ITC Energy Community Adder

 Last Updated June 16, 2026

Section 48E of the Tax Code includes an adder under the Investment Tax Credit for commercial projects constructed in an “Energy Community.” Energy Community means one of the following:

1. A “metropolitan statistical area or nonmetropolitan statistical area which has (or, at any time during the period beginning after December 31, 2009, had) 0.17 percent or greater direct employment or 25 percent or greater local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas (as determined by the Secretary), and has an unemployment rate at or above the national average unemployment rate for the previous year (as determined by the Secretary).”

2. A census tract in which after December 31, 1999 a coal mine has closed, or which after December 31, 2009 a coal-fired electric generating unit has been retired, or a census tract directly adjoining either.

3. A federally designated brownfield site.

For the ITC, the adder is 10% for projects below one megawatt. For projects larger than one megawatt, the ITC is 2% plus an additional 8% if they meet prevailing wage and apprenticeship requirements.

On June 10, Treasury and the IRS released Notice 2026-39, which updates the locations qualifying as Energy Communities. You can see CALSSA’s consolidated map showing all currently qualifying California counties and coal-closure census tracts below.

Category 1: Areas with high unemployment and a history of fossil fuel employment

Appendix 1 to Notice 2026-39 shows updated counties that qualify as energy communities because of high unemployment and a history of fossil fuel employment. Napa County is the only California county newly added to the list. No California counties included in the previous annual list were removed.

For the ITC, Energy Community status is generally determined when a project is placed in service. However, a project that begins construction while its location qualifies may preserve Energy Community treatment through its placed-in-service date under the applicable beginning-of-construction rule.

The updated list is for counties that qualify as being in an energy community is as follows:

Category 2: Census tracts with closed coal mines or retired coal-fired generating units

The IRS and Treasury have published several cumulative appendices identifying qualifying coal-closure census tracts and directly adjoining census tracts. The current complete list consists of Appendix C to Notice 2023-29, Appendix 3 to Notice 2023-47, Appendix 2 to Notice 2024-48, Appendix 4 to Notice 2025-31, and Appendix 2 to Notice 2026-39. Of those appendices, only Appendix C to Notice 2023-29 identifies California locations.

Most of the California coal-closure tracts are also located within counties that independently qualify countywide under Category 1: Inyo, Kern, Riverside, San Bernardino, and Tulare counties. Seven qualifying census tracts are located in San Joaquin County, which does not qualify countywide under Category 1. These can be found in the above CALSSA map.

Category 3: Brownfields

Not all federally designated brownfields are eligible for the ITC adder. Brownfield qualification depends on the federal statutory definition, applicable exclusions, and IRS guidance. To locate eligible brownfields, see this CALSSA resource.