility has 

integrated operations with one or more 

other qualified facilities of the same 

technology type, then the aggregate 

nameplate capacity of the applicable 

facility and each other qualified facility 

is used to determine whether the less 

than five megawatts requirement in 

paragraph (b)(1)(ii) of this section is 

met. If an applicable facility has a 

maximum net output equal to or more 

than 5MW (as measured in AC), it is not 

eligible for the Program. The nameplate 

capacity for purposes of the less than 

five megawatts requirement in 

paragraph (b)(1)(ii) of this section is the 

maximum electrical generating output 

in MW that the applicable facility is 

capable of producing on a steady state 

basis and during continuous operation 

under standard conditions, as measured 

by the manufacturer and consistent with 

the definition of nameplate capacity 

provided in 40 CFR 96.202. If 

applicable, the International Standard 

Organization conditions should be used 

to measure the maximum electrical 

generating output of an applicable 

facility. 

(iii) Nameplate capacity for an 

applicable facility that generates in 

direct current for purposes of the less 

than five megawatts requirement. Only 

for applicable facilities that generate 

electricity in direct current, the taxpayer 

may choose to determine the maximum 

net output (in alternating current) of the 

applicable facility by using the lesser of: 

(A) The nameplate generating 

capacity of the applicable facility in 

direct current, which is deemed the 

nameplate generating capacity of the 

applicable facility in alternating current; 

or 

(B) The nameplate capacity of the first 

component of property that inverts the 

direct current electricity into alternating 

current. 

(iv) Integrated operations. For the 

purposes of the less than five megawatts 

requirement in paragraph (b)(1)(ii) of 

this section, an applicable facility is 

treated as having integrated operations 

with one or more other qualified 

facilities of the same technology type if 

the facilities are: 

(A) Owned by the same or related 

taxpayers; 

(B) Placed in service in the same 

taxable year; and 

(C) Transmit electricity generated by 

the facilities through the same point of 

interconnection or, if the facilities are 

not grid-connected or are delivering 

electricity directly to an end user 

behind a utility meter, are able to 

support the same end user. 

(4) Related taxpayers—(i) Definition. 

For purposes of this paragraph (b), the 

term related taxpayers means members 

of a group of trades or businesses that 

are under common control (as defined 

in § 1.52–1(b)). 

(ii) Related taxpayer rule. For 

purposes of this paragraph (b), related 

taxpayers are treated as one taxpayer in 

determining whether an applicable 

facility has integrated operations. 

(c) Eligible property. Eligible property 

means a qualified investment (as 

defined in section 48E(b)) with respect 

to any applicable facility. 

(d) Location—(1) In general. An 

applicable facility is treated as located 

in a low-income community or located 

on Indian land under section 

48E(h)(2)(A)(iii)(I) if the applicable 

facility satisfies the requirements of the 

Nameplate Capacity Test for Location of 

paragraph (d)(2) of this section. 

Similarly, an applicable facility is 

treated as located in a geographic area 

under the Additional Selection Criteria 

described in paragraph (h) of this 

section if it satisfies the Nameplate 

Capacity Test for Location. 

(2) Nameplate Capacity Test for 

Location. An applicable facility satisfies 

the requirements of the Nameplate 

Capacity Test for Location of this 

paragraph (d)(2) and is considered 

located in or on the relevant geographic 

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

section if 50 percent or more of the 

applicable facility’s nameplate capacity 

is in a qualifying area. The percentage 

of an applicable facility’s nameplate 

capacity (as defined in paragraph (d)(3) 

of this section) that is in a qualifying 

area is determined by dividing the 

nameplate capacity of the applicable 

facility’s electricity-generating units that 

are located in the qualifying area by the 

total nameplate capacity of all the 

electricity-generating units of the 

applicable facility. 

(3) Nameplate capacity for purpose of 

Nameplate Capacity Test for Location. 

Nameplate capacity for an electricity 

generating unit means the maximum 

electrical output that the applicable 

facility is capable of producing on a 

steady state basis and during continuous 

operation under standard conditions, as 

measured by the manufacturer and 

consistent with the definition of 

nameplate capacity provided in 40 CFR 

96.202. If applicable, the International 

Standard Organization conditions 

should be used to measure the 

maximum electrical generating output. 

For purposes of assessing the Nameplate 

Capacity Test, electricity-generating 

units that generate direct current (DC) 


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power before converting to AC (for 

example, solar photovoltaic), should use 

nameplate capacity in DC, otherwise the 

nameplate capacity in AC should be 

used. 

(e) Financial benefits for a Category 3 

facility—(1) In general. To satisfy the 

requirements of a Category 3 facility as 

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

section, the financial benefits of the 

electricity produced by the facility must 

be allocated equitably among the 

occupants of the dwelling units of the 

Qualified Residential Property. The 

same rules for financial benefits for 

Category 3 facilities apply to both multifamily property and single-family 

Qualified Residential Property. 

(2) Threshold requirement. At least 50 

percent of the financial benefits of the 

electricity produced by the applicable 

facility (as defined in paragraph (e)(3) of 

this section) must be allocated equitably 

to the Qualified Residential Property’s 

occupants that are designated as lowincome occupants under the covered 

housing program or other affordable 

housing program. 

(3) Financial value of the electricity 

produced by the facility. Financial 

benefits are calculated as the financial 

value of the electricity produced by the 

applicable facility. For purposes of this 

paragraph (e), financial value of the 

electricity produced by the facility 

means the greater of: 

(i) 25 percent of the gross financial 

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

this section) of the annual electricity 

produced by the applicable facility; or 

(ii) The net financial value (as defined 

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

annual electricity produced by the 

applicable facility. 

