MEMO

TO:	People’s Solar Energy Fund
FROM:	Jeremy Kalin
DATE:	September 27, 2023
RE:	Solar Low-Income Bonus Credit final rules and process

The first part of this memo outlines the process for applying for the Low Income Bonus Credit Capacity Limitation, as described in IRS Revenue Procedure 2023-27.

The second part of this memo outlines the requirements under the Final Rules for the Low Income Communities Bonus Credit Program, as detailed in the final regulations published in the Federal Register on August 15, 2023, and adoped as 26 CFR 1.48(e)-1.

At 9 a.m. ET on October 19, 2023, the Department of Energy will begin accepting applications across all Categories (1, 2, 3 and 4) for the Low Income Bonus Credit Program. The Applicant Portal and User Guide will be released by DOE shortly. Each individual completing an application on behalf of their organization will need a Login.Gov account in order to complete an application.

PART 1: LOW INCOME BONUS CREDIT APPLICATION PROCESS

BACKGROUND:

The Inflation Reduction Act (IRA) allows certain solar projects to receive a federal Investment Tax Credit equal to 30% of the project cost, for projects smaller than 1,000 kilowatts or that meet prevailing wage or apprenticeship requirements. Solar projects can also receive some bonus credits in addition to the 30% base ITC.

Section 48(e) of the Internal Revenue Code established an “environmental justice communities” bonus to the ITC, of either 10% or 20%, as indicated below, described by the IRS as the Low Income Bonus Credit or at times the Low Income Bonus in this memo.

Cognress limited the total capacity of all eligible projects receiving LMI Bonus credits to 1.8 Gigawatts each year for 2023 and 2024. Similar program structure and requirements are likely to apply to environmental justice communities bonuses under the new Section 48E “technology-neutral” low-carbon tax credit for which solar projects are nearly certain to be eligible in 2025 and going forward.

TIMING:

Project owners must apply for the Low Income Bonus and receive an allocation letter from the IRS before a project is placed in service.

The U.S. Department of Energy will administer Low Income Bonus Credit program allocation process for the IRS.

Each individual completing an application on behalf of their organization will need a Login.Gov account in order to complete an application.

DOE will hold open the application window for the first 30 days, and all projects submitted during that first window will be treated as submitted at the same date and at the same time. Projects will be reviewed as discussed below from that initial application pool.

If capacity remains within each pool of bonus credits, DOE will accept applications on a rolling basis and review applications and provide recommendations to IRS in the order applications are received until the IRS allocates all of the 1.8 GW in capacity limitations in that program year. The IRS will award applications in the order it receives recommendations from DOE.

Once the IRS awards all of the Capacity Limitation within each catgory or a program year ends, DOE will cease review of any remaining applications.

LOTTERY PROCESS:

If the first round of applications exceed the reserved capacity limitation for any Category outlined below, or for the Behind The Meter (BTM) sub-reservation of Category 1, applications in any oversubscribed category will be entered into a lottery to determine the order of DOE’s review.

DOE will first separate applications during the initial 30-day window to group all applications by Additional Selection Criteria eligibility as described below, with those eligible project applications prioritized for processing first as follows:

1. If the capacity total of eligible applications exceeds any category’s total Capacity Limitation, facilities purporting to meet both of the Additional Selection Criteria will be reviewed before other applications in that category.

2. If additional Capacity Limitation remains, facilities purporting to meet just one of the Additional Selection Criteria will be reviewed before other applications in that category.

3. If additional Capacity Limitation still remains, then all other projects will be reviewed by DOE.

ADDITIONAL SELECTION CRITERIA:

At least 50% of the the total Capacity Limitation for each Category will be reserved for qualified facilities meeting the following Additional Selection Criteria. Exhibit 1 to this Memo includes more specific information about each Additional Selection Criteria eligibility factor.

CURE FOR DOE-IDENTIFIED DEFECTS

If a DOE reviewer identifies a defect in an application, DOE will contact the applicant via the DOE portal, requesting additional information or documentation. Applicants will have 21 days to respond and provide the requested information or documentation.

