An energy community under the Inflation Reduction Act is a geographic area tied to fossil fuel industries or environmental contamination, and a clean energy project located in one qualifies for a bonus added to the Investment Tax Credit or Production Tax Credit. The energy community IRA bonus credit adds 10 percentage points to the base credit when the project meets prevailing wage and apprenticeship requirements, or 2 percentage points when it does not.1U.S. Department of the Treasury. Energy Communities Three categories of areas can qualify: brownfield sites, census tracts affected by coal closures, and metropolitan or non-metropolitan statistical areas with significant fossil fuel employment and elevated unemployment.
The Three Ways a Site Can Qualify
Brownfield Sites
A brownfield is real property whose redevelopment or reuse is complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant, as defined under CERCLA. Land contaminated by petroleum products or controlled substances is included.2Office of the Law Revision Counsel. 42 USC 9601 – Definitions
Rather than litigating whether a site meets that statutory definition, the IRS provides a safe harbor. A site qualifies if any one of the following is true:3Internal Revenue Service. Notice 2023-29 – Energy Community Bonus Credit Amounts Under the Inflation Reduction Act
- The site was previously assessed through a federal, state, tribal, or territorial brownfield program as meeting the statutory definition. The EPA’s Cleanups in My Community database and state lists help confirm this.
- An ASTM E1903 Phase II Environmental Site Assessment confirms a hazardous substance, pollutant, or contaminant on the site.
- For projects with a nameplate capacity of 5 MW (AC) or less, an ASTM E1527 Phase I Environmental Site Assessment is enough. This lower documentation bar makes the brownfield pathway more accessible for smaller solar installations.
Coal Closure Census Tracts
A census tract qualifies if a coal mine closed within it at any point after December 31, 1999, or if a coal-fired power plant retired within it after December 31, 2009. Any census tract that directly adjoins a qualifying tract also counts.4Internal Revenue Service. Frequently Asked Questions for Energy Communities
“Directly adjoining” is broader than it sounds. Two tracts qualify as adjoining if their boundaries touch at even a single point, so a tract sharing only a corner with a coal closure tract still counts.3Internal Revenue Service. Notice 2023-29 – Energy Community Bonus Credit Amounts Under the Inflation Reduction Act The result is a wide halo of eligible land around each closed mine or retired plant. Treasury verifies mine closures through Mine Safety and Health Administration data and confirms retired plants through Energy Information Administration Forms EIA-860 and EIA-860M.4Internal Revenue Service. Frequently Asked Questions for Energy Communities Once a tract qualifies on coal closure grounds, that status does not expire.
Fossil Fuel Statistical Areas
The third category applies to entire metropolitan or non-metropolitan statistical areas. Two conditions must be met at the same time.4Internal Revenue Service. Frequently Asked Questions for Energy Communities
First, the area must have had, at any point after December 31, 2009, either 0.17% or greater direct employment in the extraction, processing, transport, or storage of coal, oil, or natural gas, or 25% or greater local tax revenues from those industries.1U.S. Department of the Treasury. Energy Communities The employment measure uses specific NAICS codes covering oil and gas extraction, coal mining, petroleum refining, natural gas distribution, and pipeline construction and transportation.5Internal Revenue Service. Notice 2024-30 – Modification of Fossil Fuel Employment Rate Determination
Second, the area’s unemployment rate for the previous year must equal or exceed the national average for that same year.4Internal Revenue Service. Frequently Asked Questions for Energy Communities Once the fossil fuel prong is met for any year after 2009, it is permanent. Only the unemployment condition resets each year, which is why statistical area status can turn on and off as annual unemployment data changes.
What the Bonus Is Worth
The energy community bonus stacks on top of the base ITC or PTC. Its size depends on labor compliance:1U.S. Department of the Treasury. Energy Communities
- With prevailing wage and apprenticeship compliance, the bonus is 10 percentage points. A solar project claiming the 30% ITC would receive 40%.
- Without that compliance, the bonus is 2 percentage points. That same project would receive the reduced 8% base ITC plus 2, for 10% total.
