The Inflation Reduction Act (IRA) has brought exciting news for businesses looking to invest in solar energy. One of the most exciting aspects of the IRA for solar is the expansion and enhancement of the Investment Tax Credit (ITC). This tax credit significantly reduces the upfront cost of installing a solar system, making solar a more accessible and financially attractive option for companies of all sizes.

But did you know the IRA also introduced exciting bonus options – ITC adders – that can improve the deal even more? These adders can significantly increase the value of your ITC, boosting your company’s return on investment and accelerating your solar project’s payback period.  

Understanding these adders and how they can impact your project’s financial picture is crucial to maximizing your tax credit benefits. This guide will help you understand more about ITC adders, and if you want to know how these IRA tax credits would benefit your company, contact us. Our team of experts can help you navigate the entire process, from assessing your company’s needs to maximizing your tax credits.

Key Takeaways


• Leverage ITC Adders: The IRA introduced three ITC adders – Domestic Content, Energy Community, and Low-Income Communities. These adders provide a significant bonus on top of the standard solar tax credit, making your project more financially rewarding.
• Understand Eligibility Requirements: Each ITC adder has specific requirements your project must meet. These can involve factors like project location, material sourcing, and community impact.
• Expert Guidance is Key: Navigating the complexities of ITC adders and ensuring eligibility can be challenging. Consulting with a solar energy expert can streamline the process and maximize your potential benefits.
• Unlock the Future of Clean Energy: By going solar and taking advantage of ITC adders, you’re not only saving money but also contributing to a cleaner and more sustainable future for your business and the environment.

What Are ITC Adders?

The Inflation Reduction Act (IRA) introduced ITC adders to incentivize even greater adoption of solar energy while supporting American manufacturing and job creation.  Think of them as bonus credits you can earn on top of the standard ITC benefit. These adders reward companies for making specific choices with their solar projects. 

Essentially, the ITC adders allow you to claim a higher tax credit, reducing your solar investment’s upfront costs, accelerating your ROI, and improving your solar IRR. Let’s see the different types of ITC adders available and how they can benefit your company.

Types of ITC Adders

Domestic Content Adder

The IRA renewable energy  introduced the Domestic Content Adder (DCA) to incentivize the use of American-made materials in renewable energy projects. This adder essentially provides an extra 10% tax credit on top of the base ITC for companies that choose solar panels and components manufactured in the USA. This incentive encourages investment in domestic manufacturing and strengthens the American solar industry.

Eligibility & Requirements

To qualify for the DCA, your company’s solar project must use a minimum percentage of domestically manufactured content, including steel, iron, and other materials. Currently (as of July 2024), the minimum requirement for solar projects is 40% for manufactured products used in the project. This percentage is scheduled to rise to 55% by 2027. Planning ahead and ensuring your project uses materials that meet these evolving requirements will be crucial to maximize your long-term benefit from the DCA.

Applicable Project Components for ITC Domestic Content Adder

See the complete list on the official IRS Notice 2023-38. 

Benefits & Impact

The DCA offers several advantages for your company and the clean energy sector:

• Increased Tax Savings: The primary benefit is the boosted ITC you can claim through the adder, which can lead to significant cost reductions for your solar project.
• Enhanced Profitability: The additional tax credit can improve your project’s financial viability, increase your solar IRR, and accelerate your ROI.
• Support for American Jobs: By prioritizing domestic materials, you contribute to creating jobs in the American manufacturing sector and strengthening the US clean energy economy.
• Boosting Domestic Production: The DCA encourages increased domestic production of solar energy components, reducing reliance on foreign sources and fostering a more robust clean energy supply chain within the US.

Additional Considerations

• Percentage Thresholds: It is crucial to ensure your project meets the current and future DCA thresholds for domestic content. Remember that the minimum domestic content requirement will increase over time.
• Material Costs: Domestically sourced materials might be slightly more expensive than some foreign alternatives. When calculating the overall project budget, factor in this potential cost increase to ensure it remains within your financial parameters.
• Market Availability: Depending on the specific materials needed, domestic sources might have limited availability. This could potentially cause delays or require adjustments to your project plan.

