Tag: Investment Tax Credit

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The Energizer – Volume 86
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Senate’s Version of the “Tax Cuts and Jobs Act” Is Good News for Energy Renewables
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Senate Finance Committee Releases New technology-neutral Energy Credits Legislation
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Treasury Guidance Clarifies and (Again) Expands Field of Renewable Energy Projects That May Qualify for the PTC or ITC
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New Treasury Guidance Significantly Expands Field of Renewable Energy Projects That May Qualify for the PTC or ITC
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Treasury Department Issues New Guidance on PTC and ITC
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Winds of Change for Alternative Energy Tax Incentives in 2016
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Blumenauer Introduces Energy Tax Extenders Bill, Includes a Sought-After Amendment for Solar
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IRS Attempts to Clear the Air with Additional Guidance on Renewable Energy Tax Credits
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Energy Tax Incentives Prominent in Senate Finance Committee’s Extenders Package

The Energizer – Volume 86

By: Buck B. Endemann, Daniel S. Cohen, Olivia B. Mora, Molly K. Barker, Natalie J. Reid, Matthew P. Clark, Nathan C. Howe, Orethu Manu

There is a lot of buzz around clean technology, distributed energy resources (DERs), microgrids, and other technological innovations in renewable energy and clean transport industries, and how these developments can contribute to solving longstanding environmental justice issues. As these innovations develop, energy markets will undergo substantial changes to which consumers and industry participants alike will need to adapt and leverage. Every other week, K&L Gates’ The Energizer will highlight emerging issues or stories relating to the use of DERs, energy storage, emerging technologies, hydrogen, and other innovations driving the energy industry forward.

IN THIS ISSUE: 

  • New Legislation Would Extend Investment Tax Credit to Standalone Storage
  • FERC and BOEM Approve Nation’s First Wave Energy Testing Facility
  • DOE Begins Planning of US$75 Million Grid Energy Storage Facility
  • DOE Announces Grants for Clean Hydrogen Projects
  • EV Connect Announces Large-Scale Vehicle-to-Grid Charging Project

Senate’s Version of the “Tax Cuts and Jobs Act” Is Good News for Energy Renewables

By: Charles H. Purcell, Mary Burke Baker, Elizabeth C. Crouse, Rachel D. Trickett

On November 2, 2017, we alerted taxpayers that the House Ways and Means Committee had unveiled its much anticipated tax reform bill titled the “Tax Cuts and Jobs Act” (the “House Plan”). The House Plan includes substantial modifications to existing renewable energy tax credits including the production tax credit (“PTC”) and the investment tax credit (“ITC”), and also eliminates other tax incentives entirely, effective beginning after 2017, including the Section 199 Domestic Production Activities Deduction (the “DPAD”), the New Markets Tax Credit (the “NMTC”), the Historic Rehabilitation Tax Credit (the “HRTC”), the Enhanced Oil Recovery Credit, and the Credit for Producing Oil and Gas from Marginal Wells.

On the evening of November 9, 2017, Senate Republicans released the Senate’s proposal (the “Senate Plan”). The Senate Plan differs from the House’s proposed legislation in several key ways. Significantly, the Senate Plan does not modify the PTC or the ITC, which is consistent with public statements made by several Senate Republicans since the House Plan was released. Similarly, the Enhanced Oil Recovery Credit, Credit for Producing Oil and Gas from Marginal Wells, and NMTC would all be left intact and the HRTC would remain available, albeit in reduced form. However, unlike the House Plan, the Senate’s proposed legislation did not address expired energy credits for qualified fuel cell and small wind energy property, qualified microturbine property, or production from advanced nuclear power facilities.

Similar to the House’s proposed legislation, the Senate Plan would repeal the DPAD effective for tax years beginning after 2017. As we discussed in our previous alert, repealing the DPAD would affect a variety of domestic manufacturers of a number of items, including solar panels, construction equipment, and software, as well as oil and gas producers.

The Senate Plan is moving very quickly and is expected to proceed on a schedule roughly one week behind that of the House Plan.

