2.3¢/kWh for wind, geothermal, closed-loop biomass; 1.1¢/kWh for other eligible technologies. Generally applies to first 10 years of operation.
'''''Note: The American Recovery and Reinvestment Act of 2009 allows taxpayers eligible for the federal renewable electricity production tax credit (PTC) to take the federal business energy investment tax credit (ITC) instead of taking the PTC for new installations.'''''
The federal renewable electricity production tax credit (PTC) is a per-kilowatt-hour 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 Originally enacted in 1992, the PTC has been renewed and expanded numerous times, most recently by the American Recovery and Reinvestment Act of 2009 ([http://thomas.loc.gov/home/h1/Recovery_Bill_Div_B.pdf H.R. 1 Div. B, Section 1101 and 1102]) in February 2009 (often referred to as "ARRA") and the American Taxpayer Relief Act of 2012 (H.R. 6, Sec. 407) in January 2013.
The February 2009 legislation revised the credit by: (1) extending the in-service deadline for most eligible technologies by three years (two years for marine and hydrokinetic resources); and (2) allowing facilities that qualify for the PTC to opt instead to take the federal business energy investment credit (ITC) or an equivalent cash grant from the U.S. Department of Treasury. The availability of the cash grant option expired December 31, 2011, though the ITC may still be claimed for eligible projects. The ITC for PTC-eligible technologies is generally equal to 30% of eligible costs.*
The January 2013 legislation revised the credit by: (1) removing "placed in service" deadlines and replacing them with deadlines that use the beginning of construction as a basis for determining facility eligibility; (2) extending the deadline for wind energy facilities by one year, from December 31, 2012 to December 31, 2013; (3) extending the permission for PTC-eligible facilities to claim the ITC through 2013 (also using the start of construction rather than placed in service date as a reference); and (4) 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 definitional 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.
In April 2013 the IRS issued guidance on how it will evaluate whether construction has commenced for the purpose of the year-end 2013 deadline, which was later clarified by IRS Notice 2013-60. The guidelines establish two paths for meeting this benchmark, which are very similar to those used by the U.S. Department of Treasury under the former Section 1603 Grant in Lieu of Tax Credit program. Under one path, a project is considered to have begun construction when "physical work of a significant nature" has started. Under the other path, construction of a facility is considered to begun when five percent of the total cost of the facility has been incurred by the taxpayer, and the taxpayer makes continuous efforts to complete the facility thereafter. The guidance also provides that in certain circumstances the evaluation can take place on a project-wide basis rather than separately for each individual piece of equipment. For further information on this and other aspects of the IRS guidance please see the full text of IRS Notices [http://www.irs.gov/pub/irs-drop/n-13-29.pdf 2013-29] and [http://www.irs.gov/pub/irs-drop/n-13-60.pdf 2013-60].
The tax credit amount is 1.5¢/kWh in 1993 dollars (indexed for inflation) for some technologies, and half of that amount for others. The rules governing the PTC vary by resource and facility type. The table below outlines two of the most important characteristics of the tax credit -- the begin construction deadline and the credit amount -- as they apply to different facilities. The table includes changes made by H.R. 8 in January 2013 and the inflation-adjusted credit amounts are current for the 2013 calendar year, as published in the April 3, 2013 Federal Register. (See the history section below for information on prior rules.)
|Resource Type||Begin Construction Deadline||Credit Amount|
|Wind||December 31, 2013||2.3¢/kWh|
|Closed-Loop Biomass||December 31, 2013||2.3¢/kWh|
|Open-Loop Biomass||December 31, 2013||1.1¢/kWh|
|Geothermal Energy||December 31, 2013||2.3¢/kWh|
|Landfill Gas||December 31, 2013||1.1¢/kWh|
|Municipal Solid Waste||December 31, 2013||1.1¢/kWh|
|Qualified Hydroelectric||December 31, 2013||1.1¢/kWh|
|Marine and Hydrokinetic (150 kW or larger)**||December 31, 2013||1.1¢/kWh|
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 five-year period.