(4) Gross financial value defined. For 

purposes of this paragraph (e), gross 

financial value of the annual electricity 

produced by the applicable facility 

means the sum of: 

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

facility multiplied by the Qualified 

Residential Property’s metered 

volumetric price of electricity; 

(ii) The total exported kilowatt-hours 

produced by the applicable facility 

multiplied by the Qualified Residential 

Property’s volumetric export 

compensation rate for the type of 

electricity produced by the applicable 

facility per kilowatt-hour; and 

(iii) The sale of any attributes 

associated with the applicable facility’s 

production (including, for example, any 

Federal, State, Tribal, or utility 

incentives or renewable energy 

certificates), if separate from the 

metered price of electricity or export 

compensation rate. 

(5) Net financial value defined—(i) 

Common ownership. For purposes of 

this paragraph (e), if the facility and 

Qualified Residential Property are 

commonly owned, net financial value 

means: 

(A) The gross financial value of the 

annual electricity produced; minus 

(B) The annual average (or levelized) 

cost of the applicable facility over the 

useful life of the facility (including debt 

service, maintenance, replacement 

reserve, capital expenditures, and any 

other costs associated with constructing, 

maintaining, and operating the facility). 

(ii) Third-party ownership. For 

purposes of this paragraph (e), if the 

facility and the Qualified Residential 

Property are not commonly owned and 

the facility owner enters into a power 

purchase agreement or other contract for 

electricity services with the Qualified 

Residential Property owner and/or 

building occupants, net financial value 

means: 

(A) The gross financial value of the 

annual electricity produced; minus 

(B) Any payments made by the 

building owner and/or building 

occupants to the facility owner for 

electricity services associated with the 

facility in a given year. 

(iii) Equitable allocation of financial 

benefits. Paragraphs (e)(5)(iii)(A) and (B) 

of this section provide rules regarding 

an equitable allocation of financial 

benefits in circumstances where 

financial value is distributed to building 

occupants via utility bill savings or via 

different means, respectively. 

Distributed financial benefits or 

investments previously made to the 

Qualified Residential Property are not 

considered eligible financial benefits for 

this purpose. 

(A) If financial value distributed via 

utility bill savings. If financial value is 

distributed via utility bill savings, 

financial benefits will be considered to 

be allocated equitably if at least 50 

percent of the financial value of the 

electricity produced by the facility is 

distributed as utility bill savings in 

equal shares to each building dwelling 

unit among the Qualified Residential 

Property’s occupants that are designated 

as low-income under the covered 

housing program or other affordable 

housing program (described in section 

48E(h)(2)(B)(i)) or alternatively 

distributed in proportional shares based 

on each low-income dwelling unit’s 

square footage, or each low-income 

dwelling unit’s number of occupants. 

For any occupant(s) who choose to not 

receive utility bill savings (for example, 

who exercise their right to not 

participate in or to opt out of a 

community solar subscription in their 

applicable jurisdictions), the portion of 

the financial value that would otherwise 

be distributed to non-participating 

occupants must be distributed instead to 

all participating occupants. No less than 

50 percent of the Qualified Residential 

Property’s occupants that are designated 

as low-income must participate and 

receive utility bill savings for the facility 

to use this method of benefit 

distribution. In the case of a solar 

facility, applicants must follow 

guidance published by the Department 

of Housing and Urban Development 

(HUD) regarding benefits sharing, such 

as Treatment of Financial Benefits to 

HUD-Assisted Tenants Resulting from 

Participation in Solar Programs Notice 

(Housing Notice 2023–09), located at 

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

OCHCO/documents/2023-09hsgn.pdf, or 

other applicable HUD guidance, or other 

guidance or notices from the Federal 

agency that oversees the applicable 

housing program identified in section 

48E(h)(2)(B) to ensure that tenants’ 

annual income for rent calculations or 

other requirements impacting total 

tenant payment are not negatively 

impacted by the distribution of financial 

value. In the case of any other 

applicable facility, applicants must 

follow applicable HUD guidance on 

benefits sharing, or other guidance from 

the Federal agency that oversees the 

applicable housing program. In the 

absence of applicable guidance from a 

Federal agency, applicants should apply 

principles similar to those articulated in 

HUD guidance in the case of any other 

applicable facility. 

(B) If financial value is not distributed 

via utility bill savings. If financial value 

is not distributed via utility bill savings, 

financial benefits will be considered to 

be allocated equitably if at least 50 

percent of the financial value of the 

electricity produced by the facility is 

distributed to occupants using one or 

more methods described in HUD 

guidance regarding benefits sharing for 

master-metered HUD-assisted housing, 

such as the Treatment of Financial 

Benefits to HUD-Assisted Tenants 

Resulting from Participation in Solar 

Programs Notice (Housing Notice 2023– 

09) located at https://www.hud.gov/ 

sites/dfiles/OCHCO/documents/2023- 

09hsgn.pdf, or other applicable HUD 

guidance, or other guidance or notices 

from the Federal agency that oversees 

the applicable housing program 

identified in section 48E(h)(2)(B). In the 

case of a solar facility, applicants must 

comply with applicable HUD guidance 

for how residents of master-metered 

HUD-assisted housing can benefit from 

owners’ sharing of financial benefits 


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accrued from an investment in solar 

electricity generation to ensure that 

HUD-assisted tenants’ calculations for 

utility allowances and annual income 

for rent are not negatively impacted. In 

the absence of applicable guidance from 

a Federal agency, applicants should 

apply principles similar to those 

articulated in HUD guidance in the case 

of any other applicable facility. 

