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IRS Releases 2026 Energy Community Bonus Credit Updates for Statistical Areas and Coal Closures

 

July 7, 2026 - The IRS released additional guidance regarding the energy community bonus credit under Sections 45, 48, 45Y and 48E of the Internal Revenue Code on June 10, 2026, in Notice 2026-39 (Notice). The Notice follows prior guidance issued in Notice 2023-29 (clarified by Notice 2023-45), Notice 2023-47, Notice 2024-30, Notice 2024-48 and Notice 2025-31. The new guidance includes three appendices: Appendix 1, Appendix 2 and Appendix 3.

Updated Categories of Energy Communities

The energy community bonus, made available under the Inflation Reduction Act, generally increases the value of credits found in Sections 45, 48, 45Y and 48E by 10 percent – the bonus amount is reduced if the prevailing wage and apprenticeship requirements are not satisfied – for projects located in an energy community. There are three location-based categories of energy communities for purposes of the energy community bonus credit: Brownfield category, statistical area category, and coal closure category. (See Holland & Knight's previous alert, "IRS Energy Community Bonus Guidance Provides Welcome Clarity," April 7, 2023.)

Notice 2026-39 provides updated guidance on the statistical area and coal closure categories, but not the Brownfield category. Notably, it also provides an updated listing of counties and county equivalents that qualify for the statistical area category based on 2025 unemployment data using both the 2010 decennial census delineation (Vintage 1) and 2020 decennial census delineation (Vintage 2), and it identifies additional census tracts that qualify for the coal closure category.

Statistical Area Category

These energy communities are metropolitan statistical areas (MSAs) or non-metropolitan statistical areas (non-MSAs) that both:

  • have (or, at any time during the period beginning after Dec. 31, 2009, had) 0.17 percent or greater direct employment (fossil fuel employment), or 25 percent or greater local tax revenues related to the extraction, processing, transport or storage of coal, oil or natural gas
  • had an unemployment rate at or above the national average unemployment rate for the previous year.

Appendix 1 of Notice 2026-39 provides a list of counties and county equivalents that qualify as energy communities because they meet the fossil fuel employment threshold (as of the U.S. Census Bureau's publication of the 2023 County Business Patterns) and have an unemployment rate at or above the national average unemployment rate for calendar year 2025. It does not include a new fossil fuel employment appendix because no additional counties met the threshold. Eligibility is determined under both Vintage 1 (based on the 2010 decennial census) and Vintage 2 (based on the 2020 decennial census), and a county qualifies only if it meets the criteria under the same vintage.

The energy community status for the counties listed in Appendix 1 is applicable as of June 10, 2026, and that status will continue until the U.S. Department of the Treasury and IRS issue an updated list based on unemployment rates for 2026.

Coal Closure Category

These energy communities are census tracts (or adjoining census tracts) where a coal mine has closed after 1999 or a coal-fired electric generating unit was retired after 2009.

Appendix 2 of Notice 2026-39 lists newly identified census tracts in the coal closure category based on coal mine closures or coal-fired electric generating unit retirements, along with directly adjoining census tracts. Appendix 2 should be analyzed in combination with Appendix C to Notice 2023-29, Appendix 3 to Notice 2023-47, Appendix 2 to Notice 2024-48 and Appendix 4 to Notice 2025-31 to provide the full list of coal closure census tracts.

Appendix 3 of Notice 2026-39 lists census tracts in Appendix 2 that newly qualify as coal closure tracts based on location data corrections issued since the publication of Notice 2025-31. Accordingly, projects placed in service after December 31, 2022, that would have been located in a coal closure category based on the additional census tracts in Appendix 3 are eligible to claim the energy community bonus.

Additional Insight from Holland & Knight's Energy Tax Team

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