By Contributing Editor Clay Anderson
The Renewable Energy Tax Credit within the Wall Street Bailout which offers 30% tax credit off solar systems has been extended. The new provisions are:
8-year extension of investment tax credits (ITC) for residential and applications
No limit – Removal of the $2,000 cap on residential applications.
Repeal of the limitation on utilities from claiming ITC
Allowability for credits to be used to offset alternative minimum tax.
The American Recovery And Reinvestment Act Of 2009
Advanced Energy Investment Credit. The proposal establishes a new 30% investment tax credit for facilities engaged in the manufacture of advanced energy property. Credits are available only for projects certified by the Secretary of Treasury, in consultation with the Secretary of Energy, through a competitive bidding process. The Secretary of Treasury must establish a certification program no later than 180 days after date of enactment, and may allocate up to $2.3 billion in credits. Advanced energy property includes technology for the production of renewable energy, energy storage, energy conservation, efficient transmission and distribution of electricity, and carbon capture and sequestration. This proposal is estimated to cost $1.647 billion over 10 years.
Long‐term Extension and Modification of Renewable Energy Production Tax Credit. The bill would extend the placed‐in‐service date for wind facilities for three years (through December 31, 2012). The bill would also extend the placed‐in‐service date for three years (through December 31, 2013) for certain other qualifying facilities: closed‐loop biomass; open‐loop biomass; geothermal; small irrigation; hydropower; landfill gas; waste‐to‐energy; and marine renewable facilities. This proposal is estimated to cost $13.143 billion over 10 years.
Temporary Election to Claim the Investment Tax Credit in Lieu of the Production Tax Credit. Under current law, facilities that produce electricity from solar facilities are eligible to take a thirty percent (30%) investment tax credit in the year that the facility is placed in service. Facilities that produce electricity from wind, closed‐loop biomass, open‐loop biomass, geothermal, small irrigation, hydropower, landfill gas, waste‐to‐energy, and marine renewable facilities are eligible for a production tax credit. The production tax credit is payable over a ten‐year period. Because of current market conditions, it is difficult for many renewable projects to find financing due to the uncertain future tax positions of potential investors in these projects. The bill would allow facilities to elect to claim the investment tax credit in lieu of the production tax credit. This proposal is estimated to cost $285 million over 10 years.
Repeal Subsidized Energy Financing Limitation on the Investment Tax Credit. Under current law, the investment tax credit must be reduced if the property qualifying for the investment tax credit is also financed with industrial development bonds or through any other Federal, State, or local subsidized financing program. The bill would repeal this subsidized energy financing limitation on the investment tax credit in order to allow businesses and individuals to qualify for the full amount of the investment tax credit even if such property is financed with industrial development bonds or through any other subsidized energy financing. The cost of this proposal is included in the estimated
Removal of Dollar Limitations on Certain Energy Credits. Under current law, businesses are allowed to claim a thirty percent (30%) tax credit for qualified small wind energy property (capped at $4,000). Individuals are allowed to claim a thirty percent (30%) tax credit for qualified solar water heating property (capped at $2,000), qualified small wind energy property (capped at $500 per kilowatt of capacity, up to $4,000), and qualified geothermal heat pumps (capped at $2,000). The bill would repeal the individual dollar caps. As a result, each of these properties would be eligible for an uncapped thirty percent (30%) credit. This proposal is estimated to cost $872 million over 10 years.
Clean Renewable Energy Bonds (“CREBs”). The bill authorizes an additional $1.6 billion of new clean renewable energy bonds to finance facilities that generate electricity from the following resources: wind; closed‐loop biomass; open‐loop biomass; geothermal; small irrigation; hydropower; landfill gas; marine renewable; and trash combustion facilities. This $1.6 billion authorization will be subdivided into thirds: 1/3 will be available for qualifying projects of State/local/tribal governments; 1/3 for qualifying projects of public power providers; and 1/3 for qualifying projects of electric cooperatives. This proposal is estimated to cost $578 million over 10 years.
