The Internal Revenue Service (IRS) and the Department of the Treasury have issued Notice 2024-20 to clarify the location requirements for the Section 30C alternative fuel vehicle refueling property credit. This credit, crucial for businesses and individuals investing in clean energy infrastructure, has specific geographic eligibility criteria that taxpayers must understand to claim the incentive. This article breaks down IRS Notice 2024-20, providing a clear guide to the eligible census tracts for the 30C credit in 2024 and beyond, ensuring you can navigate these requirements effectively.
Understanding the Section 30C Credit and 2024 Updates
The Section 30C credit isn’t new, but it has been significantly enhanced and extended through the Inflation Reduction Act (IRA). Originally established in 2005, the credit aims to encourage the adoption of alternative fuels by offsetting the costs of installing refueling infrastructure. The IRA has not only prolonged the credit’s lifespan but also introduced key modifications that are particularly relevant for projects in 2024 and moving forward.
Key Changes from the Inflation Reduction Act (IRA)
The Inflation Reduction Act brought several important changes to the Section 30C credit, impacting its scope and benefits:
- Extended Credit Period: The credit is now available for qualified alternative fuel vehicle refueling property placed in service after December 31, 2021, and extends until December 31, 2032. This long-term extension provides sustained support for investment in this sector.
- Location Requirement: A significant addition is the requirement that qualified refueling property must be placed in service within an eligible census tract. This geographic targeting aims to direct incentives towards communities that can benefit most from clean energy infrastructure. Eligible census tracts are defined as either low-income communities or areas not classified as urban.
- Credit Limit Adjustments: The IRA revised the credit limitations. Instead of a per-location cap, the limit now applies per single item of qualified refueling property. For depreciable property, the credit is capped at $100,000, and for all other property, the limit is $1,000.
- Inclusion of Bi-Directional Charging: The definition of qualified property was clarified to include property that can both charge vehicle batteries and discharge electricity back to an external load. This acknowledges advancements in vehicle-to-grid technology.
- Two- and Three-Wheeled Vehicle Charging: The definition was broadened to encompass depreciable property designed for charging two- and three-wheeled electric vehicles commonly used on public roads.
- Credit Rate Modification: The credit amount for depreciable property changed from 30 percent to 6 percent, with a potential enhanced credit amount for projects meeting prevailing wage and apprenticeship requirements or those started before January 29, 2023.
Credit as a Business or Personal Incentive
The Section 30C credit can function as either a personal credit or a general business credit, depending on the nature of the property. Generally, it is a nonrefundable personal credit. However, if the credit is for depreciable property (property used in a trade or business or for the production of income), it is treated as a current year business credit. This distinction is crucial for how taxpayers can utilize the credit and potentially benefit from direct pay or credit transfer options introduced by the IRA.
Defining Eligible Census Tracts for 2024
The core of Notice 2024-20 lies in defining what constitutes an “eligible census tract.” For property to qualify for the Section 30C credit, it must be located within one of these designated areas. The notice specifies two primary categories of eligible census tracts: low-income community census tracts and non-urban census tracts.
Low-Income Community Census Tracts
These tracts are defined based on criteria established for the New Markets Tax Credit (NMTC) under Section 45D(e). Generally, a low-income community census tract is one where the poverty rate is at least 20 percent or where the median family income does not exceed 80 percent of the area median income. The specific income threshold depends on whether the tract is located within a metropolitan area or not.
It’s important to note that the designation of low-income community census tracts is periodically updated by the Community Development Financial Institutions Fund (CDFI Fund). For 2024, and for property placed in service after December 31, 2022, and before January 1, 2025, taxpayers have a choice: they can use either the 2011-2015 NMTC tracts or the 2016-2020 NMTC tracts to determine eligibility. After December 31, 2024, and until January 1, 2030, only the 2016-2020 NMTC tracts will be applicable. This transition period is intended to provide flexibility for taxpayers as data updates occur.
Non-Urban Census Tracts
The second category of eligible census tracts comprises non-urban areas. The IRS, referencing the Census Bureau’s definitions, clarifies that a non-urban census tract is one where at least 10 percent of its census blocks are not designated as urban areas according to the most recent decennial census (2020 Census). This definition uses 2020 census tract boundaries and the Census Bureau’s urban area designations from the 2020 Census. This approach ensures that the credit extends to less densely populated regions, supporting the expansion of alternative fuel infrastructure beyond major cities.
Transition Period and 2024 Applicability
For the year 2024, understanding the transition rules is critical. As mentioned, for property placed in service before January 1, 2025, taxpayers can choose to use either the 2015 census tract boundaries (2011-2015 NMTC tracts) or the 2020 census tract boundaries (2016-2020 NMTC tracts and 2020 non-urban census tracts) to determine if a location qualifies. This dual approach for 2024 offers a broader range of eligible locations and accommodates the data update cycles of the Census Bureau and CDFI Fund. From January 1, 2025 onwards, the 2020 census tract boundaries and related designations will be the sole basis for determining eligibility until further updates are issued.