At ArtIn Energy, we’re proud to be a leading manufacturer of renewable energy solutions in the USA. All our products use at least 40% American-made components, ensuring your project automatically qualifies for the Domestic Content Adder. This simplifies the process and ensures you’re receiving high-quality, American-made solar equipment.

Contact us and let our team help you design and install a high-quality solar system. 

Energy Community Adder

The IRA goes further in supporting clean energy by offering a bonus for projects located in designated “energy communities,” meaning areas that have been economically impacted by the decline of the fossil fuel industry. This incentive, known as the Energy Community Adder, provides a 10% increase in the value of the ITC and PTC tax credits. By offering a tax credit boost for projects located in these communities, the IRA encourages investment in clean energy while promoting economic revitalization.

Eligibility & Requirements

There are two main aspects to consider for project eligibility in the Energy Community Adder program:

• Project Location: Your project must be situated in at least one of the three types of designated energy communities:
  • Brownfield: A site that has been contaminated by hazardous substances, pollutants, or contaminants. The project can qualify based on existing brownfield programs, a completed Phase II assessment, or a Phase I assessment (for smaller projects).
  • Coal closure: A census tract where a coal mine closed after 1999 or a coal-fired power plant retired after 2009 (including adjoining tracts).
  • Statistical area: A metropolitan or non-metropolitan statistical area that has a significant fossil fuel industry (based on employment or tax revenue) and an unemployment rate above the national average.

• Project eligibility:
  • For investment tax credits (§48 & §48E), eligibility is determined on the date the project is placed in service (PIS).
  • For production tax credits (§45 & §45Y), eligibility is determined annually during the ten-year credit period. However, there’s a safe harbor provision for projects that began construction on or after January 1, 2023.
  • Projects placed in service before December 31, 2022 (legacy §45 PTCs) are not eligible.
  • At least 50% of the project’s nameplate capacity (energy generation or storage) or square footage (for non-generation/storage projects) must be located in an energy community.

Benefits & Impact

The significant financial incentive of the Energy Community Adder promotes the development of clean energy in areas most in need of economic revitalization.  Here’s a deeper look at the positive impacts:

• Economic Revitalization: The Energy Community Adder encourages investment in areas that have been economically disadvantaged by the decline of fossil fuels. This can create new jobs, boost local tax revenue, and stimulate economic growth.
• Brownfield Redevelopment: The program incentivizes the reuse of contaminated sites for clean energy production. This generates renewable energy and revitalizes these areas, making them more attractive for future development.
• Environmental Benefits: By promoting solar energy, the Energy Community Adder contributes to a cleaner environment by reducing reliance on fossil fuels and their associated emissions.
• Community Empowerment: Energy communities gain a greater stake in their energy production, fostering a sense of ownership and environmental responsibility.

Additional considerations

While geographic location is a key factor for the Energy Community Adder, there are other considerations that can impact your project’s eligibility and general financial benefit.

• Labor Costs: The prevailing wage for construction labor in your chosen location can significantly affect project economics. States like New Mexico and Texas tend to have lower average wages compared to California, for example. Production Occupations, Installation, Maintenance, and Repair Occupations, and Construction and Extraction Occupations are the primary categories to consider when comparing labor costs across different states. For instance, the average hourly wage for construction workers in California can be as high as $35.69, while in Texas, it might be closer to $25.13. Lower labor costs can translate to a more financially attractive project for investors seeking to maximize the benefits of the Energy Community Adder.
• Project Complexity: The specific details and challenges of your project can also influence its eligibility and overall cost.  Complex projects with specialized labor requirements or unique engineering needs might require adjustments to the cost estimates used for the adder calculations.

Understanding these factors and their potential impact on your project’s eligibility and overall economics highlights the value of consulting with a solar energy expert. Our team can help you analyze all important factors and scenarios to maximize the benefits of the Energy Community Adder.

Low-Income Communities Adder

The IRA introduced the Low-Income Communities Adder to incentivize the development of clean energy projects in underserved areas.  This incentive offers a significant boost to the standard ITC for solar and wind projects under 5 megawatts (MW) that meet specific criteria.