Qualified Energy Conservation Bonds. The bill authorizes an addition $2.4 billion of qualified energy conservation bonds to finance State, municipal and tribal government programs and initiatives designed to reduce greenhouse gas emissions. The bill would also clarify that qualified energy conservation bonds may be issued to make installment loans for bad credit grants for capital expenditures to implement green community programs. The bill also clarifies that qualified energy conservation bonds may be used for programs in which utilities provide ratepayers with energy‐efficient property and recoup the costs of that property over an extended period of time. This proposal is estimated to cost $803 million over 10 years.
Tax Credits for Energy‐Efficient Improvements to Existing Homes. The bill would extend the tax credits for improvements to energy‐efficient existing homes through 2010. Under current law, individuals are allowed a tax credit equal to ten percent (10%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during the taxable year. This tax credit is capped at $50 for any advanced main air circulating fan, $150 for any qualified natural gas, propane, oil furnace or hot water boiler, and $300 for any item of energy‐efficient building property. For 2009 and 2010, the bill would increase the amount of the tax credit to thirty percent (30%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements during the taxable year. The bill would also eliminate the property‐by‐property dollar caps on this tax credit and provide an aggregate $1,500 cap on all property qualifying for the credit. The bill would update the energy‐efficiency standards of the property qualifying for the credit. This proposal is estimated to cost $2.034 billion over 10 years.
Tax Credits for Alternative Refueling Property. The alternative refueling property credit provides a tax credit to businesses (e.g., gas stations) that install alternative fuel pumps, such as fuel pumps that dispense E85 fuel, electricity, hydrogen, and natural gas. For 2009 and 2010, the bill would increase the 30% alternative refueling property credit for businesses (capped at $30,000) to 50% (capped at $50,000). Hydrogen refueling pumps would remain at a 30% credit percentage; however, the cap for hydrogen refueling pumps will be increased to $200,000. In addition, the bill would increase the 30% alternative refueling property credit for individuals (capped at $1,000) to 50% (capped at $2,000). This proposal is estimated to cost $54 million over 10 years.
Plug‐in Electric Drive Vehicle Credit. The bill modifies and increases a tax credit passed into law at the end of last Congress for each qualified plug‐in electric drive vehicle placed in service during the taxable year. The base amount of the credit is $2,500. If the qualified vehicle draws propulsion from a battery with at least 5 kilowatt hours of capacity, the credit is increased by $417, plus another $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours up to 16 kilowatt hours. Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter in which the manufacturer records its 200,000 th sale of a plug‐in electric drive vehicle. The credit is reduced in following calendar quarters. The credit is allowed against the alternative minimum tax (AMT). The bill also restores and updates the electric vehicle credit for plug‐in electric vehicles that would not otherwise qualify for the larger plug‐in electric drive vehicle credit and provides a tax credit for plug‐in electric drive conversion kits. This proposal is estimated to cost $2.002 billion over 10 years.
Addition of Permanent Sequestration Requirement to CO2 Capture Tax Credit. Last year, Congress provided a $10 credit per ton for the first 75 million metric tons of carbon dioxide captured and transported from an industrial source for use in enhanced oil recovery, and $20 credit per ton for carbon dioxide captured and transported from an industrial source for permanent storage in a geologic formation. Facilities were required to capture at least 500,000 metric tons of carbon dioxide per year to qualify. The bill would require that any taxpayer claiming the $10 credit per ton for carbon dioxide captured and transported for use in enhanced oil recovery must also ensure that such carbon dioxide is permanently stored in a geologic formation. This proposal is estimated to have a negligible revenue effect.
Treasury Department Energy Grants in Lieu of Tax Credits. Under current law, taxpayers are allowed to claim a production tax credit for electricity produced by certain renewable energy facilities and an investment tax credit for certain renewable energy property. These tax credits help attract private capital to invest in renewable energy projects. Current economic conditions have severely undermined the effectiveness of these tax credits. As a result, the bill would allow taxpayers to receive a grant from the Treasury Department in lieu of tax credits. This grant will operate like the current‐law investment tax credit. The Treasury Department will issue a grant in an amount equal to thirty percent (30%) of the cost of the renewable energy facility within sixty days of the facility being placed in service or, if later, within sixty days of receiving an application for such grant. This proposal is estimated to cost $5 million over 10 years.
Source: U.S. Senate Finance & House Ways & Means Committees.