IRS issues Notice 2026-39 updating Energy Community Bonus Credit eligibility

On June 10, 2026, the IRS released Notice 2026-39, providing the latest annual update to the Energy Community Bonus Credit eligibility under the Inflation Reduction Act (IRA); Internal Revenue Code (IRC) sections 45, 45Y, 48, and 48E. The Notice identifies updates to the counties, metropolitan areas, non-metropolitan areas, and coal closure census tracts that may qualify for the Energy Community Bonus Credit under the Statistical Area Category and Coal Closure Category for purposes of claiming the credit.

The Energy Community Bonus Credit may be claimed in connection with investment tax credits (ITCs) under IRC sections 48 and 48E and production tax credits (PTCs) under IRC sections 45 and 45Y. For taxpayers claiming an ITC or PTC for a project located within an eligible Energy Community, the applicable credit amount may be increased. For ITCs, the base credit percentage may be increased by 2%, or by 10% if the prevailing wage and apprenticeship (PW&A) requirements under Treas. Reg. sections 1.45-7, 1.45-8, 1.45-12 are satisfied. For PTCs, the credit amount is increased by 10%.

There are three ways for a location to qualify as an Energy Community: the Brownfield Category, Statistical Area Category, or Coal Closure Category. Notice 2026-39 includes updates to the Statistical Area and Coal Closure Categories but does not provide any changes to the Brownfield Category. The updated designations are effective beginning June 10, 2026, and generally remain applicable until the IRS publishes its next annual update, which is typically released in June of each eligible year.

Updates to the Statistical Area category

The Statistical Area Category uses Metropolitan Statistical Areas (MSAs) and non-MSAs to evaluate whether a project location qualifies for the Energy Community Bonus Credit. To qualify, an area must satisfy both a fossil fuel employment threshold and an unemployment rate threshold. Notice 2026-39 continues the dual-vintage framework introduced in Notice 2025-31. Under this framework, eligibility is evaluated using both:

• Vintage 1 statistical areas, generally based on 2010 Census delineations
• Vintage 2 statistical areas, generally based on 2020 Census delineations

The IRS updated qualifying areas using 2023 County Business Patterns data and 2025 county unemployment rates published by the Bureau of Labor Statistics. Notice 2026-39 primarily serves as an annual refresh of eligibility determinations. The Notice updates the list of counties and county equivalents that satisfy both the fossil fuel employment and unemployment rate criteria under either Vintage 1 or Vintage 2. Appendix 1 of the Notice contains the updated list of qualifying counties and county equivalents. These updated Statistical Area Category designations are effective June 10, 2026, and remain applicable until the Treasury Department and IRS publish updated unemployment-rate data for 2026.

Project owners should review the updated Appendix 1 carefully, as some counties, MSAs, and non-MSAs may gain or lose Energy Community status due to the annual unemployment rate update or updates to the local fossil fuel employment level.

Updates to the Coal Closure Category

Notice 2026-39 also expands the list of qualifying census tracts under the Coal Closure Category. A census tract qualifies under this category if:

• A coal mine closed after Dec. 31, 1999, within the tract;
• A coal-fired electric generating unit retired after Dec. 31, 2009, within the tract; or
• The tract directly adjoins a qualifying coal closure tract.

Appendix 2 identifies newly eligible census tracts using updated data from the Mine Safety and Health Administration (MSHA) and the U.S. Energy Information Administration (EIA) through May 4, 2026.

To determine the complete list of eligible coal closure census tracts, Appendix 2 should be reviewed together with Appendix C to Notice 2023-29, Appendix 3 to Notice 2023-47, Appendix 2 to Notice 2024-48 and Appendix 4 to Notice 2025-31.

Newly corrected Coal Closure census tracts

Notice 2026-39 also includes Appendix 3, which identifies census tracts that newly qualify due to corrections to coal closure location data. These census tracts represent a subset of newly identified coal closure tracts and, as a result, some projects that were previously considered outside an Energy Community may be affected. The IRS clarified that projects placed in service after Dec. 31, 2022, that otherwise satisfied the Energy Community requirements, may qualify for the Energy Community Bonus Credit if located within one of these newly corrected census tracts.

Project owners with facilities located near recently identified coal closure areas should consider whether prior eligibility determinations should be revisited, and whether amended filings or updated tax credit analyses may be warranted.

What developers and investors should do next

Notice 2026-39 does not fundamentally change the Energy Community framework but provides important annual updates to qualifying Statistical Areas and Coal Closure census tracts. These changes may affect both planned projects and projects already placed in service, making it critical for taxpayers to evaluate whether their projects remain eligible for Energy Community Bonus Credits. Developers, investors, and project owners should review the updated designations carefully and assess how these changes may affect project economics, tax credit modeling and compliance documentation.

Connect with a Baker Tilly IRA energy tax credit specialist today to understand these changes in depth and to determine if your project may qualify for the Energy Community Bonus Credit.