If applicants do not respond within 21 days, the application will be marked as withdrawn. An applicant can submit a new application at a later date.

NOTIFICATION OF ALLOCATION DECISIONS

The IRS will send final decision letters through the DOE portal. Successul applicant letters will include the amount of the allocated Capacity Limitation award (DC for solar projects), based on the nameplate capacity of the facility as stated in the application. The final allocation award may be less than a project’s nameplate capacity.

However, an owner does not need to reduce the total nameplate capacity of the project due to a reduced allocation. Instead, the Low Income Bonus Credit increase will be reduced by a factor equal to the Capacity Limitation allocated divided by the total nameplate capacity at the time the ITC is claimed.

Applicants may not admistratively appeal decisions regarding Capacity Limitation allocations.

Notice of an allocation award is not a final determination that a project is eligible for Bonus Credit.

DOCUMENTATION REQUIRED AFTER ALLOCATION IS RECEIVED

1. Facility owners must report to DOE the date the project was placed in service via the portal.

2. The owner must also provide to DOE:

a. Attestation of no material change in ownership or facility changes since the date of Low Income Bonus Credit application.

b. Permission to Operate Letter (or a commissioning report verifying for off-grid facilities) confirming that the facility has been placed in service and the project location.

c. Final, P.E.-stamped as-built design plan (if required by state or local law), a PTO letter with nameplate capacity listed, or other documentation from an unrelated party that verifies as-built nameplated capacity.

d. For Category 3 facilities, a Benefits Sharing Statement, described below.

e. For Category 4 facilities:

i. a final list of low-income households served (name, address, subscription share and income verification method).

ii. A spreadsheet demonstrating expected financial benefit to low-income subscribers to demonstrate the 20% bill credit discount rate.

RESTRICTIONS TO ORIGINAL APPLICANT

A Capacity Limitation allocation award applies only to the taxpayer applicant who applied for an dreceived an allocation award for the owner applicant’s project, and to the original location of the project . Any transfer of an allocation award must be made via formal transfer request with the IRS, with the following exception authorized under 1.48(e)-1(m)(5)

In general, the project applicant must either retain ownership or transfer to a tax equity partnership in which the project applicant serves as managing member. Where applications relied on Additional Selection Criteria for priority review, transfer of project ownership will disqualify the Low Income Bons Credit allocation award unless the original applicant transfers the project to an entity treated as a partnership for federal income tax purposes and retains at least a one percent interest (either directly or indirectly) and is a managing member, general partner or similar at all times during the existence of the partnership and retains all material items of partnership income, gain, loss, deduction and credit of the partnership.

CONSUMER DISCLOSURE FORMS:

Applicants entering into agreements with consumers as part of a community solar/wind subscription, lease, or power purchase agreement (PPA), must attest that consumer disclosures informing customers of their legal rights and protections have been provided to customers that have signed up and will be provided to future customers, in accordance with program requirements.

DOE encourages applicants to use applicable state-approved disclosure forms where available or may use other forms of similar substance.

DOE expects to provide same disclosure forms including:

· Community Subscription Disclosure Form

· Consumer Lease Disclosure Form

· Consumer Power Purchase Agreement (PPA) Disclosure Form

As of Sept. 27, DOE has not provided these sample disclosure forms, but Avisen Legal is prepared to address these disclosures using our industry-standard subscription, lease and PPA forms for low-income participants.

PART 2:

FINAL REGULATIONS for

LOW INCOME BONUS CREDIT PROGRAM

( 26 CFR 1.48(e)-1 )

1. BASICS OF THE SOLAR INVESTMENT TAX CREDIT

a. The Investment Tax Credit

Section 48 of the Code establishes a non-refundable federal tax credit for qualified energy projects, the most efficient of which are solar photovoltaic (PV) generating installations, smaller than 1,000 kilowatts in nameplate capacity. These smaller projects do not need to meet the prevailing wage and apprenticeship requirements of larger projects, and are at times eligible for additional ITC “adders” under the Inflation Reduction Act.