The Low-Income Communities Adder provides a 10% or 20% bonus on the value of the standard ITC for qualified projects. The bonus amount increases to 20% for projects that directly benefit low-income housing or communities.  This financial incentive aims to accelerate clean energy adoption in areas that have historically lacked access to these technologies.

Eligibility & Requirements

The Department of Energy (DOE) oversees the Low-Income Communities Adder incentive and allocates capacity each year (currently capped at 1.8 gigawatts). There are four main categories for project eligibility, with specific capacity allocations for 2024:

Check the complete list to find more information about this adder. It’s important to note that at least half of the capacity allocated to each category is reserved for projects that meet additional criteria. These criteria might focus on project ownership by low-income communities or specific geographical locations within designated low-income areas.

Benefits & Impact

The Low-Income Communities Adder program offers several compelling benefits:

• Increased Clean Energy Adoption in Underserved Communities: This financial incentive encourages the development of clean energy projects in areas that have historically lacked access. This promotes energy independence, reduces reliance on fossil fuels, and fosters a cleaner environment for these communities.
• Encourages Clean Energy Adoption for Small Businesses: The incentive’s focus on smaller projects (under 5 MW) opens doors for small companies and households to use and benefit from renewable energy. 
• Provides Financial Benefits to Low-Income Residents and Communities: The LIC Adder incentivizes projects that reduce energy costs for low-income households and communities. This can have a significant positive impact on household budgets and overall community well-being.

Additional Considerations

Beyond the eligibility requirements, there are additional factors to consider when pursuing the LIC Adder:

• Community Engagement: Proactive engagement with the low-income community throughout the project lifecycle is crucial. Building trust, ensuring the project addresses community needs, and demonstrating a commitment to long-term benefits strengthens your case for the LIC Adder.

• Long-Term Sustainability: The LIC Adder aims to create lasting positive impacts beyond just the construction phase. Consider incorporating job training programs, establishing partnerships with local businesses, or exploring community ownership aspects to ensure long-term sustainability.

Practical Steps for Commercial Solar Projects

The Inflation Reduction Act’s ITC adders offer significant financial incentives for solar projects. Here are some practical steps to consider for each adder incentive: 

Domestic Content Adder (DCA):

• Documentation: It is crucial to maintain clear and meticulous documentation demonstrating the origin of all materials used in your project. This paperwork proves you meet the domestic content requirements for the DCA.

Energy Community Adder:

• Adjustment: Calculating the national average unemployment rate and project complexity can help you adjust the cost estimate for the Energy Community Adder. If your project requires specialized skills or faces unique challenges, you might need to change the cost adder upwards to ensure its financial benefit.

Low-Income Communities Adder (LICA):

• Metrics and Data: It is essential to develop clear metrics to track the project’s impact on the low-income community. This data will be crucial for demonstrating eligibility for the LIC Adder.

Considering these complexities, consulting with a solar energy expert can make a significant difference. ArtIn Energy’s team of renewable energy consultants can help you navigate the intricacies of each IRA incentive. We can assist with documentation for the DCA, analyze the cost impact of the Energy Community Adder for your specific project, and guide you through developing metrics to qualify for the LIC Adder.

Let ArtIn Energy Simplify ITC Adders – Schedule Your Free Consultation Today!

As we’ve seen, the IRA introduced exciting new commercial solar tax credit adders to incentivize clean energy projects. In this guide, we explored the Domestic Content Adder (DCA), the Energy Community Adder, and the Low-Income Communities Adder (LICA), all of which significantly increase your solar project’s value.

While these incentives present great opportunities, it can be hard to navigate all the eligibility requirements to maximize your benefits. But don’t worry—we’re here to help! We can simplify the process for you and ensure your project meets the criteria of the ITC adder your company is interested in.

At ArtIn Energy, we want to be your trusted partner throughout your company’s transition to solar energy solutions. Let’s start your company’s transition to renewable energy. Contact us and schedule a free consultation! Let’s discuss your project’s goals and explore how solar power can benefit your business and the environment.