Energy Tax Implications of the American Jobs Plan

Pillsbury Winthrop Shaw Pittman LLP

Pillsbury Winthrop Shaw Pittman LLP


  • The American Jobs Plan would provide significant extension and expansion of many existing renewable energy tax credits, and it would also provide direct payment options for certain tax benefits such as the investment tax credit and production tax credit.
  • The proposal also significantly expands available tax benefits for many energy transition assets such as battery storage, electric vehicles, carbon capture and hydrogen.

On March 31, 2021, the Biden administration released the American Jobs Plan, which aims to modernize infrastructure, stimulate job growth, and increase the United States’ global competitiveness. While much of the American Jobs Plan focuses on infrastructure, it contains numerous tax-related references that could impact the energy industry, including the following:

  • Encouraging investment in electric vehicles. The Plan includes provisions to spur the domestic production of batteries and electric vehicles and would provide point-of-sale rebates and tax incentives to buy American-made electric vehicles.
  • Power infrastructure. The Plan calls for a targeted investment tax credit to incentivize the buildout of at least 20 gigawatts of high-voltage capacity power lines.
  • Renewable energy generation and delivery. The Plan proposes a 10-year extension and phase down of an expanded direct-pay investment tax credit and production tax credit for clean energy generation and storage, in an effort to modernize the power sector and to move toward 100-percent carbon pollution-free power by 2035.
  • Plugging orphan oil-and-gas wells and reclaiming abandoned mines. The Plan would commit an upfront $16 billion investment focused on plugging oil-and-gas wells and restoring and reclaiming abandoned coal and uranium mines.
  • Energy transition. The Plan focuses on building next-generation, cleaner energy industries. For example, the Infrastructure Plan would pair an investment in 15 decarbonized hydrogen demonstration projects in distressed communities with a new production tax credit.
  • Carbon capture. The Plan would also establish 10 pioneer carbon-capture retrofit projects for large steel, cement and chemical production facilities, as well as supporting large-scale sequestration efforts. In order to accelerate carbon capture efforts, the Plan would reform and expand the Section 45Q tax credit, making it direct pay and easier to use for hard-to-decarbonize industrial applications, direct air capture and retrofits of existing power plants.
  • Miscellaneous. In addition, the Plan contains a number of other recommendations that could indirectly benefit the energy sector, such as expanding the Section 48C tax credit.

While it is unclear whether all of these proposals will be included in the final legislation, many of these individual changes would be significant on a stand-alone basis. Taxpayers should carefully monitor the American Jobs Plan and evaluate the impact that such proposals may have on investments, operations and strategic decisions.

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Pillsbury Winthrop Shaw Pittman LLP

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