The base value of the ITC for each such smaller solar projects is equal to 30% of tax basis, with additional adders available as “bonus” credit amounts that increase the total ITC percentage of the tax basis.

Cost basis is the typical method for determining the basis of an ITC eligible project. In some jurisdictions with much higher retail cost of power or robust solar incentives, the project’s appraised fair market value (FMV) can establish a higher basis for the ITC. Some of these FMV-basis jurisdictions are California, the District of Columbia, Hawaii and in some cases resilience-focus installations in tribal areas without utility service.

Most PSEF member projects will rely on the standard cost basis method. This memo does not address the mechanics of securing appraisals and structuring affiliate sales in order to secure FMV basis for projects, sometimes called a “step-up basis.”

For an example portfolio of 50 projects at a $20,000 cost basis for each project, for a total basis of $1,000,000 using cost basis, the total ITC base value would be $300,000.

For for-profit investors, the ITC is nonrefundable, and can only be used to offset a federal tax liability. As a tax credit, the ITC reduces investors federal tax liability on a dollar-for-dollar basis.

The ITC vests the year that a project is placed in service, defined as the start of commercial operation. A project is often described as the year it was placed in service, for instance a “2023 project.”

The Inflation Reduction Act (IRA) increased the look-back period for the ITC from a one-year lookback to a three-year lookback. A 2024 project ITC can be used to offset taxes owed in 2021, 2022 or 2023 as well as the actual Placed In Service year (2024, in this example). If applied to years before the placed in service year, the credit would first be applied to 2021 taxes paid, then to 2022, and then to 2023. ITC claimants would do so via filing an amendment for such years.

The ITC can also be carried forward for up to 22 years for any unused portions.

FEDERAL INVESTMENT TAX CREDIT EXAMPLE

BASIS of the PORTFOLIO:

$ 1,000,000

30% ITC $ 300,000

CASH VALUE $ 300,000 reduction in federal taxes in 2024*

* or look-back against 2021, 2022 and/or 2023

2. TAX CREDIT RECAPTURE

The Investment Tax Credit statute and the related rules are structured to ensure that tax credit claimants truly own the system and are responsible for the system operations, risks, insurance, etc… In particular, the IRS wants to be sure that any ownership structure is not what is known as a “disguised sale” or is otherwise structured only to allow a non-owner to claim the ITC.

ITC claimants must own the tax credit property for at least 5 years, or risk a “recapture” payment and a penalty to the IRS. The recapture amount is 100% of the credit value in the first year, 80% in the second, 60% in the third, 40% in the fourth, and 20% in the fifth year of project operations.

3. ITC “DIRECT PAY” ELECTIVE PAYMENTS UNDER SECTION 6417

The IRA included a new Section 6417 of the tax code, provided a “direct pay” option for eligible tax-exempt entities such as tax-exempt non-profit organizations, tribal entities and states and local governments.

The mechanics of the 6417 Elective Payment of the ITC are discussed in a separate memo to PSEF members.

However, PSEF members should note that elective payment recipients face the same compliance requirements and recapture risks as for-profit tax credit claimants.

4. ITC TRANSFERABILITY UNDER SECTION 6418

The IRA included a new Section 6418 of the tax code, providing project owners the one-time option to effectively sell the ITC for cash value. Project owners who eligible entities for the 6417 elective payment are not able to use section 6418 transfer authority.

The mechanics of the 6418 Transferability are discussed in a separate memo to PSEF members.

5. PROJECT CATEGORIES FOR LOW INCOME BONUS CREDIT PROGRAM:

As discussed above, Section 48(e) of the Internal Revenue Code established the Low Income Bonus Credit Program as additional “adders” to the ITC, of either 10% or 20%. Cognress limited the total capacity of all eligible projects receiving LMI Bonus credits to 1.8 Gigawatts each year for 2023 and 2024.

The IRS has established the following categories for the 1.8 Gigawatt total capacity limitation of the Low-Income Bonus program.