(6) Benefits sharing statement—(i) In 

general. The facility owner must 

prepare a Benefits sharing statement to 

submit at placed in service reporting, 

which must include: 

(A) A calculation of the facility’s gross 

financial value using the method 

described paragraph (e)(4) of this 

section; 

(B) A calculation of the facility’s net 

financial value using the method 

described in paragraph (e)(5) of this 

section; 

(C) A calculation of the financial 

value required to be distributed to 

building occupants using the method 

described in paragraph (e)(3) of this 

section; 

(D) A description of the means 

through which the required financial 

value will be distributed to building 

occupants; and 

(E) If the facility and Qualified 

Residential Property are separately 

owned, specify 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. The 

requirements of each of paragraph 

(f)(1)(i) through (iii) of this section must 

be met to satisfy the requirements of a 

Category 4 facility as provided in 

paragraph (b)(2)(iv) of this section. 

(i) The facility must serve multiple 

qualifying low-income households 

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

(Qualifying Household). 

(ii) At least 50 percent of the total 

financial benefits of the electricity 

produced by the applicable facility must 

be assigned to Qualifying Households. 

Total financial benefits is calculated as 

the sum of all value from electricity 

production as measured by the utility, 

independent system operator, or other 

off-taker procuring electricity, and any 

additional value (including, for 

example, any electricity services, 

products, and credits or certificates such 

as RECs provided in connection with 

the electricity produced by such facility, 

but excluding any Federal tax credits), 

from the facility. 

(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) With 

cost to participate. A bill credit discount 

rate is the difference between the 

amount of the total financial benefits 

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 by a Qualifying 

Household for participating in the 

program (including, but not limited to 

subscription payments for zero carbon 

and any other fees or charges, such as 

consolidated billing fees), expressed as 

a percentage of the amount of the total 

financial benefits provided to a 

Qualifying Household. The bill credit 

discount rate must be calculated by 

starting with the amount of the total 

financial benefits provided to a 

Qualifying Household, subtracting all 

payments made by a Qualifying 

Household (or payments remitted on 

behalf of the Qualifying Household 

through net crediting, consolidated 

billing, or similar arrangements) to the 

facility owner and any related third 

parties as a condition of receiving that 

financial benefit to determine the net 

financial benefit (cost savings) to a 

Qualified Household, then dividing that 

difference by the amount of the total 

financial benefit provided to the 

Qualifying Household. 

(ii) No or nominal cost of 

participation. In cases in which the 

Qualifying Household has no or only a 

nominal cost of participation, and 

financial benefits are delivered through 

a utility or government body, the bill 

credit discount rate must be calculated 

as the net financial benefits (cost 

savings) 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 amount of the total financial 

benefit assigned to a Qualifying 

Household. 

(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. Each month, the facility owner 

will assign a portion of the electricity 

generated (or its value) by the facility to 

the household’s utility bill, and the 

household will pay the facility owner. 

The amount the household pays the 

facility owner cannot exceed 80 percent 

of the monetary value of the assigned 

generation. The remaining 20 percent is 

a cost savings to the household on 

electricity. In this example, over the 

course of the first year the facility owner 

or their agent cause $180 in utility bill 

credits to be placed on the Qualifying 

Household’s bill, and the Qualifying 

Household pays $144, inclusive of any 

upfront fees. The subsequent year, due 

to variation in solar generation and/or 

the compensation paid by the utility for 

solar generation, the facility owner, in 

accordance with the community solar 

subscription agreement, causes $240 in 

bill credits to be provided to the 

Qualifying Household’s bill and the 

household pays $192. In each year of 

facility operation described within this 

example, a bill credit discount rate of 20 

percent is maintained (($180–$144)/ 

$180 = 20%) and (($240–$192)/$240 = 

20%), respectively. 

(B) Example 2. Due to the regulatory 

structure of the applicable jurisdiction 

or program, the terms of the community 

solar subscription, the use of a netcrediting mechanism, or other reason, 

the Qualifying Household does not 

make a direct payment to the facility 

owner, but rather payment is remitted 

on their behalf by the utility. In this 

example, over the course of the first year 

the facility owner or their agent cause 

$200 in utility bill credits to be placed 

on the Qualifying Household’s bill, and 

the Qualifying Household’s utility 

remits $160 to the facility owner, 

inclusive of any upfront fees. The 

subsequent year, due to variation in 

solar generation and/or the 

compensation paid by the utility for 

solar generation, the facility owner, in 

accordance with the community solar 

subscription agreement, causes $240 in 

bill credits to be provided to the 

Qualifying Household’s bill and the 

utility remits $192 to the facility owner. 

In each year of facility operation 

described within this example, a bill 

credit discount rate of 20 percent is 

maintained (($200–$160)/$200 = 20%) 

and (($240–$192)/$240 = 20%), 

respectively. 

(C) Example 3. Assume the facility is 

part of a program by which the financial 

benefits are delivered to 100 Qualifying 

Households through a utility or 

government body, and each Qualifying 

Household pays no cost to participate. 

Assume that the financial value of the 

electricity produced by the facility’s 

total output is $120,000 in the first year 

and $160,000 in the second year. 