Qualifying under more than one energy community category adds nothing. A project sitting on a brownfield inside a coal closure tract still receives one bonus.4Internal Revenue Service. Frequently Asked Questions for Energy Communities The energy community bonus can, however, stack with other IRA bonus credits such as the domestic content bonus, each with its own qualification rules. Combined with the base 30% ITC, all available bonuses can push the total credit to 50% or more of eligible project costs.
When Eligibility Is Measured
Timing rules differ by credit, and getting them wrong can cost you the entire bonus. For the ITC under sections 48 and 48E, energy community status is determined on the date the project is placed in service. For the PTC under sections 45 and 45Y, status is tested separately for each year of the 10-year credit period, and a project qualifies for any year in which the site is located in an energy community during any part of that year.4Internal Revenue Service. Frequently Asked Questions for Energy Communities
This creates real risk for ITC projects in statistical areas. If you begin construction in a qualifying area but unemployment drops below the national average before you place the project in service, the bonus can disappear. Coal closure and brownfield status do not fluctuate that way.
A significant safe harbor limits the exposure. If construction begins on or after January 1, 2023, in a location that qualifies as an energy community at the time construction starts, that location keeps its energy community status for the entire PTC credit period, or on the ITC placed-in-service date.4Internal Revenue Service. Frequently Asked Questions for Energy Communities Using the safe harbor means documenting the area’s status as of the day construction began.
How to Check Whether Your Site Qualifies
Start with the 11-digit census tract code for the location. It combines a 2-digit state code, a 3-digit county code, and a 6-digit tract number, and you can find it by running an address through the Census Bureau’s geocoding tools.6United States Census Bureau. Understanding Geographic Identifiers (GEOIDs)
The National Energy Technology Laboratory, part of the Department of Energy, maintains an interactive mapping tool that overlays energy community boundaries on a map. Enter coordinates or an address and see which categories apply. Treasury also publishes downloadable lists of qualifying census tracts and counties through IRS notices, with appendices that separate coal closure tracts from statistical area designations. The IRS updates the qualifying list each year after new Bureau of Labor Statistics unemployment data is released.1U.S. Department of the Treasury. Energy Communities
Brownfield eligibility is not something a mapping tool can settle. Check the EPA’s Cleanups in My Community database for a prior assessment, or commission a Phase I or Phase II Environmental Site Assessment depending on your project’s nameplate capacity.3Internal Revenue Service. Notice 2023-29 – Energy Community Bonus Credit Amounts Under the Inflation Reduction Act
Save every piece of evidence. Print or screenshot the mapping tool results, download the relevant IRS notice appendices, and keep copies of environmental assessments. Those records are what you rely on if the IRS asks questions.
Claiming the Bonus on Your Return
For the ITC, report the bonus on Form 3468 (Investment Credit). Part I includes a checkbox on line 10 to claim the energy community bonus, and the line for entering the bonus percentage varies by the type of energy property.7IRS.gov. 2025 Instructions for Form 3468 – Investment Credit
For the PTC, use Form 8835. Electing to treat a qualifying facility as an energy community facility requires a statement attached to your timely filed return that includes the taxpayer’s name and address, the facility’s name and address, the facility identification number, the date operations began, and an explicit election statement.8Internal Revenue Service. Instructions for Form 8835 – Renewable Electricity Production Credit
Keep supporting documentation for at least five full years after the property is placed in service. The IRS can recapture investment credits during that window if prevailing wage requirements are not met, and credit records must be retained as long as their contents may be relevant to any tax administration purpose.7IRS.gov. 2025 Instructions for Form 3468 – Investment Credit
If You Cannot Use the Credit Yourself
Tax-exempt organizations, state and local governments, tribal entities, and other eligible entities can receive the bonus credit’s value through elective payment, sometimes called direct pay. The IRS treats the credit amount as a tax payment, creating an overpayment that is refunded to the entity.9Internal Revenue Service. Elective Pay and Transferability
Taxable entities that cannot use elective pay can instead transfer all or part of the credit to a third-party buyer for cash, on terms the parties negotiate. Both elective pay and transferability apply to the full credit, energy community bonus included, which extends the practical reach of the bonus well beyond developers with enough tax liability to absorb it directly.