Project owners can apply for only one category per project, unless and until the project’s Capacity Limitation application is withdrawn.

Category 1 Located in a Low Income Community census tract 700 MW

Projects located within 45D census tracts as defined by the New Market Tax Credit statute

10% LMI Bonus Credit

Category 2 Located on Indian Land 200 MW

10% LMI Bonus Credit

Category 3 Qualified Low-Income Residential Building Project 200 MW

Projects installed on a federally-supported affordable housing rental building with the financial benefits of the solar project allocated equitably among the residential occupants of the building.

20% LMI Bonus Credit

Category 4 Qualified Low-Income Economic Beneficiaries 700 MW

Projects in which at least 50% of financial benefits of the electricity produced are provided to households with income less than 200% of poverty line applicable to a family of the size involved or less than 80% Area Median Income.

20% LMI Bonus Credit

a. CATEGORY 1: PROJECTS LOCATED IN A LOW-INCOME CENSUS TRACT

10% Bonus Credit

700 MW Capacity Limitation / yr, of which 490 MW is reserved for qualified Behind-The-Meter projects in 2023

i. Location by Nameplate Capacity

A project is located in a low-income community if the 50% or more of its nameplate capacity is in a qualifying area. Nameplate capacity is measured in DC capacity using ISO conditions to measure the maximum electricity generating output.

Energy storage capacity is not included in the nameplate capacity test.

ii. Qualifying Area

A qualifying area for Category 1 is:

1. Any census tract with at least 20% poverty rate based on the 2011-2015 American Community Survey currenyl used for the New Markets Tax Credit under section 45D of the tax code, or

2. If the census tract is not located within a metropolitan area, then the median family income for such census tract does not exceed 80% of the greater of statewide median family income or the metropolitan area family income.

New Markets Tax Credit census tracts can be found at https://cimsprodprep.cdfifund.gov/CIMS4/apps/pn-nmtc/index.aspx

If ACS low-income community data updates are released for the NMTC program, for one year from the date of the released data, the project owner can choose to base the poverty rate for any population track on either the 2011-2015 ACS data for the NMTC program, -or- the updated ACS low-income community data for the NMTC program. After the first anniversary of the updated data release, the new data must be used to determine a qualifying area.

Projects that meet the qualifying area definition are considered to continue to meet the definition of low-income community for Category 1 bonus credits for the duration of the recapture period for the ITC, unless the project location actually changes.

iii. Behind-The-Meter Projects

Of the 700 MW total Capacity Limitation for Category 1 projects, 490 MW of the 2023 Capacity Limitation is reserved for Category 1 projects that are residential Behind The Meter projects.

iv. Single-Family Low-Income Residential Projects

Residential solar projects owned by a third-party entity under a Solar Lease or a Solar Power Purchase Agreement are ineligible for Category 4 increased Bonus Credit of 20%. As Behind-The-Meter projects, so long as the single-family solar installations otherwise meet the definitions of Category 1, these residential installations are eligible for the priority sub-category designation.

b. CATEGORY 2: LOCATED ON INDIAN LAND

10% Bonus Credit

200 MW Capacity Limitation / yr

A project is located on Indian land if the 50% or more of its nameplate capacity is on Indian land as defined in section 2601(2) of the Energy Policy Act of 1992 (25 USC 3501(2)). Nameplate capacity is measured in DC capacity using ISO conditions to measure the maximum electricity generating output.

Energy storage capacity is not included in the nameplate capacity test.

c. CATEGORY 3: QUALIFIED LOW-INCOME RESIDENTIAL BUILDING PROJECT

20% Bonus Credit

200 MW Capacity Limitation / yr

A project is part of a qualified low-income residential building project (a “Qualified Residential Property”) if:

1. The project is installed on the building of, or on the same parcel as or an adjacent parcel to, a residential rental building of a “covered housing program” or “other affordable housing program as the Secretary may provide”

-and-

2. The financial benefits of the electricity produced by the project are allocated equitably among the occupants of the dwelling units of such building.

i. Location: A facility is considered on a Qualified Residential Property even if not on the the building if the facility is installed on the same or an adjacent parcel of land as the Qualified Residential Property.

ii. Qualified Residential Property: A Qualified Residential Property can be either a multifamily rental property or a single-family rental property.