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Assume that 50% of the facility’s 

financial value of the electricity is 

assigned to Qualifying Households and 

is therefore calculated as $60,000 in the 

first year ($120,000 × 50% = $60,000) 

and $80,000 in the second year 

($160,000 × 50% = $80,000). Assume 

further that each Qualifying Household 

is assigned the same total financial 

benefit ($600 in the first year and $800 

in the second year). If the bill credit 

discount rate for each Qualifying 

Household is 20 percent in each year, 

the net financial benefits (or cost 

savings) provided to each Qualifying 

Household is $120 in the first year 

($120/$600 = 20%) and $160 in the 

second year ($160/$800 = 20%). 

(3) Demonstration of financial 

benefits statement. The facility owner 

must prepare a Demonstration of 

Financial Benefits Statement, which 

must include: 

(i) A calculation of the total financial 

benefits of annual electricity 

production, as described in paragraph 

(f)(1)(ii) of this section; 

(ii) The percent of the total financial 

benefits provided and/or assigned to 

Qualifying Households; 

(iii) The bill credit discount rate 

method used (with cost to participate or 

no or nominal cost of participation); 

(iv) A calculation of the bill credit 

discount rate; 

(v) A description of the means of 

distributing the required benefits to 

Qualifying Households; and 

(vi) Documentation that the facility is 

enrolled in the applicable utility tariff, 

program, or other arrangement used to 

distribute financial benefits to 

Qualifying Households. 

(4) Low-income verification and 

recordkeeping—(i) In general. 

Taxpayers must verify that a household 

meets the income limits under section 

48E(h)(2)(C)(i) or (ii), whichever is 

applicable to the household based on 

the household’s location, for the 

household to be a Qualifying Household 

under paragraph (f)(1)(i) of this section. 

A 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. The 

qualifying income level for a Qualifying 

Household is based on where such 

household is located. Taxpayers must 

additionally maintain records of the 

verification for each household that 

prove the taxpayer has provided 

requisite percentage of financial benefits 

to Qualifying Households. 

(ii) Methods of verification. 

Applicants may use categorical 

eligibility verification or direct income 

verification methods, but not an 

impermissible verification method 

described in paragraph (f)(4)(ii)(C) of 

this section, 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. 

An individual in the household must 

currently be approved for assistance 

from or participation in a 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. 

(B) Direct income verification 

methods. Documentation like 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 

member or members of a household is 

not a permissible method to establish a 

household is a Qualifying Household. 

This prohibition on direct selfattestation from a household, for 

purposes of this Program, does not 

extend to categorical eligibility 

verification where the eligible needsbased Federal, State, Tribal, or utility 

programs with income limits rely on 

self-attestation for verification of 

income, and the taxpayer has obtained 

proof of a member or members of a 

household’s participation in such a 

program. 

(g) Annual Capacity Limitation—(1) 

In general. Under section 48E(h)(4)(C), 

the total annual Capacity Limitation is 

1.8 gigawatts of DC capacity (Annual 

Capacity Limitation) for each calendar 

year of the Program. The Annual 

Capacity Limitation for each Program 

year is divided across the four facility 

categories described in section 

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

this section 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. The initial distribution of 

the Annual Capacity Limitation for each 

Program year is: 

TABLE 1 TO PARAGRAPH (g)(1) OF

THIS SECTION

Category 

Capacity 

limitation 

(DC) 

1: Located in a Low-Income 

Community.

600 MW. 

2: Located on Indian Land ......... 200 MW. 

3: Qualified Low-Income Residential Building Project.200 MW. 

4: Qualified Low-Income Economic Benefit Project.800 MW. 

(2) Sub-reservations. The reservation 

of Capacity Limitation for Category 1 is 

further divided into Category 1 subreservations, which are described in 

paragraph (i) of this section. The 

category 1 sub-reservation distribution 

of Capacity Limitation is: 

TABLE 2 TO PARAGRAPH (g)(2) OF

THIS SECTION

Eligible FTM facilities and nonresidential BTM facilities.200 MW. 

(3) Redistribution within Program 

year. At the close of the application 

period for a Program year, if some 

categories or sub-reservations are 

undersubscribed, while others are 

oversubscribed, capacity will be 

redistributed within the Program year 

for allocation to applicants in another 

Category or sub-reservation. A category 

or sub-reservation is undersubscribed if 

the amount of capacity applied for in all 

eligible applications within a 

reservation is less than the amount of 

the Capacity Limitation portion 

distributed to that reservation. A 

category or sub-reservation is 

oversubscribed if the amount of capacity 

applied for in all eligible applications 

within a particular reservation is in 

excess of the Capacity Limitation 

portion distributed to that reservation. 

Capacity Limitation will be 

redistributed within a Program year in 

the following manner: 

(i) Capacity will first be redistributed 

within a category from the 

undersubscribed reservation to the 

oversubscribed reservation. For 

example, if the Additional Selection 

Criteria reservation is undersubscribed 

while the non-Additional Selection 

Criteria reservation is oversubscribed, 

the remaining capacity reservation for 

the Additional Selection Criteria will be 

redistributed to and increase the nonAdditional Selection Criteria reservation 

or sub-reservation in the same category. 

(ii) If there is remaining capacity in a 

category after redistribution under 

paragraph (g)(3)(i) of this section, or, in 

general, if a category is, as a whole, 


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undersubscribed such that paragraph 

(g)(3)(i) of this section does not apply to 

that category, then, any remaining 

capacity in any category will be 

redistributed to and increase the 

reservation for Category 1 residential 

BTM facilities, but only if Category 1 

residential BTM is oversubscribed. If 

both the Additional Selection Criteria 

and non-Additional Section Criteria 

reservations are oversubscribed for 

Category 1 residential BTM, then 

consistent with paragraph (h)(1) of this 

section, the redistributed capacity 

limitation will first increase the 

reservation for Additional Selection 

Criteria applications, and then if any 

capacity is remaining it will be added to 

the reservation for non-Additional 

Selection Criteria applications. 

