Following the publication of the 2022 production tax credit (PTC) amounts, the IRS has corrected the inflation-adjustment factors and reference prices to be used in the calculation of renewable energy PTC under Internal Revenue Code (IRC) section 45 for 2022. That corrected guidance provides the following:
- The production tax credit for electricity produced from wind, closed-loop biomass, and geothermal energy increased from 2.5 cents (for 2021) to 2.6 cents per kilowatt-hour (kWh) for 2022.
- The production tax credit for electricity produced from open-loop biomass, landfill gas, trash facilities, qualified hydropower facilities, and marine and hydrokinetic remained at the 2021 amount of 1.3 cents per kWh for 2022.
- The production tax credit for refined coal has expired.
Background
IRC section 45 statutorily allows a renewable energy production credit for any taxable year of 1.5 cents per kWh produced by a taxpayer from wind, closed-loop biomass or geothermal energy and sold to an unrelated person during the 10-year period beginning on the date on which the facility is originally placed in service. The credit amount is reduced by one-half for electricity produced from open-loop biomass, landfill gas, trash, qualified hydropower, and marine and hydrokinetic resources.
IRC section 45 provides that the 1.5 cent amount is to be adjusted annually for inflation.
Impact of IRS guidance
This IRS guidance provides the inflation-adjusted amounts of production credits available for sales of electricity or refined coal during 2021. For 2022, the statutory 1.5 cent credit for electricity generation increased to 2.6 cents (and remaining at 1.3 cents for technologies entitled to one-half of the credit amount).
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