A Qualified Residential Property is any of the “covered housing programs” listed in the Category 3 Exhibit: Covered Housing Programs at the end of this memo, which largely includes HUD rental support programs, LIHTC-support projects, Section 8 projects, VA supported rental housing progams and Tribal Housing support programs. Please refer to the Exhibit 2 to this Memo for specifics.

iii. At least 50% of financial value to low-income occupants. At least 50% of the financial value of the solar project must be equitably allocated to occupants designated as low-income under the housing program.

iv. “Financial Value.” Financial value of the energy produced by the facility is defined as the greater of either:

i. 25% of the gross financial value of the annual energy produced by the solar project -or-

ii. The net financial value of the annual energy produced by the solar project.

“Gross financial value” is the sum of:

a) The total self-consumed kWh produced by the solar project x the building’s metered price of electricity (which is not further specified in the rules)

-plus-

b) the total exported kWh produced by the building’s

volumetric export compensation rate for kWh

-plus-

c) the sale of any tax credits and environmental attributes associated with system production if separate from the metered price of electricity or the export consumption rate.

“Net financial value” is as follows:

a) When the solar project and the Qualified Residential Property are commonly owned, net financial value is:

1. The gross financial value of the energy produced

-minus-

2. the annual cost (either average or levelized) of the solar or wind facility over the useful life of the facility, when including debt service, maintenance, replacement reserve, capital expenditures and other construction, maintenance and operational costs.

b) When the solar project and the Qualified Residential Property are not commonly owned and the solar owner enters into a PPA or other contract for energy services with the Qualified Residential Property owner and/or building occupants, net financial value is:

1. The gross financial value of the energy produced

-minus-

2. any payments made by the building owner or occupants to the facility owner for energy services associated with the facility in a given year.

v. Equitable Allocation of Financial Benefits:

a. If distributed via utility bill savings:

i. Meet the “equitable allocation” requirement if at least 50% of financial value of energy produced is distribute as utility bill savings in equal shares to each biolding dwelling unit whose occupants are designated as low-income under the relevant housing program, or…

ii. Alternatively distributed in proporational shares based on each low-income unit’s square footage, or….

iii. Alternatively distributed in proportional shares based on each low-income unit’s number of occumapnts.

iv. The utility bill savings that would be allocated to any occupants who opt out of the savings (for any reason, including because they don’t wish to participate, or are subscribing to an alternative solar facility, for example) should be distributed to all participating occupants.

v. No less than 50% of the low-income occupants must participate and receive bill savings.

vi. Solar project owners must follow the HUD guidance on the Treatment of Community Solar Credits on Tenant Utility Bills from July 2022, or other future guidance from HUD or the federal agrency that oversees the covered housing program to ensure that tenants’ utility allowances and annual income for rent calculations are not negatively impacted.

b. If distributed via other means:

i. Meet the “equitable allocation” requirement if at least 50% of financial value of energy produced is distributed to occupants using one of the methods described in HUD guidance on the Treatment of Solar Benefits in Master-metered Buildings from May 2023, or future guidance from HUD or the the federal agency that oversees the covered housing program.

ii. Solar owners must ensure that tenants’ utility allowances and annual income for rent calculations are not negatively impacted.

vi. Benefits Sharing Statement: The building owner must formally notify all building occupants of the solar project and the planned distribution of benefits. The solar owner must prepare a Benefits Sharing Statement that includes:

a. A calculation of the gross financial value, described above;

b. A calculation of the net financial value, described above;

c. A calculation of the financial value to be distributed to building occupants;

d. A description of the means by which the financial value will be distributed to occupants;

e. If the solar facility is owned separate from the building, identification of the responsible entity for distributing benefits to the occupants.

