On April 3, the Senate Finance Committee passed a modified extenders package that includes a two-year extension of the renewable energy production tax credit (PTC) under section 45 of the Internal Revenue Code as well as an extension of the option to claim the energy investment tax credit (ITC) under section 48 of the Code in lieu of PTC.
Under current law, an income tax credit is allowed for the production of electricity from qualified energy resources at qualified facilities (the PTC). Qualified energy resources include wind, biomass, municipal solid waste, and certain other identified alternative energy sources. Qualified facilities are, generally, facilities that generate electricity using qualified energy resources, provided the construction of the facility begins before January 1, 2014. Under current law, a taxpayer may make an irrevocable election to have certain property which is part of a qualified facility be eligible for a 30% investment tax credit (the ITC) in lieu of claiming the PTC.
The EXPIRE Act would extend the PTC and the election to claim ITC for two years, through December 31, 2015.
If it becomes law, this change would alleviate the concerns of tax equity investors, lenders, and sponsors regarding whether otherwise eligible facilities that were started in 2013 satisfied the requirements of IRS Notice 2013-29 and IRS Notice 2013-60; that is, whether the taxpayer started “physical work of a significant nature” or paid or incurred a minimum threshold of costs with respect to the facility to satisfy the “5% safe harbor.” Click here for a summary of IRS Notice 2013-29. Click here for a summary of ITC Notice 2013-60.