On December 18, 2015, the President signed the Omnibus Appropriations Act (the “Act”) into law. Among the numerous changes in tax law contained in the Act are five-year extensions of the 30% investment tax credit (“ITC”), which was scheduled to drop to 10% from 30% of eligible basis for solar facilities placed in service after 2016, and the production tax credit (“PTC”) which was scheduled to expire for wind and certain other renewable energy projects for which construction had not begun before the end of 2015. For both the ITC and the PTC, the five-year extension is based on the year in which construction of the applicable project begins, rather than when the project is placed in service. Developers of, and investors in, solar and wind projects will welcome the tax credits being available for a significantly longer time given that the industry has been plagued by uncertainty in light of Congress’s past tendency to extend the ITC and PTC for one or two year at a time. This extension is expected to generate continuing development of, and investment in, new solar and wind energy facilities.

Notably, however, the new five-year extensions will phase out over time. The amount of the PTC and ITC available will be reduced over the five-year period, as discussed in greater detail in the next paragraph. As a result, there will most likely still be pressure to commence construction of renewable energy projects prior to the end of the last taxable year for which the maximum tax credits are available.