d. CATEGORY 4: QUALIFIED LOW-INCOME ECONOMIC BENFICIARIES

10% Bonus Credit

700 MW Capacity Limitation / yr

A Category 4 solar project must:

1. Serve multiple qualifying households;

2. Assing to qualifying households at least 50% of the project’s total output (in kilowatts), and

3. Each qualifying household must be provided a bill credit discount rate of at least 20%.

i. Bill Credit Discount Rate is the difference between 1) the financial benefit provided to the qualifying household and 2) the cost of participating in the community program, expressed as a percentage of the financial benefit.

a. The financial benefit may be in the form of utility bill credits, reductions in a qualifying household’s electricity rate, or other monetary benefits accrued by a qualifying household on the their utility bill, or other form of financial benefit.

b. The cost includes subscription payments for renewable energy and any other fee or charges.

c. Where the qualifying household has a nominal or no cost of participation, the bill credit discount rate is 1) the financial benefit provided to the qualifying household, divided by the total value of the electricity produced by the solar project and assigned to the qualifying household as measured by the utility, the independent system operator or other off-taker procuring electricity (and related services, products and credits) from the facility.

d. The Bill Credit Discount Rate is calculated on an annual basis.

ii. Low Income Verification. Solar owners must submit documentation of a “qualifying household” that receives the required financial benefit to meet the Category 4 projects.

a. A qualifying household’s income status is determined at the time that household enrolls in the subscription program.

b. A qualifying household’s income status does not need to be re-verified anytime after enrollment.

c. Verification may be via:

1. Categorical Method, or

2. Income Verification Method.

d. Self attestation by a household is not a permissible method solely for purposes of Category 4 eligiblity, though self-attestation may be allowed for any eligible categorical verification method program.

iii. Categorical Method of Verification. Solar owners may verify income by obtaining proof of the household’s participation in a needs-based Federal, State, Tribal or utility program with income limits at or below 200% of the federal poverty line or 80% of Area Median Income (the Income Levels).

a. Federal programs include those listed in the Exhibit 3 to this memo.

b. State agencies can provide verification if the state program and income limits for such state program are at or below the Income Levels, with the qualifying income level for a specific household based on the location of that specific household.

c. The federal poverty line is defined by the Office of Management and Budget based on the most recent Census data available, available here:

https://www.healthcare.gov/glossary/federal-poverty-level-fpl/

d. The Area Median Income are available here from HUD data:

https://www.huduser.gov/portal/datasets/il.html

iv. Income Verification Method. Solar owner may verify household income via paystubs, federal or state tax returns, or via crediting agencies and commercial data sources.

6. ENERGY STORAGE INSTALLED IN CONNECTION WITH QUALIFIED SOLAR PROJECTS

Energy storage projects are included as part of a single qualified solar project if the project otherwise meets the Low Income Bonus Credit criteria, so long as the solar and energy storage property:

i. Is owned by a single legal entity;

ii. Is located on the same or contiguous pieces of land;

iii. Have the same interconnection point, and

iv. Are described in one or more regulatory or environmental permits.

Energy storage projects must be charged at least 50% by the eligible solar (or wind) projects under the Low Income Bonus Credit criteria. The storage is deemed to meet the 50% charging threshold if the power rating of the energy storage property (in kW) is less than two times the capacity rating of the connected solar facility (in kW DC) or the wind facility (in kW AC).

EXHIBIT 1

ADDITIONAL SELETION CRITERIA

4. If the capacity total of eligible applications exceeds any category’s total Capacity Limitation, facilities purporting to meet both of the Additional Selection Criteria will be reviewed before other applications in that category.

5. If additional Capacity Limitation remains, facilities purporting to meet just one of the Additional Selection Criteria will be reviewed before other applications in that category.

