§ 1.48E(h)-1 — Clean Electricity Low-Income Communities Bonus Credit Amount Program.

26 CFR § 1.48E(h)-1

• Title: Title 26: Internal Revenue
• Part: Part 1: Income Taxes
• Source: eCFR (current through Mar 20, 2026)

Text

§ 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 low-income community data for the NMTC program or the updated ACS low-income 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 low-income 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 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) 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 multi-family 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 low-income 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 kilowatt-hours 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 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 net-crediting 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. 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 self-attestation from a household, for purposes of this Program, does not extend to categorical eligibility verification where the eligible needs-based 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 sub-reservations, 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 Residential BTM facilities	400 MW.
Eligible FTM facilities and non-residential 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 non-Additional 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, 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 non-residential 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 sub-reservations 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 sub-reservation (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 sub-reservations 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);

(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 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 non-residential 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 sub-reservation 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 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 sub-reservation, 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 sub-reservation 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 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.

[T.D. 10025, 90 FR 2861, Jan. 13, 2025]