How to Determine if Your Property is in an Eligible Tract (Practical Guide)
Notice 2024-20 provides clear instructions and resources for taxpayers to verify if their property location falls within an eligible census tract. The IRS provides Appendices and online tools to facilitate this determination.
Using Appendices A & B
The notice includes two crucial appendices:
- Appendix A: Lists eligible low-income community census tracts based on the 2011-2015 NMTC tracts and using 2015 census tract boundaries. Appendix A Link
- Appendix B: Lists eligible low-income community census tracts based on the 2016-2020 NMTC tracts and non-urban census tracts, both using 2020 census tract boundaries. Appendix B Link
To use these appendices, you need to determine the 11-digit census tract GEOID for your property’s location. For property placed in service before January 1, 2025, you can check against either Appendix A or Appendix B. For property placed in service from January 1, 2025, to January 1, 2030, you must use Appendix B. If the 11-digit GEOID of your location is listed in the relevant appendix, your property is considered to be in an eligible census tract.
Utilizing Online Tools
The IRS notice directs taxpayers to online tools provided by the CDFI Fund and the Census Bureau to find the 11-digit census tract GEOID for a specific location:
- CDFI Fund Mapping Tool (for 2015 census tract boundaries): Accessible via https://www.cdfifund.gov/cims. On this tool, select “CDFI,” then in “Layers,” check “2015 CDFI Tract” and uncheck “2020 CDFI Tract.” Enter the address or latitude/longitude in the “Search Addresses” bar. Left-clicking on the location will display the 11-digit GEOID.
- Census Geocoder (for 2020 census tract boundaries): Available at https://geocoding.geo.census.gov/geocoder/geographies/address?form (for address) or https://geocoding.geo.census.gov/geocoder/geographies/coordinates?form (for latitude/longitude). Set “Benchmark” to “Public_AR_Census2020” and “Vintage” to “Census2020_Current.” The 11-digit GEOID will be listed under “Census Tracts.”
Using these tools, taxpayers can accurately identify the 11-digit census tract GEOID under both the 2015 and 2020 boundaries and then cross-reference this GEOID with Appendices A and B to confirm location eligibility for the Section 30C credit.
Key Dates and Future Updates
Staying informed about updates to eligible census tracts is crucial for long-term planning. Notice 2024-20 provides insights into anticipated future updates:
2024-2025 Transition
As emphasized, 2024 is a transition year where taxpayers can use either the 2015 or 2020 census tract boundaries for determining eligibility. From January 1, 2025, to January 1, 2030, the 2020 census tract boundaries will be the standard. Keep these dates in mind when planning and placing refueling property in service to ensure compliance and credit eligibility.
Looking Ahead: Post-2025 and Future Updates
The IRS and Treasury anticipate further updates to low-income community census tracts based on future NMTC census tract determinations by the CDFI Fund, expected around late 2028. The 2016-2020 NMTC tracts are expected to remain relevant through 2029. Similarly, non-urban census tract designations are tied to the decennial census, with the next update likely following the 2030 Census, potentially around 2033. Taxpayers should monitor for further guidance from the IRS regarding these future updates to ensure continued compliance and maximize their eligibility for the Section 30C credit in the evolving landscape of census data and urban/non-urban designations.
Conclusion
IRS Notice 2024-20 is an essential resource for anyone seeking to claim the Section 30C alternative fuel vehicle refueling property credit. By clarifying the eligible census tract requirements and providing practical tools for verification, the IRS is helping taxpayers navigate the location-based eligibility criteria introduced by the Inflation Reduction Act. For projects in 2024, understanding the transitional rules and utilizing Appendices A and B, along with the online mapping tools, are key steps to ensuring your investments in alternative fuel infrastructure qualify for this valuable tax credit. As always, taxpayers should consult with a tax professional to discuss their specific circumstances and ensure full compliance with IRS guidelines.
References:
- IRS Notice 2024-20: https://www.irs.gov/pub/irs-drop/n-24-20.pdf
- Appendix A – List of 2015 Census Tract Boundary 30C Eligible Tracts: https://www.irs.gov/pub/irs-drop/appendix-a-list-of-2015-census-tract-boundary-30c-eligible-tracts-v2-1-4-2024.pdf
- Appendix B – List of 2020 Census Tract Boundary 30C Eligible Tracts: https://www.irs.gov/pub/irs-drop/appendix-b-list-of-2020-census-tract-boundary-30c-eligible-tracts-v2-1-4-2024.pdf
- CDFI Fund Mapping Tool: https://www.cdfifund.gov/cims
- Census Geocoder: https://geocoding.geo.census.gov/geocoder/