6. If additional Capacity Limitation still remains, then all other projects will be reviewed by DOE.

ADDITIONAL SELECTION CRITERIA:

OWNERSHIP CRITERIA:

A qualified solar or wind facility meets the Ownership Criteria if owned by one of the following:

1. A Tribal Enterprise or an Alaska Native Corporation

2. A renewable energy cooperative

3. A “qualified renewable energy company” or

4. A qualified tax-exempt-entity

1. TRIBAL ENTERPRISE OR ALASKA NATIVE CORPORATION:

A Tribal enterprise is an entity:

a. owned at least 50% by an Indian Tribal government (under 30D(g)(9) of the Code, or owned at least 51% indirectly through a corporation wholly owned by the Indian Tribal government and is created under either the Tribal government laws or through a section 17 tribal corporation or a section 3 corporation under the Oklahome Indian Welfare Act, and

b. Subject to Tribal government rules, regulations and/or codes that regulate the operations of the entity.

An Alaska Native corproration must meet the critera in Section 3 of the Alaska Native Claims Settlement Act.

2. RENEWABLE ENERGY COOPERATIVE

A renewable energy cooperative meets Ownership Criteria requirements if the entity develops qualified solar and/or wind facilities and is either:

a. A consumer or purchasing cooperative controlled by its members with:

i. each member having an equal voting right and rights to profit distributions based on patronage as defined by 1) proportion of volume of energy or energy credits purchased (in kWh); 2) volume of financial benefits delivered (in dollars); or 3) volume of financial payments made (in dollars), and in which at least 50% of the

ii. and at least 50% of the patronage in the qualified facility is by cooperative members who are low-income households under the Category 4 Income Levels,

-or-

b. A worker cooperative controlled by its worker-members with each member having an equal voting right.

3. QUALIFIED RENEWABLE ENERGY COMPANY

A qualified renewable energy company is an entity that services low-income communities and provides pathways for adoption of clean energy by low-income households as its general business purpose, and meets one of the part 1 requirements, and all of the part 2 requirements:

a. Part 1 requirements:

At least 51% of the entity’s equity interests are owned and controlled by:

i. One or more individuals.

ii. A Community Development Corporation.

iii. An agricultural or horticultural cooperative defined in section 199A(g)(4)(A).

iv. An Indian Tribal government.

v. An Alaska Native corporation.

vi. A Native Hawaiian organization.

b. Part 2 requirements:

i. Has less than 10 full time employees (determined under 4980H(c)(2)(E) and (c)(4)), including for all affiliates.

ii. Has less than $20,000,000 in annual gross receipts in the previous calendar years, including for all affiliates.

iii. The entity first installed and/or operated a qualified solar or wind facility under the Low Income Bonus Credit eligibility requirements at least two years prior to the Bonus Credit application date.

iv. Has provided solar services as a contrctor or subcontractor to qualified projects with at least 100kW of cumulative nameplate capacity located in one or more low-income communities under the Category 1 definition.

4. QUALIFIED TAX-EXEMPT ENTITY:a.

Any of the following:

a. An entity exempt under section 501(c)(3) or 501(d) of the tax Code.

b. Any State, the District of Columbia, or any political subdivision, or any agency or instrumentality of any of these entities;

c. An Indial Tribal government defined in 30(D)(g)(9) of the Code, or any political subdivision, or any agency or instrumentality of any of these entities;

d. Any corporation described in section 501(c)(12) operating on a cooperative basis that is engaged in furnishing electric energy to persons in a rural area.

GEOGRAPHIC CRITERIA:

Note that Geographic Criteria does not apply to Category 2 facilities.

To meet a geographic criteria for priority Capacity Limitation allocation, a facility must be located in a county or census tract in either Part 1 or Part 2, below.

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 ITC recapture period, unless the location of the facility changes.

a. Part 1 requirement: A Persistent Poverty County (PCC), as adopted by the USDA.

PCC information found here: https://www.ers.usda.gov/data-products/poverty-area-measures/

A PCC is generally defined as any county where at least 20% of residents have experienced high rates of poverty over the past 30 years.

The current data posted on the USDA website above will be in force for 2023 Bonus Credit Program applications.

Applicants who meet the PCC criteria at the time of application are considered to continue to meet the geographic criteria for the duration of the ITC recapture period, unless the location of the facility changes.

b. Part 2 requirement: Certain Census Tracts, as designated in the Climate and Economic Justice Screenting Tool as disadvantaged based on eligibility under either part A or part B, below.