(iii) If there is remaining capacity after 

redistribution under paragraphs (g)(3)(i) 

and (ii) of this section, or if 

redistribution under paragraph (g)(3)(ii) 

of this section is inapplicable due to 

undersubscription in Category 1 

residential BTM, then the remaining 

capacity will be redistributed to and 

increase the reservation for Category 4. 

If both the Additional Selection Criteria 

and the non-Additional Selection 

Criteria reservations under Category 4 

are oversubscribed, then consistent with 

paragraph (j)(4)(ii) of this section, the 

redistributed capacity limitation will 

first increase the reservation for 

Additional Selection Criteria 

applications, and then if any capacity is 

remaining it will be added to the 

reservation for non-Additional Selection 

Criteria applications. 

(iv) If there is remaining capacity after 

redistribution under paragraphs (g)(3)(i) 

through (iii) of this section, or if 

redistribution under paragraph (g)(3)(iii) 

of this section is inapplicable due to 

undersubscription in Category 1 

residential BTM and Category 4, then 

the remaining capacity will be 

redistributed to and increase the 

reservation for Category 3. If both the 

Additional Selection Criteria and the 

non-Additional Selection Criteria 

reservations under Category 3 are 

oversubscribed, then consistent with 

paragraph (j)(4)(ii) of this section, the 

redistributed capacity limitation will 

first increase the reservation for 

Additional Selection Criteria 

applications, and then if any capacity is 

remaining it will be added to the 

reservation for non-Additional Selection 

Criteria applications. 

(v) If there is remaining capacity after 

redistribution under paragraphs (g)(3)(i) 

through (iv) of this section, or if 

redistribution under paragraph (g)(3)(iv) 

of this section is inapplicable due to 

undersubscription in Category 1 

residential BTM, Category 4, and 

Category 3 then the remaining capacity 

will be redistributed to and increase the 

reservation for Category 2. If both the 

Additional Selection Criteria and the 

non-Additional Selection Criteria 

reservations under Category 2 are 

oversubscribed, then consistent with 

paragraph (j)(4)(ii) of this section, the 

redistributed capacity limitation will 

first increase the reservation for 

Additional Selection Criteria 

applications, and then if any capacity is 

remaining it will be added to the 

reservation for non-Additional Selection 

Criteria applications. 

(vi) If there is remaining capacity after 

redistribution under paragraphs (g)(3)(i) 

through (v) of this section, or if 

redistribution under paragraph (g)(3)(iv) 

of this section is inapplicable due to 

undersubscription in Category 1 

residential BTM, Category 4, Category 3, 

and Category 2, then the remaining 

capacity will be redistributed to and 

increase the reservation for Category 1 

Eligible FTM facilities and nonresidential BTM facilities. If both the 

Additional Selection Criteria and the 

non-Additional Selection Criteria 

reservations under Category 1 Eligible 

FTM facilities and non-residential BTM 

facilities are oversubscribed, then 

consistent with paragraph (j)(4)(ii) of 

this section, the redistributed capacity 

limitation will first increase the 

reservation for Additional Selection 

Criteria applications, and then if any 

capacity is remaining it will be added to 

the reservation for non-Additional 

Selection Criteria applications. 

(vii) If after redistribution under 

paragraphs (g)(3)(i) through (vi) of this 

section, there is remaining Capacity 

Limitation at the close of a Program 

year, the unallocated amount of 

Capacity Limitation will be carried 

forward to the succeeding year as 

described in paragraph (g)(4) of this 

section. 

(4) Carryover of unallocated Annual 

Capacity Limitation. If the Annual 

Capacity Limitation, as described in 

paragraph (g)(1) of this section, for any 

calendar year exceeds the aggregate 

amount of Annual Capacity Limitation 

allocated for a given calendar year, the 

Annual Capacity Limitation for the 

succeeding calendar year will be 

increased by the amount of such excess 

or remainder from previous Program 

Year. No amount of Capacity Limitation 

may be carried to any calendar year after 

the third calendar year following the 

applicable year (as defined in section 

45Y(d)(3) of the Code). Any unallocated 

Capacity Limitation carried over from 

the preceding year will be equally 

distributed across Category 1, 2, 3, and 

4. Within Category 1, the portion 

distributed from the carried over 

Capacity Limitation will be equally 

distributed across Category 1 subreservations and further across the 

reservation for Additional Selection 

Criteria within those sub-reservations. 

The portion of the carried over Capacity 

Limitation distributed to each of 

Category 2, 3, and 4 will be equally 

distributed within each category to the 

Additional Selection Criteria reservation 

and the non-Additional Selection 

Criteria reservation. 

(5) Allocations to applicable facilities 

with nameplate capacity in alternating 

current. For applicable facilities which 

have a nameplate capacity in AC, and 

which are awarded an allocation, such 

an applicable facility will be awarded 

an amount of Capacity Limitation in 

direct current that is equal to the 

applicable facility’s reported nameplate 

capacity in alternating current. 

