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Renewable Electricity Production Tax Credit (PTC)

Savings Category 
Geothermal Electric
Wind (All)
Municipal Solid Waste
Landfill Gas
Ocean Thermal
Wind (Small)
Hydroelectric (Small)
Program Info
Sector Name 
U.S. Internal Revenue Service
Expiration Date 


Program Type 
Corporate Tax Credit
Rebate Amount 

$0.023/kWh for wind, geothermal, closed-loop biomass
$0.011/kWh for other eligible technologies
Generally applies to first 10 years of operation

Note: In December 2014, The Tax Increase Prevention Act of 2014 extended the expiration date for this tax credit to December 31, 2014. Projects that are not under construction prior to January 1, 2015, are ineligible for this credit. In March 2015, IRS Notice 2015-25 extended the Continuous Construction Test and Continuous Efforts Test (used to determine if a project commencing construction before the end of 2014 is eligible for the PTC) by 1 year to January 1, 2017.

The federal renewable electricity production tax credit (PTC) is an inflation-adjusted per-kilowatt-hour (kWh) tax credit for electricity generated by qualified energy resources and sold by the taxpayer to an unrelated person during the taxable year. Originally enacted in 1992, the PTC has been renewed and expanded numerous times, most recently by the American Recovery and Reinvestment Act of 2009 (H.R. 1 Div. B, Section 1101 & 1102) in February 2009 (often referred to as "ARRA"), the American Taxpayer Relief Act of 2012 (H.R. 8, Sec. 407) in January 2013, and the Tax Increase Prevention Act of 2014 (H.R. 5771, Sec. 155) in December 2014.

Tax Credit Amount

The tax credit amount is $0.015 per kWh in 1993 dollars for some technologies and half of that amount for others. The amount is adjusted for inflation by multiplying the tax credit amount by the inflation adjustment factor for the calendar year in which the sale occurs, rounded to the nearest 0.1 cents. The Internal Revenue Service (IRS) publishes the inflation adjustment factor no later than April 1 each year in the Federal Registrar. (For 2014, the inflation adjustment factor used by the IRS is 1.5088.) 

The table below outlines the credit amount as it applies to different resource types. The table includes changes made by H.R. 8 in January 2013, and the inflation-adjusted credit amounts are current for the 2014 calendar year, as published in the IRS Notice 2014-36.

 Resource Type

 Credit  Amount



 Closed-Loop  Biomass


 Open-Loop  Biomass


 Geothermal  Energy


 Landfill Gas


 Municipal Solid  Waste


 Qualified  Hydroelectric


 Marine and  Hydrokinetic


Tax Credit Duration

The duration of the credit is generally 10 years after the date the facility is placed in service, but there are two exceptions:

  • open-loop biomass, geothermal, small irrigation hydro, landfill gas, and municipal solid waste combustion facilities placed into service after October 22, 2004, and before enactment of the Energy Policy Act of 2005, on August 8, 2005, are only eligible for the credit for a 5-year period, and
  • open-loop biomass facilities placed in service before October 22, 2004, are eligible for the 5-year period beginning January 1, 2005.

Process for Claiming the Tax Credit

The credit is claimed by completing Form 8835, "Renewable Electricity Production Credit," and Form 3800, "General Business Credit." For more information, contact IRS Telephone Assistance for Businesses at 1-800-829-4933.

Recent Legislative Changes

The Tax Increase Prevention Act of 2014 (H.R. 5771, Sec. 155) extended both the PTC and permission for PTC-eligible facilities to claim the Investment Tax Credit in lieu of the PTC through the end of 2014. (Prior to the legislation, the PTC had expired December 31, 2013.) Although not enacted until December 2014, the effective date is January 1, 2014, meaning any qualifying project that commenced construction at any point in 2014 is eligible to claim the PTC.

The American Taxpayer Relief Act of 2012 revised the PTC by removing "placed in service" deadlines and replacing them with deadlines that use the commencing of construction as a basis for determining facility eligibility. It also contained language revising the definition of the term "municipal solid waste" to exclude "paper that is commonly recycled and which has been segregated from other solid waste.” The definition change for municipal solid waste applies to electricity produced and sold after the enactment date of the legislation (January 2, 2013) in taxable years ending after that date.

Determination of Commencing Construction 

To claim the PTC, construction on an eligible project must have “commenced construction” prior to January 1, 2015. The IRS has issued guidance on how it will evaluate whether construction has commenced in IRS Notices 2013-292013-60, 2014-46, and 2015-25 (please see the full text of these notices for complete information on determining the commencing of construction). The guidelines establish two methods—a “physical work” test and a 5% safe harbor (see sections below for details)—to determine when construction has begun on a qualified facility. Meeting the criteria of either method is sufficient to demonstrate that construction has commenced. 

Both methods require that a taxpayer make continuous progress towards completion once construction has begun by meeting the Continuous Construction Test (to satisfy the Physical Work Test) or the Continuous Efforts Test (to satisfy Safe Harbor). For projects beginning construction before the end of 2014 and placed in service before January 1, 2017, the facility will be considered to satisfy the Continuous Construction Test or the Continuous Efforts Test, regardless of the amount of physical work performed or the amount of costs paid or incurred (Notice 2015-25).

Physical Work Test

The physical work test provides that a taxpayer may establish the beginning of construction by beginning "physical work of a significant nature.” The physical work test is based on the nature of the work performed rather than the cost of the work; if the work performed is of a significant nature, then “there is no fixed minimum amount of work or monetary or percentage threshold required to satisfy the Physical Work Test” (Notice 2014-46).

Notice 2013-29 provides several examples of actions that constitute work of a significant nature, including:

  • for a facility that produces electricity from a wind turbine, the beginning of the excavation for the foundation, the setting of anchor bolts into the ground, or the pouring of the concrete pads of the foundation;
  • physical work on a custom-designed transformer that steps up the voltage of electricity produced at the facility to the voltage needed for transmission; and
  • beginning construction of roads integral to the activity performed by the facility including onsite roads used for moving materials to be processed (e.g., biomass) and roads for equipment to operate and maintain the facility. 

Safe Harbor

Safe Harbor with respect to a facility is demonstrated by showing that 5% or more of the total cost of the facility was paid or incurred before January 1, 2015.

If less than 5% of the total cost of the facility was paid or incurred prior to January 1, 2015, Safe Harbor is not fully satisfied; however, if a taxpayer paid or incurred at least 3%, the Safe Harbor may be satisfied and the PTC (or ITC) may be claimed with respect to some, but not all, of the individual facilities comprising the project. Specifically, “a taxpayer may claim the PTC or ITC on any number of individual facilities as long as the total aggregate cost of those individual facilities at the time the project is placed in service is not greater than 20 times the amount the taxpayer paid or incurred before” January 1, 2015 (Notice 2014-46).