The landscape of clean energy incentives is constantly evolving, and for businesses and individuals involved in alternative fuel vehicle infrastructure, staying informed is crucial. The Internal Revenue Service (IRS) Notice 2024-20 brings important updates to the Section 30C alternative fuel vehicle refueling property credit (often referred to as the 30C credit), particularly concerning where qualified refueling property must be located to be eligible for this valuable tax break. This notice clarifies key aspects of the Inflation Reduction Act’s (IRA) impact on the 30C credit and provides a roadmap for claiming this credit effectively through 2029. Understanding these updates, especially those effective from 2024 onwards, is vital for anyone planning to invest in or operate alternative fuel refueling stations over the next 7 years and beyond.
Understanding the Evolving 30C Credit
The 30C credit isn’t new; it was initially introduced in 2005 to encourage the development of alternative fueling infrastructure. However, the Inflation Reduction Act of 2022 significantly revamped and extended this credit, making it more impactful than ever. These changes, effective for properties placed in service after December 31, 2022, are the core focus of IRS Notice 2024-20.
Key IRA Modifications to the 30C Credit:
- Credit Limit Restructuring: Previously limited per location, the credit now applies per item of qualified refueling property. The limits have also been increased, especially for depreciable property, reaching up to $100,000 for businesses and $1,000 for individuals.
- Geographic Eligibility Mandate: A significant change is the requirement that qualified alternative fuel vehicle refueling property must be placed in service within an “eligible census tract” to qualify for the credit. This targets investments towards specific communities.
- Expanded Definition of Qualified Property: The definition now explicitly includes equipment that not only charges electric vehicle batteries but can also discharge electricity back to the grid. It also encompasses charging solutions for two- and three-wheeled electric vehicles designed for public roads.
- Credit Amount Adjustment & Enhancement: For depreciable property, the base credit rate changed from 30% to 6%. However, a significantly enhanced credit is available for projects meeting prevailing wage and apprenticeship requirements or those started before January 29, 2023.
- Direct Pay and Transferability: The IRA introduced mechanisms for “applicable entities” (like government bodies and non-profits) to receive the credit as a direct payment and for “eligible taxpayers” to transfer the credit to unrelated parties, increasing the credit’s accessibility and financial flexibility.
These modifications, particularly the eligible census tract requirement, are critical for anyone looking to leverage the 30C credit from 2024 through 2029 and beyond, making Notice 2024-20 essential guidance.
Defining “Eligible Census Tracts” for 30C Credit Qualification
The core of Notice 2024-20 revolves around defining “eligible census tracts.” According to the IRA and clarified by this notice, to qualify for the 30C credit, your alternative fuel vehicle refueling property must be placed in service in one of two types of census tracts:
- Low-Income Community Census Tracts: These are tracts that meet the criteria for “low-income communities” as defined for the New Markets Tax Credit (NMTC) program under Section 45D(e) of the tax code. Generally, these are areas with a poverty rate of at least 20% or where median family income does not exceed 80% of the area median.
- Non-Urban Census Tracts: These are census tracts that are not designated as “urban areas” by the Census Bureau. Notice 2024-20 clarifies that a census tract is considered “non-urban” if at least 10% of its census blocks are not designated as urban areas, using the Census Bureau’s 2020 Census urban area designations.
Navigating Census Bureau Terminology:
To accurately determine if your property location falls within an eligible census tract, understanding some Census Bureau terminology is necessary:
- Census Block: The smallest geographic unit used by the Census Bureau for data collection.
- Population Census Tract: A small, relatively permanent statistical subdivision of a county, designed to be homogeneous regarding population characteristics, economic status, and living conditions. Census tracts are composed of census blocks. Each tract has a unique 11-digit GEOID (geographic identifier).
- Census Tract Boundaries: These boundaries, delineated by the Census Bureau, are based on population density and housing. They are updated roughly every ten years following the decennial census. The 2020 Census is the most recent, and the boundaries used are referred to as “2020 census tract boundaries.”
- Urban Area: Defined by the Census Bureau based on population density and urban land use. Crucially, urban area designations are based on census blocks, not census tracts.
Understanding Census Bureau geographic terms is crucial for 30C credit eligibility.
Low-Income Community Census Tracts: Utilizing NMTC Designations
Determining low-income community census tracts for the 30C credit relies on designations made for the New Markets Tax Credit (NMTC) program. The Community Development Financial Institutions (CDFI) Fund, in conjunction with the IRS, designates these tracts. These designations are updated periodically based on American Community Survey (ACS) 5-year estimates.
Transition Period for NMTC Tracts:
Notice 2024-20 addresses a transition period related to using different NMTC tract designations. The NMTC low-income community census tracts were updated on September 1, 2023, using 2016-2020 ACS 5-year estimates. Previously, they were based on 2011-2015 estimates. To provide flexibility, the IRS is allowing a transition period for the 30C credit:
- For property placed in service between January 1, 2023, and December 31, 2024: Taxpayers can use either the 2011-2015 NMTC tracts or the 2016-2020 NMTC tracts to determine low-income community eligibility.
