IRS Updates Energy Community Bonus Eligibility for 2025, What Developers Need to Know

The IRS has released Notice 2025-31, providing updated data that determines whether a project qualifies for the Energy Community Bonus Credit under sections 45, 45Y, 48, and 48E of the tax code. These bonus amounts, added by the Inflation Reduction Act, can increase a project's production or investment tax credit by 10% or boost energy credit rates by up to 10 percentage points, making energy community status one of the most valuable features in federal clean energy incentives.

This new notice republishes and expands the Statistical Area and Coal Closure data that developers rely on to determine eligibility, incorporating updated Census, BLS, MSHA, and EIA information. If your project is anywhere near a former coal mine, a retired coal-fired plant, or within an MSA or non-MSA with high fossil fuel employment, this update matters.

Here’s how the main pieces of the notice fit together, based on the details in Notice 2025-31.

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1. Updated Energy Community Lists, Two Vintages of MSA Boundaries

The IRS now recognizes two parallel sets of boundaries for metropolitan statistical areas, referred to as Vintage 1 and Vintage 2.

• Vintage 1 reflects the 2010 Census delineations, and has been used in all EC notices since 2023.

• Vintage 2 reflects the new 2020 Census groupings.

Changes in county classification can alter whether a project falls into a qualifying MSA, so developers must check both vintages carefully.

Appendix 1 lists every county or county-equivalent and shows how it is classified under both vintages, enabling taxpayers to verify the correct MSA or non-MSA category for EC purposes.

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2. New Fossil Fuel Employment Data

Under the Statistical Area Category, a location must show that:

• It is in an MSA or non-MSA with 0.17% or more employment in fossil fuel industries, and

• It meets the unemployment threshold.

Appendix 2 provides an updated list of counties that meet the fossil fuel employment threshold based on 2022 County Business Patterns data. This appendix integrates new data and reflects industry code updates included in previous IRS guidance.

When combined with Appendix 1 of Notice 2024-30, Appendix 1 of Notice 2023-47, and Appendix B of Notice 2023-29, it forms the full authoritative list of qualifying counties for fossil fuel employment.

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3. Counties That Fully Qualify as Energy Communities in 2025

Appendix 3 lists all MSAs and non-MSAs that qualify as full Energy Communities because they satisfy both the fossil fuel employment threshold and the 2024 unemployment rate test.

To make this determination, the IRS uses:

• BLS Local Area Unemployment Statistics data for 2024, and

• The national average unemployment rate for calendar year 2024.

Energy community status for the areas in Appendix 3 becomes effective June 23, 2025 and remains valid until updated after 2025 unemployment data becomes available.

This stability window is crucial for developers pursuing safe harbor timing or planning project placement before construction or before credit qualification events.

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4. Newly Identified Coal Closure Census Tracts

The Coal Closure Category allows projects located in or adjacent to census tracts where a coal mine has closed or a coal-fired generating unit has retired to qualify as energy communities.

Appendix 4 provides:

• Newly identified tracts where coal closures occurred, and

• All adjacent tracts that therefore also qualify.

Data is sourced from:

• MSHA's Mine Data Retrieval System,

• EIA's Form 860 and 860M datasets, and

• Historical mine status records.

These tracts must be combined with earlier lists from Notice 2023-29, Notice 2023-47, and Notice 2024-48 to form the complete inventory of coal closure locations nationwide.

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5. Correction List, New Tracts Retroactively Eligible

Appendix 5 identifies census tracts that qualify because of newly corrected location data issued after Notice 2024-48.

Projects placed in service after December 31, 2022 that fall within one of these newly added tracts are retroactively eligible for the energy community bonus, even if they previously appeared outside qualifying areas.

This correction could impact credit amounts, investment decisions, or return expectations for projects already under construction or recently placed in service.

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How Margen Helps You Apply These Energy Community Updates

Energy community qualification affects credit sizing, capital stack planning, safe harbor strategies, and long term ROI. Margen helps developers and tax professionals determine eligibility by answering questions such as:

• "Is my project's county listed in Vintage 1 or Vintage 2 for EC status?"

• "Does my project qualify under the Coal Closure Category based on the updated Appendix 4?"

• "Do unemployment rate updates affect my EC eligibility window?"

• "Which census tract is my project in, and does it now qualify under Appendix 5?"

Margen checks your project location and timing against the latest IRS notices and appendices, helping you confirm eligibility before filing and ensuring you capture every available bonus credit.

For full details, see IRS Notice 2025-31.