The IRS released additional guidance on June 23, 2025, in the form of Notice 2025-31 (Notice) regarding the energy community bonus credit under Sections 45, 48, 45Y and 48E of the Internal Revenue Code. The Notice follows prior guidance issued in Notice 2023-29 (clarified by Notice 2023-45), Notice 2023-47, Notice 2024-30 and Notice 2024-48. The Notice also provides a new grouping of categories for metropolitan statistical areas (MSAs) and non-metropolitan statistical areas (non-MSAs). The additional guidance also includes five new appendices: Appendix 1, Appendix 2, Appendix 3, Appendix 4 and Appendix 5.
3 Categories of Energy Communities
The energy community bonus, made available under the Inflation Reduction Act (IRA), 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.)
The Notice provides updated guidance on the Statistical Area Category and Coal Closure Category, but not the Brownfield Category. Notably, the Notice provides a new listing of MSAs and non-MSAs based on 2020 decennial census data and updated census tracts that qualify for the Coal Closure Category.
Statistical Area Category
These energy communities are MSAs or non-MSAs that 1) 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, and 2) had an unemployment rate at or above the national average unemployment rate for the previous year.
Appendix 1 of Notice 2025-31 provides a list of MSAs and non-MSAs that are newly relevant to the Statistical Area Category based on updated information from the 2020 decennial census. The list contains 1) county or county equivalents, as well as MSAs or non-MSAs under the 2010 decennial census (Vintage 1) and 2) county or county equivalents, as well as MSAs or non-MSAs under the 2020 decennial census (Vintage 2).
Appendix 2 of Notice 2025-31 provides an updated list of counties that have met the Fossil Fuel Employment threshold.
Appendix 3 of Notice 2025-31 is the list of counties or county equivalents that qualify as a Statistical Area Category for calendar year 2024 under Vintage 1, Vintage 2 or both. The energy community status listed in Appendix 3 is applicable as of June 23, 2025, and that status will continue until the U.S. Department of the Treasury and IRS issue an updated list based on unemployment rates for 2025.
Coal Closure Category
These energy communities are census tracts (or adjoining census tracts) where 1) a coal mine has closed after 1999 or 2) a coal-fired electric generating unit was retired after 2009.
Appendix 4 of Notice 2025-31 adds newly identified census tracts in the coal closure category that were not included in Appendix C of Notice 2023-29, Appendix 3 of Notice 2023-47 or Appendix 2 to Notice 2024-48. Appendix 4 should be analyzed in combination with Appendix C to Notice 2023-29, Appendix 3 to Notice 2023-47 and Appendix 2 to Notice 2024-48 to provide the full list of coal closure census tracts.
Appendix 5 of Notice 2025-31 lists census tracts in Appendix 4 of Notice 2025-31 that newly qualify as coal closure tracts based on location data corrections. Accordingly, projects placed in service after Dec. 31, 2022, that would have been located in a Coal Closure Community Category based on the additional census tracts in Appendix 5 are eligible to claim the energy community bonus.
Holland & Knight Insights
For more information, see Holland & Knight's previous alerts, "IRS Issues Updated Energy Community Bonus Guidance," June 20, 2023, "IRS Updates and Expands Energy Community Bonus Tax Credit Guidance," March 27, 2024, and "IRS Updated Energy Community Bonus Tax Credit Guidance," June 11, 2024.
The Holland & Knight Energy Tax Team is available for questions regarding the guidance. To receive additional analysis from the team, please subscribe to our alerts.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.
