On January 1, 2013, amid much contentious debate, Congress enacted the American Taxpayer Relief Act of 2012 (H.R. 8) (the “Relief Act”). Although the Relief Act does not comprehensively address U.S. energy policy issues, it does extend important federal tax credits for renewable energy projects, including projects that produce wind power, blend biodiesel, and produce cellulosic “second generation” biofuel. This Client Alert will summarize certain energy tax incentives relevant to wind, biodiesel and biofuel project developers that the Relief Act extends, modifies or revives.
Extension of Production Tax Credits for Wind Power -
As authorized by the Energy Policy Act of 1992 and subsequently amended, Section 45 of the Internal Revenue Code provides a 10-year, inflation adjusted production tax credit to qualified tax paying owners of certain types of renewable power generating projects (“Section 45 projects”), including (among others) wind, closed- and open-loop biomass, geothermal, landfill gas, qualified hydropower, and marine and hydrokinetic facilities. The Relief Act extends through the year 2013 the existing production tax credit (PTC) of $0.02 cents for every kilowatt hour of electricity produced by wind generation projects that begin construction by the end of 2013. Previously, such tax credit was only available to wind power generation projects that completed construction and were placed into service by the end of 2012. The Relief Act does not make clear what constitutes “beginning construction”. However, under rules promulgated by the Treasury Department for awarding cash grants for Section 45 projects under Section 1603 of the American Recovery and Reinvestment Act of 2009 (Public Law 111-5) (discussed further below), “beginning construction” requires an applicant to begin “physical work of a significant nature” or pay or incur 5% or more of the project’s eligible basis by the “begin construction” deadline.i Similar such rules may be adopted by the IRS in connection with determining whether construction has begun for wind production facilities.
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Topics: American Taxpayer Relief Act, Biofuel, Clean Tech, Energy Policy, Fiscal Cliff, Production Tax Credit, Renewable Energy, Tax Extensions, Wind Power
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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