(h) Reservations of Capacity 

Limitation allocation for facilities that 

meet certain Additional Selection 

Criteria—(1) In general. 50 percent of 

the total Capacity Limitation in each 

facility category described in paragraph 

(b) of this section and Category 1 subreservation (described in paragraph (i) 

of this section) will be reserved at the 

beginning of an application period for 

applicable facilities meeting 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). The reservation 

of Capacity Limitation for applicable 

facilities meeting the Additional 

Selection Criteria may be redistributed 

across facility categories and subreservations as described in paragraph 

(g)(3) of this section. If after the initial 

30-day period an Additional Selection 

Criteria reservation for a category or 

Category 1 sub-reservation is 

undersubscribed, such Additional 

Selection Criteria reservation of 50 

percent is maintained. The procedures 

for applying under these Additional 

Selection Criteria are provided in 

guidance published in the Internal 

Revenue Bulletin. 

(2) Ownership criteria—(i) In general. 

The ownership criteria are based on 

characteristics of the applicant that 

owns the applicable facility. An 

applicable 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); 


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(C) A Native Hawaiian Organization 

(as defined in paragraph (h)(2)(v) of this 

section); 

(D) A renewable energy cooperative 

(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). 

(F) A qualified renewable energy 

company (as defined in paragraph 

(h)(2)(viii) of this section). 

(ii) Indirect ownership—(A) 

Disregarded entities. If an applicant 

wholly owns a disregarded entity that is 

the owner of an applicable facility, then 

the applicant, and not the disregarded 

entity, is treated as the owner of the 

applicable facility for purposes of the 

ownership criteria. For entities wholly 

owned and chartered under Tribal law 

and corporations incorporated under the 

authority of either section 17 of the 

Indian Reorganization Act of 1934, 25 

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

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

5203, an application may be made as a 

Tribal Enterprise. Disregarded entities 

are not eligible for an award and may 

not submit an application. 

(B) Partner qualifying partnership 

under ownership criteria. Except as 

described in paragraph (h)(2)(ii)(C) of 

this section, if an applicant is an entity 

classified 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 

indirectly) in each material item of 

partnership income, gain, loss, 

deduction, and credit of the partnership 

and is also a managing member or 

general partner (or similar title) under 

State or Tribal law of the partnership (or 

directly owns 100 percent of the equity 

interests in the managing member or 

general partner) at all times during the 

existence of the partnership, the 

applicable facility will be deemed to 

meet the ownership criteria. If the 

partnership described in the preceding 

sentence 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, 

then 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. Nothing in this 

paragraph (h)(2)(ii)(B) applies to an 

applicant described in paragraph 

(h)(2)(i)(F) of this section. 

(C) Partner qualifying partnership 

involving low-income housing credit 

under ownership criteria. If an applicant 

is an entity classified as a partnership 

for Federal income tax purposes and is 

the owner of an applicable facility 

connected to a residential building to 

which credits under section 42 of the 

Code are reasonably anticipated or have 

been determined and has a partner for 

Federal income tax purposes that is an 

entity described in paragraphs 

(h)(2)(i)(A) through (E) of this section, 

the applicable facility will be deemed to 

meet the ownership criteria. If the 

partnership becomes the owner of the 

facility after an allocation is made to an 

entity described in paragraph (h)(2)(i)(E) 

of this section, and complete ownership 

is transferred to a partnership that owns 

a qualified low-income building within 

the meaning of section 42(c)(2) 

(including, through a disregarded entity 

owned by the partnership), then the 

transfer of the facility to the partnership 

is not a disqualification event for 

purposes of paragraph (m)(5) of this 

section or subject to recapture for 

purposes of paragraph (n) of this 

section, so long as the requirements of 

paragraph (m)(5) of this section are 

satisfied. 

(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 

Code), or owned at least 51 percent 

indirectly through an entity 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) Native Hawaiian Organization. A 

Native Hawaiian Organization for 

purposes of the ownership criteria is 

defined in 13 CFR 124.3. 

(vi) Renewable energy cooperative. A 

renewable energy cooperative for 

purposes of the ownership criteria is an 

entity that develops applicable 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 electricity or 

energy credits purchased (kWh), volume 

of financial benefits delivered (in 

United States dollars), or volume of 

financial payments made (in United 

States dollars); and in which at least 50 

percent of the patronage in the qualified 

facility is by cooperative members who 

are low-income households (as defined 

in section 48E(h)(2)(C)); or 

(B) A worker cooperative controlled 

by its worker-members with each 

member having an equal voting right. 

(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 of the Code 

by reason of being described in section 

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

(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. 

(viii) Qualified renewable energy 

company. A qualified renewable energy 

company (QREC) for purposes of the 

ownership criteria is an entity that 

serves low-income communities and 

provides pathways for the adoption of 

clean energy by low-income 

households. To be a QREC, an entity 

must meet all of the requirements in 

paragraphs (h)(2)(vii)(A) through (D) of 

this section. 

(A) The entity’s business purpose 

must be to serve low-income 

households or low-income 

communities, and this purpose must be 

stated in governing documents and 

dated at least two years prior to 

application submission; 

(B) At least 51 percent of the entity’s 

equity interests must be owned and 

controlled by one or more individuals; 

(C) The entity must have first 

installed, operated, or provided services 

as a contractor or subcontractor to an 

applicable facility two or more years 

prior to the date of application; and 

(D) The entity must have at least one 

but 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 two 

calendar years. The number of full-time 

equivalent employees and amount in 

annual gross receipts must include the 

full-time equivalent employees and 


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annual gross receipts of all affiliated 

entities. An entity is considered to be an 

affiliated entity if— 

(1) 25 percent or more of an entity’s 

board seats, voting rights, or equity 

interests, are cumulatively held by 

another entity and related entities (as 

described in described in section 267(b) 

or section 707(b)(1) of the Code); or 

(2) One or more of an entities’ officers, 

directors, managing members or 

partners with authority over the board 

of directors or management and 

operations also have authority over the 

board of directors or management and 

operations of another entity. 

