Increase in energy credit for solar facilities placed in service in connection with low-income communities

(a)

In general

Section 48 is amended by adding at the end the following new subsection:

(e)

Special rules for certain solar facilities placed in service in connection with low-Income communities

(1)

In general

In the case of any qualified solar facility with respect to which the Secretary makes an allocation of environmental justice solar capacity limitation under paragraph (4)—(A)equipment described in paragraph (3)(B) shall be treated for purposes of this section as energy property described in subsection (a)(2)(A)(i),(B)the energy percentage otherwise determined under subsection (a)(2) with respect to any eligible property which is part of such facility shall be increased by—(i)in the case of a facility described in subclause (I) of paragraph (2)(A)(iii) and not described in subclause (II) of such paragraph, 10 percentage points, and (ii)in the case of a facility described in subclause (II) of paragraph (2)(A)(iii) and not described in subclause (I) of such paragraph, 20 percentage points, and(C)the increase in the credit determined under subsection (a) by reason of this subsection for any taxable year with respect to all property which is part of such facility shall not exceed the amount which bears the same ratio to the amount of such increase (determined without regard to this subparagraph) as—(i)the environmental justice solar capacity limitation allocated to such facility, bears to(ii)the total megawatt nameplate capacity of such facility.(2)

Qualified solar facility

For purposes of this subsection—(A)

In general

The term qualified solar facility means any facility—(i)which generates electricity solely from property described in subsection (a)(3)(A)(i),(ii)which has a nameplate capacity of 5 megawatts or less, and(iii)which—(I)is located in a low-income community (as defined in section 45D(e)), or(II)is part of a qualified low-income residential building project or a qualified low-income economic benefit project.(B)

Qualified low-income residential building project

A facility shall be treated as part of a qualified low-income residential building project if—(i)such facility is installed on a residential rental building which 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))), a Housing Development Fund Corporation cooperative under Article XI of the New York State Private Housing Finance Law, a housing assistance program administered by the U.S. Department of Agriculture under title V of the Housing Act of 1949, or such other affordable housing programs as the Secretary may provide, and(ii)the financial benefits of the electricity produced by such facility are allocated equitably among the occupants of the dwelling units of such building.(C)

Qualified low-income economic benefit project

A facility shall 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—(i)less than 200 percent of the poverty line applicable to a family of the size involved, or(ii)less than 70 percent of area median gross income (as determined under section 142(d)(2)(B)). (D)

Financial benefit

For purposes of subparagraphs (B) and (C), electricity acquired at a below-market rate shall not fail to be taken into account as a financial benefit.(3)

Eligible property

(A)

In general

For purposes of this section, the term eligible property means—(i)energy property which is described in subsection (a)(3)(A)(i), including any property that stores electricity which is installed in connection with such energy property, and(ii)the amount of any expenditures which are paid or incurred by the taxpayer for qualified interconnection property installed in connection with the installation of property described in subparagraph (A) to provide for the transmission or distribution of the electricity produced or stored by such property, and which are properly chargeable to the capital account of the taxpayer.(B)

Definitions

For purposes of subparagraph (A)—(i)

Qualified interconnection property

The term qualified interconnection property means, with respect to a qualified facility which is not a microgrid, any tangible property—(I)which is part of an addition, modification, or upgrade to a transmission or distribution system which is required at or beyond the point at which the qualified facility interconnects to such transmission or distribution system in order to accommodate such interconnection,(II)either—(aa)which is constructed, reconstructed, or erected by the taxpayer, or (bb)for which the cost with respect to the construction, reconstruction, or erection of such property is paid or incurred by such taxpayer, and(III)the original use of which, pursuant to an interconnection agreement, commences with the utility.(ii)

Interconnection agreement

The term interconnection agreement means an agreement entered into by a utility and the taxpayer for the purposes of interconnecting the qualified facility owned by such taxpayer to the transmission or distribution system of such utility.(iii)

Utility

The term utility means the owner or operator of an electrical transmission or distribution system which is subject to the regulatory authority of—(I)the Federal Energy Regulatory Commission, or(II)a State public utility commission or other appropriate State agency.(C)

Special rule for interconnection property

In the case of expenses paid or incurred for interconnection property, amounts otherwise chargeable to capital account with respect to such expenses shall be reduced under rules similar to the rules of section 50(c). (4)

Allocations

(A)

In general

Not later than 180 days after the date of enactment of this subsection, the Secretary shall establish a program to allocate amounts of environmental justice solar capacity limitation to qualified solar facilities.(B)

Limitation

The amount of environmental justice solar capacity limitation allocated by the Secretary under subparagraph (A) during any calendar year shall not exceed the annual capacity limitation with respect to such year. (C)

Annual capacity limitation

For purposes of this paragraph, the term annual capacity limitation means 1.8 gigawatts for each of calendar years 2022 through 2031, and zero thereafter.(D)

Carryover of unused limitation

If the annual capacity limitation for any calendar year exceeds the aggregate amount allocated for such year under this paragraph, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2033.(E)

Placed in service deadline

(i)

In general

Paragraph (1) shall not apply with respect to any property which is placed in service after the date that is 4 years after the date of the allocation with respect to the facility of which such property is a part.(ii)

Application of carryover

Any amount of environmental justice solar capacity limitation which expires under clause (i) during any calendar year shall be taken into account as an excess described in subparagraph (C) (or as an increase in such excess) for such calendar, subject to the limitation imposed by the last sentence of such subparagraph.(F)

Selection criteria

In determining to which qualified solar facilities to allocate environmental justice solar capacity limitation under this paragraph, the Secretary shall take into consideration which facilities will result in—(i)the greatest health and economic benefits for individuals described in section 45D(e)(2),(ii)the greatest employment and wages for such individuals, and(iii)the greatest engagement with, outreach to, or ownership by, such individuals, including through partnerships with local governments and community-based organizations.(G)

Disclosure of allocations

The Secretary shall, upon making an allocation of environmental justice solar capacity limitation under this paragraph, publicly disclose the identity of the applicant and the amount of the environmental justice solar capacity limitation allocated to such applicant.(5)

Recapture

The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any increase in the credit allowed under subsection (a) by reason of this subsection with respect to any property which ceases to be property eligible for such increase (but which does not cease to be investment credit property within the meaning of section 50(a)). The period and percentage of such recapture shall be determined under rules similar to the rules of section 50(a). Such recapture shall not apply with respect to any property if, within 12 months after the date the taxpayer becomes aware (or reasonably should have become aware) of the such property ceasing to be property eligible for such increase, the eligibility of such property for such increase is restored. The preceding sentence shall not apply more than once with respect to any facility.

(b)

Effective date

The amendments made by this section shall apply to periods after December 31, 2021, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).