Late last night, Congress passed the COVID-19 relief bill, which provides extensions for key renewable energy tax credits. President Trump is expected to sign the bill into law in the next few days.
Investment Tax Credit (ITC) for Solar Projects
The phasedown of the ITC applicable to solar projects is delayed for two years. As a result:
- For projects that begin construction after 2019 but before 2023 and are placed in service before 2026, a 26% ITC will apply;
- For projects that begin construction in 2023 and are placed in service before 2026, a 22% ITC will apply; and
- For projects that begin construction after 2023 or that are placed in service in 2026 or later, a 10% ITC will apply.
Production Tax Credit (PTC) for Wind Projects
The production tax credit that applies to wind projects is extended for one year, and wind projects that begin construction in 2021 are eligible for PTCs at a 40% reduction level (i.e., the same reduction level that was available for wind projects that began construction in 2020).
ITC for Offshore Wind Projects
The legislation extends the ITC for electing offshore wind facilities that begin construction before 2026. The credit reductions in effect for onshore wind will not apply to offshore wind facilities, including facilities that have already begun construction. These rules apply to wind facilities located in inland navigable or coastal waters of the United States.
Tax Credit for Carbon Capture (Section 45Q)
The deadline for beginning construction on carbon capture facilities in order to claim tax credits under Section 45Q has been extended by two years from January 1, 2024 to January 1, 2026.
A five-year extension is included for the new markets tax credit, and the bill makes waste energy recovery property (property that generates electricity solely from heat from buildings or equipment if the primary purpose of such property is not the generation of electricity) eligible for a 30% ITC.
One-year extensions are also provided for a variety of other credits, including (1) PTCs for electricity produced from certain other renewable sources, (2) the fuel cell motor vehicles credit, (3) the alternative fuel refueling property credit, (4) the alternative fuel and alternative fuel mixture credits, and (5) the second generation biofuel credit.