(3) Geographic criteria—(i) In general. 

Geographic criteria do 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)(ii) or 

(iii) 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. 

(ii) Persistent Poverty County. A 

Persistent Poverty County (PPC), which 

is, generally, described as any county 

where 20 percent or more of residents 

have experienced high rates of poverty 

over the past 30 years. For purposes of 

the Program and this section, the PPC 

measure adopted by the USDA is used 

to make this determination. 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. 

(iii) Certain census tracts under 

Climate and Economic Justice Screening 

Tool. A census tract that is described in 

the latest official Climate and Economic 

Justice Screening Tool (CEJST), as 

greater than or equal to the 90th 

percentile for energy burden and greater 

than or equal to the 65th percentile for 

low income, or as greater than or equal 

to the 90th percentile for PM2.5 exposure 

and greater than or equal to the 65th 

percentile for low income. 

(A) Energy burden. Energy burden is 

defined as average household annual 

energy cost in dollars divided by the 

average household income. 

(B) 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. 

(C) Low-income. Low income, for 

purposes of this section, is defined as 

the percent of a census tract’s 

population in households for which 

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 

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, the sub-reservation may be 

reallocated later in the event it has 

excess capacity. 

(2) Definitions—(i) Behind the meter 

(BTM) facility. For purposes of the 

Program and this section, an applicable 

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 applicable 

facility that does not meet the 

requirements for a Category 3 facility 

and is BTM. An applicable facility is 

residential if it uses energy to generate 

electricity for use in a dwelling unit that 

is used as a residence. 

(iii) FTM facility. For purposes of the 

Program and this section, an applicable 

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, a 

FTM facility is defined as a facility that 

is not a BTM facility. For the purpose 

of Category 4 facilities, an applicable 

facility is also FTM if 50 percent or 

more of its electricity generation on an 

annual basis is exported physically 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. 

(2) Information required as part of 

application. With each application for a 

Capacity Limitation allocation, 

applicants are required to submit 

information, documentation, and 

attestations to demonstrate eligibility for 

an allocation and project viability as 

specified in guidance published in the 

Internal Revenue Bulletin. 

(3) No administrative appeal of 

Capacity Limitation allocation 

decisions. An applicant may not 

administratively appeal decisions 

regarding Capacity Limitation 

allocations. 

(4) Application period—(i) Opening 

and closing dates. For calendar year 

2026 and each succeeding calendar year 

of the Program, the application period 

will open the first Monday of February 

at 9 a.m. EST and close the first Friday 

of August at 11:59 p.m. EST. The 

application period for calendar year 

2025 will be announced in guidance 

published in the Internal Revenue 

Bulletin. 

(ii) Initial 30-day period. For each 

year, there will be an initial 30-day 

period during which all applications 

submitted will be considered to be 

submitted at the same time and date. 

The initial 30-day period will begin on 

the opening day of the application 

period described in paragraph (j)(4)(i) of 

this section, and end at 11:59 p.m. EST 

on the 30th calendar day after the 

opening day of the application period. 

The opening day is included in 

calculating the 30-day period. All 

applications submitted within the 30- 

day period will be ordered for review 

and consideration of an allocation of 

Capacity Limitation within the same 

category based on a process described in 

procedural guidance published in the 

Internal Revenue Bulletin. If during the 

initial 30-day period, an Additional 

Selection Criteria reservation for a 

category or Category 1 sub-reservation is 

oversubscribed with Additional 

Selection Criteria applications, Capacity 

Limitation from the applicable category 

or sub-reservation may be reallocated to 


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prioritize review and consideration of 

Additional Selection Criteria 

applications. Additional Selection 

Criteria applications received during the 

initial 30-day period receive priority 

over other applications received during 

the initial 30-day period. 

(iii) Applications submitted after the 

initial 30-day period—(A) In general. 

Applications submitted after the close of 

the initial 30-day period will be held for 

review and consideration of an 

allocation of Capacity Limitation after 

the applications in the same category or 

Category 1 sub-reservation which were 

submitted during the initial 30-day 

period. Review of such applications will 

occur only if sufficient Capacity 

Limitation remains to be allocated in a 

given category or Category 1 subreservation, and in conjunction with the 

redistribution provisions described 

under paragraph (g)(2) of this section. 

Provided sufficient Capacity Limitation 

remains in a given category or Category 

1 sub-reservation, these applications 

submitted after the initial 30-day period 

will be reviewed and considered for an 

allocation in the order in which they are 

received. 

(B) Additional Selection Criteria 

Applications submitted after the initial 

30-day period. If the Additional 

Selection Criteria reservation for a 

category or Category 1 sub-reservation is 

undersubscribed after the initial 30-day 

period ends, then the Additional 

Selection Criteria reservation of 50 

percent is maintained. Additional 

Selection Criteria applications 

submitted after the initial 30-day period 

will be prioritized for review and 

consideration of an allocation of 

Capacity Limitation from the Additional 

Selection Criteria reservation in the 

applicable category or Category 1 subreservation until such Additional 

Selection Criteria reservation is 

allocated or is reallocated. 

(k) Placed in service—(1) Requirement 

to report date placed in service. For any 

facility that receives an allocation of 

Capacity Limitation, the owner of the 

facility must report the date the eligible 

property was placed in service. 

