Mondaq
Summary
As Congress was completing final negotiations of the stimulus package dealing with the public health and economic impacts of the coronavirus pandemic, several key energy provisions made their way into the 5593-page omnibus spending bill passed by the House and Senate on December 21, 2020, particularly much needed extensions of several renewable energy and energy efficiency tax incentives.
Specifically, the Consolidated Appropriations Act, 2021 (the "Act")1 addresses, among other things, the concerns of renewable energy developers regarding the potential expiration of the Production Tax Credit (PTC) and Investment Tax Credit (ITC) and, for the first time, includes provisions for offshore wind projects. In addition, the Act provides for the expansion and enhancement of significant research and development programs related to renewable energy, energy efficiency, energy storage, and carbon capture and sequestration, and adds certain other provisions to reduce greenhouse gas emissions.2
Existing energy tax credits and deductions have been extended as follows:
Production Tax Credit. The PTC under Internal Revenue Code (IRC) Section 45 for large wind facilities has been extended for one year, permitting wind facilities that begin construction before January 1, 2022 to qualify at 60% of the statutory rate, which rate adjusts for inflation. For calendar year 2020, the full statutory rate is 2.5 cents per kilowatt hour and 60% of the statutory rate is 1.5 cents per kilowatt hour. The Act leaves in place the phase-down to 40% of the credit for wind facilities that began construction in 2019.
Additionally, the credit has been extended through 2021 for biomass (closed and open loop), geothermal, landfill gas, municipal solid waste-to-energy, certain hydro, and marine and hydrokinetic facilities, at various levels (2.5 cents per kilowatt hour for closed-loop biomass and geothermal energy and 1.3 cents per kilowatt hour for the other categories). As under current IRC Section 48(a)(5)(C)(ii), renewable energy developers may elect to take the ITC in lieu of the PTC. The election has been extended by one year for projects for which construction begins before January 1, 2022, however, the ITC for wind, if elected by January 1, 2022, will be reduced by 40% from the standard credit of 30% to 18%.
Investment Tax Credit. The ITC under IRC Section 48 has been extended for two years through 2023 for solar facilities, fuel cells, small wind projects, microturbines, and combined heat and power systems.
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