Solar Yoda LLC

Could Your Property Qualify for a 40% Solar Tax Credit?

Most people know about the 30% federal Investment Tax Credit (ITC) for solar energy. But did you know that certain locations across the country qualify for an extra 10%, bringing the total to 40%?

Under the Inflation Reduction Act (IRA), properties located in federally designated “energy communities” are eligible for this enhanced credit. For commercial solar customers who own their systems, that means direct tax savings. For residential customers using a third-party ownership model like an Energy Supply Agreement (ESA) or Power Purchase Agreement (PPA), the solar finance company receives the bonus credit and passes the savings along in the form of lower energy rates.

Either way, if your property is in an energy community, you benefit.

What Is an Energy Community?

The IRS defines three types of energy communities:

1. Coal Closure Communities

Census tracts where a coal mine closed after 1999 or a coal-fired power plant retired after 2009 – plus all directly adjoining census tracts. This designation is permanent and only grows over time as more plants close.

2. Statistical Area Communities

Metropolitan or non-metropolitan statistical areas with significant fossil fuel employment (at least 0.17% of total employment) and an unemployment rate at or above the national average. This category is updated annually by the IRS.

3. Brownfield Sites

Properties designated as brownfields by federal, state, or local authorities. These are evaluated on a site-by-site basis.

Which States Have Energy Communities?

Energy communities exist in every state, but the coverage varies dramatically. Here is a look at five key solar markets:

Maryland

Maryland qualifies primarily through coal closure designations. Several major coal-fired power plants have retired in recent years:

• H.A. Wagner Generating Station – Anne Arundel County (coal units retired December 2023)
• Chalk Point – Prince George’s County (Units 1 and 2 retired 2021)
• Dickerson – Montgomery County (retired 2019)
• Morgantown – Charles County (retired 2022)
• C.P. Crane – Baltimore County (retired 2018)

The qualifying census tracts extend beyond just the plant locations to include all adjoining tracts. In Anne Arundel County alone, communities like Pasadena, Riviera Beach, and Glen Burnie fall within the energy community designation. Maryland also has numerous brownfield sites, particularly in Baltimore’s industrial corridor.

Virginia

Virginia has some of the most extensive energy community coverage in the mid-Atlantic, thanks to both coal plant retirements and the state’s deep coal mining history in the southwest:

• Southwest Virginia coal country – Buchanan, Dickenson, Lee, Scott, Wise, Tazewell, and Russell counties qualify under both the Statistical Area and Coal Closure categories
• Chesterfield Power Station – Chesterfield County, near Richmond (coal units retired 2023-2024)
• Yorktown – York County (retired)
• Bremo – Fluvanna County (retired)
• Glen Lyn – Giles County (retired)

The Chesterfield County coal closure tracts are especially noteworthy because they sit in the Richmond metro area, a growing suburban and commercial solar market.

Texas

Texas has massive energy community eligibility across all three categories:

• Statistical Area: The Beaumont-Port Arthur MSA, Texarkana, and various non-metropolitan areas in East, South, and West Texas have historically qualified due to high fossil fuel employment and above-average unemployment
• Coal Closure: Multiple coal plants retired in 2018 alone, including Big Brown (Freestone County), Monticello (Titus County), Sandow (Milam County), and J.T. Deely in Bexar County (San Antonio)
• Brownfields: Extensive sites along the Gulf Coast petrochemical corridor

Note that Statistical Area eligibility changes annually. High-employment oil regions like the Permian Basin may not qualify in years when their unemployment drops below the national average.

New Jersey

New Jersey has targeted energy community eligibility:

• Atlantic County (Atlantic City-Hammonton MSA) has qualified under the Statistical Area category
• Cape May County qualifies through the B.L. England Generating Station coal closure (retired 2019), with census tracts around Upper Township and adjoining areas eligible
• New Jersey also has one of the highest concentrations of brownfield sites in the nation, particularly in northern NJ and the Delaware River corridor

Florida

Florida has more limited energy community coverage, primarily through coal closures:

• Crystal River – Citrus County (coal units retired 2013-2018)
• Cedar Bay – Duval County/Jacksonville (retired 2016)
• Indiantown Cogeneration – Martin County (retired 2020)
• C.D. McIntosh Jr. – Polk County
• Scholz – Jackson County in the Panhandle (retired 2015)

Florida also has brownfield sites in Tampa, Jacksonville, Miami-Dade, and former military installations in Pensacola.

How the Bonus Works for Residential vs. Commercial Customers

Commercial solar customers who purchase their system outright (or finance it as a capital expenditure) can claim the full 40% ITC directly on their federal tax return. This is a dollar-for-dollar tax credit, not a deduction.

Residential customers using a third-party ownership model – such as an Energy Supply Agreement, Power Purchase Agreement, or solar lease – benefit indirectly. The solar finance company (the system owner) claims the 40% ITC and uses that savings to offer you a lower rate per kilowatt-hour than you would otherwise receive. You still save on your electric bill from day one, but the energy community bonus makes the economics even better.

How to Check If Your Address Qualifies

The good news is there are several free tools to look up any address instantly:

Energy Community Check (Best for Address-Level Lookup)

The cleanest address-level lookup tool available. Type in any street address and get an instant yes or no on energy community eligibility. This tool provides precise census-tract-level verification and notes potential discrepancies in other mapping tools at tract boundaries.

DOE/NETL Interactive Map (Official Government Source)

The official federal map from the Department of Energy. It shows both Coal Closure and Statistical Area energy communities. You can zoom in and click on individual census tracts to see the designation details. This is the definitive source, though address-level precision can vary at tract boundaries.

Baker Tilly Energy Community Mapping Tool (Professional-Grade)

A professional-grade mapping tool with a clean address search interface, originally designed for solar developers and investors. Excellent for quickly verifying eligibility on commercial properties.

IRA Bonus Mapper by America Is All In (Multi-Bonus)

Built by the World Resources Institute for the America Is All In coalition, this interactive map checks not just energy community eligibility but also low-income community bonus, Justice40 status, and other IRA geographic incentives all at once. If you want to see every federal bonus your address might qualify for, start here.

Important Things to Know

Coal Closure status is permanent. Once a census tract qualifies because of a retired coal plant or closed coal mine, it stays qualified forever. This is the most bankable category for long-term solar planning.

Statistical Area status changes every year. The IRS updates the list annually based on the prior year’s unemployment data. A county that qualifies this year may not qualify next year, and vice versa.

Brownfield eligibility is site-specific. You cannot assume an entire neighborhood qualifies just because a brownfield site exists nearby. Each property must be verified individually.

Next Steps

If you are considering solar for your home or business, the first step is simple: check your address using one of the tools above. If your property falls in an energy community, you are leaving money on the table by not taking advantage of this enhanced incentive.

Whether you are a homeowner exploring an Energy Supply Agreement, a business owner evaluating a commercial solar purchase, or a nonprofit considering a $0-down PPA, the energy community bonus can meaningfully improve your project economics.

Have questions? Book a free consultation or call us at 443-864-3072. Solar Yoda LLC is an independent solar consultant serving Maryland since 2011. We compare proposals from multiple installers to find the best fit for your situation.