(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 

demonstrate the facility is still eligible 

to maintain the allocation and claim the 

increased applicable percentage under 

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

guidance published in the Internal 

Revenue Bulletin. 

(3) Confirmation. The placed in 

service documentation and attestations 

demonstrating that the facility meets the 

eligibility criteria for the owner to claim 

an increased applicable percentage will 

be reviewed. A recommendation will 

then be considered by 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 this recommendation 

and underlying facts and circumstances 

analysis, the IRS will decide whether 

the facility should retain its allocation 

or if the facility should be disqualified. 

Eligibility is determined, prior to the 

owner (or a partner or shareholder in 

the case of a partnership or S 

corporation) claiming the increased 

credit amount on Form 3468, 

Investment Credit (or Form 3800, 

General Business Credit), or successor 

form, or, if eligible, making a transfer 

election under section 6418 of the Code, 

or an elective payment election under 

section 6417 of the Code. 

(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. 

Applicable facilities must be placed in 

service after being awarded an 

allocation of Capacity Limitation. 

(2) Rejection or rescission. An 

application for an applicable 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 materially 

changes or is in a different census tract. 

(2) The maximum net output of the 

facility increases such that it exceeds 

the less than five megawatts AC 

requirement provided in section 

48E(h)(2)(A)(ii) or the nameplate 

capacity decreases by the greater of 2 

kW or 25 percent of the Capacity 

Limitation awarded in the allocation. 

However, the amount of bonus credit 

capacity allocated will not be exceeded 

from the original allocation amount. 

(3) The facility either cannot or did 

not satisfy the financial benefits 

requirements under section 

48E(h)(2)(B)(ii) and paragraph (e) of this 

section as planned, if applicable, or 

cannot satisfy the financial benefits 

requirements under section 48E(h)(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, 

unless the original applicant transfers 

the facility to an entity classified as a 

partnership for Federal income tax 

purposes and retains at least a one 

percent interest (either directly or 

indirectly) in each material item of 

partnership income, gain, loss, 

deduction, and credit of such 

partnership and is a managing member 

or general partner (or similar title) under 

State or Tribal law of the partnership (or 

directly owns 100 percent of the equity 

interests in the managing member or 

general partner) at all times during the 

existence of the partnership. 

(n) Recapture of section 48E(h) 

Increase to the section 48E(a) credit—(1) 

In general. Section 48E(h)(5) provides 

for recapturing the benefit of any 

increase in the credit allowed under 

section 48E(a) by reason of section 

48E(h) with respect to any property that 

ceases to be property eligible for such 

increase (but that does not cease to be 

investment credit property within the 

meaning of section 50(a) of the Code). 

Section 48E(h) 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 an 

applicable facility under section 48E(h) 

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 


ddrumheller on DSK120RN23PROD with RULES3
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2871 

event occurs is increased by the 

recapture percentage of the benefit of 

the increase in the section 48E 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 48E(a), the eligibility of 

such property for such increase 

pursuant to section 48E(h) is restored. 

Such restoration of an increase pursuant 

to section 48E(h) is not available more 

than once with respect to any facility. 

(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 48E(h): 

(i) Property described in section 

48E(h)(2)(A)(iii)(II) fails to provide 

financial benefits; 

(ii) Property described under section 

48E(h)(2)(B) ceases to allocate the 

financial benefits equitably among the 

occupants of the dwelling units as 

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

such as not allocating to residents the 

required net electricity savings of the 

electricity, as required by paragraph (e) 

of this section; 

(iii) Property described under section 

48E(h)(2)(C) ceases to provide at least 50 

percent of the financial benefits of the 

electricity produced to Qualifying 

Households as described under section 

48E(h)(2)(C)(i) or (ii), or fails to provide 

those households the required 

minimum 20 percent bill credit 

discount rate, as required by paragraph 

(f) of this section; 

(iv) For property described under 

section 48E(h)(2)(B), the residential 

rental building the facility is a part of 

ceases to participate in a covered 

housing program or any other affordable 

housing program described in section 

48E(h)(2)(B)(i), as applicable; or 

(v) A facility increases its maximum 

net output or nameplate capacity such 

that the facility’s maximum net output 

or nameplate capacity is 5 MW AC or 

greater. 

(4) Section 50(a) recapture. Any event 

that results in recapture under section 

50(a) also will result in recapture of the 

benefit of the increase in the section 48E 

credit by reason of section 48E(h). The 

exception to the application of recapture 

provided in paragraph (n)(2) of this 

section does not apply in the case of a 

recapture event under section 50(a). 

(o) Record retention. The applicant is 

required to retain records and materials 

related to the application for the 

following periods: 

(1) For at least 6 years after the due 

date (with extensions) for filing the 

Federal income tax return after the tax 

year that return is filed to claim the 

increase in the section 48E credit; and 

(2) For at least 6 years after the due 

date (with extensions) for filing the 

Federal income tax return for the last 

year that the applicant could be subject 

to recapture as described in paragraph 

(n) of this section. 

(p) Applicability date. This section 

applies to applicable facilities placed in 

service after December 31, 2024, and 

during taxable years ending on or after 

January 13, 2025. 

Douglas W. O’Donnell, 

Deputy Commissioner. 

Approved: December 26, 2024. 

Aviva R. Aron-Dine, 

Deputy Assistant Secretary of the Treasury 

(Tax Policy). 

[FR Doc. 2025–00331 Filed 1–8–25; 8:45 am] 

BILLING CODE 4830–01–P 


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