* Open-loop biomass facilities placed in service before October 22, 2004, are eligible for a five-year period beginning January 1, 2005.
In addition, the tax credit is reduced for projects that receive other federal tax credits, grants, tax-exempt financing, or subsidized energy financing. The credit is claimed by completing [http://www.irs.gov/pub/irs-pdf/f8835.pdf Form 8835], "Renewable Electricity Production Credit," and [http://www.irs.gov/pub/irs-pdf/f3800.pdf Form 3800], "General Business Credit." For more information, contact IRS Telephone Assistance for Businesses at 1-800-829-4933.
As originally enacted by the ''Energy Policy Act of 1992'', the PTC expired in July 1999, and was subsequently extended through the end of 2001 by the ''Ticket to Work and Work Incentives Improvement Act of 1999'' in December 1999. The PTC expired again at the end of 2001, but was then extended again in March 2002 as part of the ''Job Creation and Worker Assistance Act of 2002'' (H.R. 3090). The PTC then expired yet again at the end of 2003 and was not renewed until October 2004, as part of H.R. 1308, the ''Working Families Tax Relief Act of 2004'', which extended the credit through December 31, 2005. The ''Energy Policy Act of 2005'' (H.R. 6) modified the credit and extended it through December 31, 2007. In December 2006, the PTC was extended for yet another year -- through December 31, 2008 -- by the ''Tax Relief and Health Care Act of 2006'' (H.R. 6111).
''The American Jobs Creation Act of 2004'' (H.R. 4520), expanded the PTC to include additional eligible resources -- geothermal energy, open-loop biomass, solar energy, small irrigation power, landfill gas and municipal solid waste combustion -- in addition to the formerly eligible wind energy, closed-loop biomass, and poultry-waste energy resources. The ''Energy Policy Act of 2005'' (EPAct 2005) further expanded the credit to certain hydropower facilities. As a result of EPAct 2005, solar facilities placed into service after December 31, 2005, are no longer eligible for this incentive. Solar facilities placed in-service during the roughly one-year window in which solar was eligible are permitted to take the full credit for five years.
''The Emergency Economic Stabilization Act of 2008'' ([http://thomas.loc.gov/cgi-bin/query/z?c110:H.R.1424.enr: H.R. 1424, Div. B, Sec. 101 and 102]) extended the in-service deadlines for all qualifying renewable technologies; expanded the list of qualifying resources to include marine and hydrokinetic resources, such as wave, tidal, current and ocean thermal; and made changes to the definitions of several qualifying resources and facilities. Marine and hydrokinetic energy production are eligible as of the date the legislation was enacted (October 3, 2008), as is the incremental energy production associated with expansions of biomass facilities. A change in the definition of "trash facility" no longer requires that such facilities burn trash, and also took effect upon enactment. One further provision redefining the term "non-hydroelectric dam," took effect December 31, 2008.
*Prior to H.R. 1, geothermal facilities were already eligible for a 10% tax credit under the energy ITC (26 USC § 48). However, the new legislation permits all PTC-eligible technologies, including geothermal electric facilities, to take a 30% tax credit in lieu of the PTC. Recent guidance from the IRS regarding the Treasury grants in lieu of tax credits indicates that geothermal facilities that qualify for the PTC are eligible for either the 30% investment tax credit or the 10% tax credit, but not both. The window for the 30% tax credit runs through 2013, the deadline for the PTC, while the 10% tax credit under the section 48 ITC does not have an expiration date.
**H.R. 1424 added marine and hydrokinetic energy as eligible resources and removed "small irrigation power" as an eligible resource effective October 3, 2008. However, the definition of marine and hydrokinetic energy encompasses the resources that would have formerly been defined as small irrigation power facilities. Thus H.R. 1424 effectively extended the deadline for small irrigation power facilities by 3 years, from the end of 2008 until the end of 2011 (since extended again through 2013).