- For property placed in service after December 31, 2024, and before January 1, 2030: Taxpayers must use the 2016-2020 NMTC tracts.
This transition ensures a consistent approach and allows taxpayers to rely on a single NMTC designation for all properties placed in service within a calendar year.
Non-Urban Census Tracts: Leveraging 2020 Census Data
For non-urban census tracts, Notice 2024-20 specifies using the Census Bureau’s 2020 Census urban area designations. A census tract qualifies as non-urban if at least 10% of its census blocks are not designated as urban. This 10% threshold is a result of feedback received and is intended to align with the goal of incentivizing refueling property in genuinely non-urban locations. The 2020 non-urban census tract designations are to be used until further updates, likely following the 2030 Census.
Verifying Property Location in an Eligible Census Tract
To claim the 30C credit, you must be able to verify that your refueling property is indeed located within an eligible census tract. Notice 2024-20 provides clear guidance on how to do this, pointing to specific resources:
Tools for Determining 11-Digit Census Tract GEOIDs:
- For 2015 Census Tract Boundaries (used with 2011-2015 NMTC tracts): Utilize the CDFI Fund mapping tool, accessible through the provided link in Appendix A of Notice 2024-20. This tool allows you to input an address or latitude/longitude to identify the 11-digit census tract GEOID under the 2015 boundaries.
- For 2020 Census Tract Boundaries (used with 2016-2020 NMTC tracts and non-urban tracts): Use the Census Geocoder tool available on the Census Bureau website (links provided in Appendix B of Notice 2024-20). This tool lets you determine the 11-digit census tract GEOID for an address or specific coordinates under the 2020 census tract boundaries.
Appendices A and B: Lists of Eligible Census Tracts:
Notice 2024-20 includes two crucial appendices:
- Appendix A: Lists eligible low-income community census tracts based on the 2011-2015 NMTC tracts and the 2015 census tract boundaries.
- Appendix B: Lists eligible low-income community census tracts based on the 2016-2020 NMTC tracts and eligible non-urban census tracts, both using the 2020 census tract boundaries.
To verify eligibility, you must:
- Determine the 11-digit census tract GEOID for your property location using the appropriate tool (CDFI mapping tool for 2015 boundaries, Census Geocoder for 2020 boundaries).
- Consult the correct appendix (Appendix A or B) based on the “placed in service” date of your property.
- Confirm if your property’s 11-digit census tract GEOID is listed in the relevant appendix. If it is, your property meets the geographic eligibility requirement for the 30C credit.
Important Dates and Appendix Usage:
- For property placed in service between December 31, 2022, and January 1, 2025: Check either Appendix A or Appendix B. If the GEOID is in either list, it qualifies.
- For property placed in service between December 31, 2024, and January 1, 2030: You must check Appendix B. Only GEOIDs listed in Appendix B will qualify.
Appendices A and B of IRS Notice 2024-20 are crucial for determining eligible census tracts.
Looking Ahead: Future Updates and Reliance on Notice 2024-20
Notice 2024-20 provides interim guidance. The IRS and Treasury Department intend to issue proposed regulations that will formalize these rules. However, until those regulations are released, taxpayers can rely on Notice 2024-20 and its appendices to determine 30C credit eligibility. The IRS will also administer the 30C credit consistent with this notice in the interim.
Anticipated Updates:
- Low-Income Community Census Tracts: Expect updates to the list of low-income community census tracts as the CDFI Fund releases new NMTC census tract designations. The next update is anticipated around late 2028, with those updated tracts becoming relevant for the 30C credit around 2030.
- Non-Urban Census Tracts: Updates to non-urban census tract designations will likely follow the Census Bureau’s release of 2030 Census urban area determinations, expected around 2033. Until then, the 2020 non-urban census tract designations remain in effect for the 30C credit.
Conclusion: Strategic Planning for Clean Fueling Infrastructure Investments
IRS Notice 2024-20 is a vital piece of guidance for anyone involved in deploying alternative fuel vehicle refueling infrastructure. By clarifying the geographic eligibility requirements for the 30C credit, particularly for the period spanning 2024 to 2029, this notice enables businesses and individuals to make informed investment decisions. Understanding how to identify eligible census tracts using the provided tools and appendices is paramount to maximizing the benefits of the 30C credit. As the clean energy landscape continues to evolve, staying abreast of these regulatory updates, like Notice 2024-20, is essential for strategic planning and successful participation in the growing alternative fuel vehicle market. For those considering installing charging stations or other alternative fueling infrastructure, now is the time to leverage these incentives and contribute to a cleaner transportation future.
