The Biden administration issued final guidance on the bonus tax credit for American communities dependent on fossil fuels.
The new rules, issued by the Department of the Treasury and the Internal Revenue Service on April 4, will allow “green” energy companies to secure additional tax credits when investing in local communities economically tied to oil and coal extraction.
The Treasury Department is offering the credits under an August 2022 law that contained $270 billion in tax breaks for “green” energy.The Inflation Reduction Act (IRA), which was passed by Congress last summer, extended a 30 percent tax credit for wind, solar, and other green energy projects.
It also provided an extra 10 percent investment tax credit to those investing in what are termed “energy communities” to end their generational dependence on fossil fuels so they can supposedly benefit from “green” energy. A 10 percent production tax credit was also provided for facilities that generate green energy.
These additions to the bill helped secure West Virginia Democrat Sen. Joe Manchin’s essential support to pass it in the Senate.
The tax credits are expected to cover projects in coal-dependent regions like Appalachia, which have been decimated after government policies led to mine and plant closures, putting many out of work.“The Inflation Reduction Act ensures all Americans benefit from the growth of the clean energy economy by driving investment and creating jobs in coal communities,” said Treasury Secretary Janet L. Yellen in a press statement.
Biden Administration to Provide Bonuses for Investments in Coal Country
The Treasury Department said it will open the application process for $4 billion worth of new tax credits to build advanced energy manufacturing and decarbonization projects on May 31, but $1.6 billion is required to be invested in communities hit by coal mine or coal-fired power plant closures.“Communities like coal communities have the knowledge, infrastructure, resources, and know-how to play a leading role in the move to a clean energy economy,” deputy Treasury secretary Wally Adeyemo told reporters.
The bonus is also available to to areas which have significantly depended on fossil fuels for jobs or local tax revenue and which suffer from higher than average unemployment.
A metropolitan statistical area or non-metropolitan statistical area must have, or have recently had, at least 0.17 percent direct employment to qualify for the tax bonus, or had at least 25 percent local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas, according to the Treasury’s criteria.
Furthermore, the community receiving green investment bonuses must have an unemployment rate at or above the national average unemployment rate for the previous year.The IRA also specified that polluted “brownfield” sites contaminated by hazardous materials or other pollutants also qualify as energy communities.
The Treasury Department will work with the Interagency Working Group on Energy Communities to help identify areas that may be eligible for the bonus tax credit and will release a searchable mapping tool that helps identify those regions that qualify.
The Energy Department separately rolled out an initiative to spend $450 million from the 2021 infrastructure bill for green energy-related experimental projects on land formerly used for mining.Rare-earth elements and other minerals extracted from that waste are crucial to producing items like batteries and solar panels.
Reuters contributed to the report.