CEJST information found here: https://screeningtool.geoplatform.gov/en/#3/33.47/-97.5

PART A: Energy Burden or Cost:

The census tract is: i) greater than or equal to the 90th percentile for energy burden (or energy count as average household annual energy cost in dollars divided by average household income), and ii) greater than or equal to the 65th percentile for low-income (defined as percentage of a census tract’s population in households where household income is at or below 200% of federal povery level, not including higher-education students).

PART B: Exposure:

The census tract is: i) greater than or equal to 90th percentile for exposure to fine inhalable particles with 2.5 or smaller micrometer diameters, and ii) greater than or equal to the 65th percentile for low-income (defined as percentage of a census tract’s population in households where household income is at or below 200% of federal povery level, not including higher-education students).

EXHIBIT 2

COVERED HOUSING PROGRAMS

LIST PROVIDED BY IRS RIN 1545-BQ81

ADDITIONAL GUIDANCE ON LOW-INCOME COMMUNITIES

BONUS CREDIT PROGRAM

· Department of Housing and Urban Development’s (HUD) Section 202 Supportive Housing for the Elderly, including the direct loan program under Section 202;

· HUD’s Section 811 Supportive Housing for Persons with Disabilities;

· HUD’s Housing Opportunities for Persons With AIDS (HOPWA) program;

· HUD’s homeless programs under title IV of the McKinney-Vento Homeless Assistance Act, including the Emergency Solutions Grants program, the Continuum of Care program, and the Rural Housing Stability Assistance program;

· HUD’s HOME Investment Partnerships (HOME) program;

· Federal Housing Administration (FHA) mortgage insurance under Section 221(d)(3) subsidized with a below-market interest rate (BMIR) prescribed in the proviso of Section 221(d)(5) of the National Housing Act;

· HUD’s Section 236 interest rate reduction payments;

· HUD Public Housing assisted under section 9 of the United States Housing Act of 1937;

· HUD tenant-based and project-based rental assistance under section 8 of the United States Housing Act of 1937;

· HUD Section 8 Moderate Rehabilitation Program;

· HUD Section 8 Moderate Rehabilitation Single Room Occupancy Program for Homeless Individuals;

· USDA Section 515 Rural Rental Housing;

· USDA Section 514/516 Farm Labor Housing;

· USDA Section 538 Guaranteed Rural Rental Housing;

· USDA Section 533 Housing Preservation Grant Program;

· Treasury/IRS Low-Income Housing Credit under section 42 of the Code;

· HUD’s National Housing Trust Fund;

· Veterans Administration’s (VA) Comprehensive Service Programs for Homeless Veterans;

· VA’s grant program for homeless veterans with special needs;

· VA’s financial assistance for supportive services for very low-income veteran families in permanent housing; and/or

· Department of Justice transitional housing assistance grants for victims of domestic violence, dating violence, sexual assault or stalking.

Section 48(e)(2)(B)(i) also includes the following Federal housing programs:

· Housing assistance programs administered by the USDA under title V of the Housing Act of 1949; and/or

· Housing programs administered by an Indian Tribe or a Tribally designated housing entity (as defined in section 4(22) of the Native American Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4103(22)).

EXHIBIT 3

CATEGORICAL INCOME VERIFICATION

FEDERAL PROGRAMS FOR CATEGORY 4 ELIGIBILITY

Federal programs include, but are not limited to:

· Medicaid

· Low-Income Home Energy Assistance Program (LIHEAP)

· Weatherization Assistance Program (WAP)

· Supplemental Nutrition Assistance Program (SNAP)

· Section 8 Project-Based Rental Assistance

· Housing Choice Voucher Program

· FCC’s Lifeline Support for Affordable Communications

· National Shool Lunch Program

· Supplemental Secruity Income Program administered by the Social Security Administration

· Any verified government or non-profit program serving Asset Limited Income Constrained Employed persons or households