• Preheat the oven to 350°F and set an oven rack in the middle position. Line two nonstick 12-cup cupcake pans with paper liners. Lightly spray the top of the pans with a nonstick cooking spray with flour, such as  Baker's Joy or Pam Baking Spray with flour, just in case the cupcake tops stick to the pan.
• Whisk all-purpose flour, shredded coconut,  baking powder, and salt together in a bowl. Whisk coconut milk and avocado oil together in a liquid measuring cup.
• Using a stand mixer fitted with a paddle attachment, beat softened unsalted butter and granulated sugar on low speed until smooth, about 1 minute. Increase speed to medium-high and beat until pale and fluffy, 1 to 2 minutes. With the mixer running, add the eggs one at a time and beat until well combined. Continue to beat until the mixture is pale, thick, and smooth, for 1 to 2 minutes longer, scraping down the bowl as needed.
• Turn off the mixer. Add half of the flour mixture and mix on low speed until just incorporated, about 30 seconds. With mixer running, stream in coconut mixture and mix until just incorporated, about 30 seconds. Add remaining flour mixture and mix until just incorporated, about 30 seconds. Give the batter a few final folds with the spatula to ensure the batter is well mixed and smooth; there should be no streaks of fat or liquid. 
• Then, evenly spoon the coconut batter into the prepared cupcake pans, filling each cup about three-fourths full. Tap pans firmly on the counter to release any large air bubbles. Bake the Coconut Cupcakes until lightly golden, about 20 to 25 minutes, or until a toothpick inserted in the center comes out clean. Let the coconut cupcakes cool in the pans for about 10 minutes, then transfer them to a wire rack to cool completely for about 1 hour.

How to Make Coconut Cream Cheese Frosting

• Sift the powdered sugar and powdered milk in a large bowl to remove any lumps; set aside. In the bowl of a stand mixer fitted with the paddle attachment, beat the cream cheese, butter, clear vanilla, coconut extract, coconut milk, and pure vanilla.
• Mix on low speed until combined, then increase the speed to medium-high and beat until light, about 1 minute. Next, add the confectioners' sugar mixture, mixing at low speed to combine.
• Once the confectioners' sugar mixture is mixed in, increase the speed to medium-high and beat until light and creamy, about 1 to 2 minutes; adding 1 tablespoon more coconut milk if needed for desired consistency. If your frosting is a bit soft, cover it with saran wrap and place it in the fridge for a few minutes; this will help your frosting firm up.
• Place the coconut cream cheese frosting into a pastry bag fitted with a star tip, if desired, or cut a ½-inch opening at the base of the bag and frost the cupcakes as desired. If desired, sprinkle with the shredded coconut, pressing it gently, so it adheres, and serve. Store the coconut cupcakes covered in the refrigerator for up to 5 days.