Energy community and domestic content bonuses: how a solar credit can exceed 30%

By the Tax Field Guide editorial team. Published 2026-10-26. Facts checked 2026-10-26. Related strategies: Solar Investment Credits, Purchased Energy Credits.

Education only; not tax, legal or investment advice. Tax rules change, and how they apply depends on your facts. No outcome is guaranteed.

On top of the 6% or 30% rate (see prevailing wage and apprenticeship), two location- and supply-chain-based bonuses can raise a solar credit further. When a deal advertises a 40% or 50% credit, these bonuses are usually the reason, and each one needs its own evidence.

The energy community bonus

A project placed in service in an "energy community" gets a higher credit. For the investment credits (§48 and §48E), the rate rises by 10 percentage points if the project also meets the prevailing wage and apprenticeship requirements or another listed exception (such as under 1 megawatt), and by 2 percentage points otherwise. For the production credits (§45 and §45Y), the credit is increased by 10%.¹²

There are three categories of energy community:²³

Brownfield sites, as defined by reference to federal environmental law (CERCLA), including certain mine-scarred land;
Statistical areas with fossil fuel employment of 0.17% or more (or 25% or more of local tax revenue from fossil fuels) at any time after 2009, and an unemployment rate at or above the national average for the prior year; and
Coal closure census tracts (and adjoining tracts) where a coal mine closed after 1999 or a coal-fired generating unit was retired after 2009.

The statistical area list changes each year. The IRS published the latest update in Notice 2026-39.¹

The domestic content bonus

The domestic content bonus applies when the project's steel, iron and manufactured products meet U.S. content requirements. It adds 10 percentage points to the investment credit rate if the project meets PWA, is under 1 megawatt, or began construction before January 29, 2023, and 2 percentage points otherwise; for production credits it is a 10% increase.⁴ A domestic content certification statement must be attached to Form 3468 (or Form 8835) for the first year the bonus is claimed.⁴ The IRS has issued safe harbors for calculating the cost percentages, most recently updated in Notice 2025-08.⁴

How the numbers stack

For a §48E solar project that meets PWA, the rate can be the 30% base plus 10 points for an energy community plus 10 points for domestic content, so up to 50% of the qualified investment.⁵⁶ Each bonus is separate: a project can qualify for one, both or neither.

Other 2026 conditions still apply

The bonuses do not change the deadlines. A solar facility that begins construction after July 4, 2026 must still be placed in service by December 31, 2027, and facilities that begin construction after December 31, 2025 must satisfy the prohibited foreign entity rules.⁶⁷ See the solar credit in 2026.

What to ask for

Energy community: which category, the census tract or statistical area, and the IRS notice or Treasury data relied on as of the relevant date.
Domestic content: the certification statement and the cost-percentage calculation, including whether a safe harbor was used.
Who bears the loss if the IRS disallows a bonus. If you are buying the credit, the buyer generally bears the excessive credit transfer and the 20% penalty.⁸ See questions to ask a tax credit broker.

Common questions

How much is the energy community bonus for solar?

For the §48E investment credit, 10 percentage points if the project meets the prevailing wage and apprenticeship requirements or another listed exception, and 2 percentage points otherwise. For the §45Y production credit, a 10% increase.

Can a solar tax credit be 50%?

For a §48E project that meets the prevailing wage and apprenticeship requirements, the 30% rate plus 10 points for an energy community and 10 points for domestic content totals 50%.

How do I know if a site is in an energy community?

Check the category: brownfield, statistical area or coal closure. The IRS publishes updated statistical area and coal closure lists in notices, most recently Notice 2026-39, and Treasury publishes the methodology and data.

Education only; not tax, legal or investment advice. Talk to a qualified professional before acting.

Sources

IRS Notice 2026-39, Energy Community Bonus Credit Amounts or Rates, https://www.irs.gov/pub/irs-drop/n-26-39.pdf
IRS Notice 2023-29 (Internal Revenue Bulletin 2023-29), https://www.irs.gov/irb/2023-29_IRB
U.S. Department of the Treasury, Energy Communities, https://home.treasury.gov/policy-issues/tax-policy/data-transparency/energy-communities
IRS, Domestic content bonus credit, https://www.irs.gov/credits-deductions/domestic-content-bonus-credit
IRS, Clean Electricity Investment Credit, https://www.irs.gov/credits-deductions/clean-electricity-investment-credit
26 U.S.C. §48E, https://www.law.cornell.edu/uscode/text/26/48E
IRS Notice 2026-15 (material assistance from prohibited foreign entities), https://www.irs.gov/pub/irs-drop/n-26-15.pdf
IRS, Instructions for Form 4255 (excessive credit transfer), https://www.irs.gov/instructions/i4255

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