Senate Finance Committee Releases New technology-neutral Energy Credits Legislation

By Elizabeth C. Crouse and Mary Burke Baker

On Thursday, Senator Ron Wyden (D-OR), ranking member of the Senate Finance Committee, released new technology-neutral energy credits legislation that would revolutionize the existing Investment Tax Credit and Production Tax Credit provisions. The legislation features a graduated credit rate schedule based on the level of carbon emissions as compared to a carbon emissions baseline (keyed to “current” national average carbon emissions) that would be available without regard to technology or energy input. In a move that is consistent with cutting-edge energy innovations and responsive to the needs and concerns of many large power consumers and utilities, the credits would expressly be available for energy storage and carbon capture technology installed at power plants placed in service before January 1, 2019. Energy storage would include hydroelectric pumped storage, thermal storage, fuel cells, and–crucially–batteries, among others. Under Wyden’s legislation, the maximum credit rates would be 30% for the ITC and, for the PTC, 2.3 cents per kilowatt hour of electricity produced. In addition, the PATH Act “sunset” provisions on the PTC and ITC would be repealed and the proposal would temporarily extend other energy provisions during a transition period.

The proposed legislation would also create a technology-neutral clean fuel production credit, homeowner versions of the ITC, performance-based incentives for energy efficiency improvements to residential and commercial buildings, and clean energy bonds generally based on existing government bonds frameworks.

Although there are differences of opinion in the Congress on whether the tax code should offer energy incentives, Sen. Wyden’s proposal could come into play this year either as part of tax reform or the infrastructure debate.  Senate Democrats recently released a blueprint for infrastructure that includes technology neutral energy reform.

Members of the K&L Gates LLP policy group are closely monitoring this and other tax and energy regulatory reform matters.

 

Treasury Guidance Clarifies and (Again) Expands Field of Renewable Energy Projects That May Qualify for the PTC or ITC

By Elizabeth C. Crouse, Charles H. Purcell, Won-Han Cheng, and Alex Weber

Notice 2017-04, issued on December 15, 2016, clarifies and expands the beginning of construction and continuity safe harbors applicable to certain alternative energy projects, including wind installations. Like Notice 2016-31, released on May 5, 2016, Notice 2017-04 concerns only projects that qualify for the Production Tax Credit (“PTC”) under Code Section 45 and, by extension, many projects that qualify for the Investment Tax Credit (“ITC”) through Code Section 48(a)(5). You may read more about the provisions and consequences of Notice 2016-31 in our previous e-alert.

To read the full alert, click here.

 

New Treasury Guidance Significantly Expands Field of Renewable Energy Projects That May Qualify for the PTC or ITC

On May 5, the U.S. Treasury Department released Notice 2016-31 to address certain changes made to the Production Tax Credit (“PTC”) and Investment Tax Credit (“ITC”) in the Protecting Americans from Tax Hikes (“PATH”) Act of 2015, Pub. L. No. 114-113, Div. Q.  The Notice generally extends the application of the “beginning of construction” and “continuous construction” requirements set forth in Notices 2013-29, 2013-60, 2014-46, and 2015-25, and also favorably modifies several key factors of both requirements.  In addition, on May 18, the U.S. Treasury Department released a revised version of Notice 2016-31, which states that the provisions of Notice 2016-31 apply to any project for which a taxpayer claims the PTC or, via Code Section 48(a)(5), the ITC, that is placed in service after January 2, 2013.

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Treasury Department Issues New Guidance on PTC and ITC

Earlier today, May 5, the U.S. Treasury Department released Notice 2016-31 to address certain changes made to the Production Tax Credit (“PTC”) and Investment Tax Credit (“ITC”) in the Protecting Americans from Tax Hikes (“PATH”) Act of 2015, Pub. L. No. 114-113, Div. Q.  The Notice generally extends the application of the “beginning of construction” and “continuous construction” requirements set forth in Notices 2013-29, 2013-60, 2014-46, and 2015-25, but also creates a few new provisions that apply to renewable energy projects seeking the PTC or ITC after the PATH Act revisions to the Internal Revenue Code.

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Winds of Change for Alternative Energy Tax Incentives in 2016

Congress has some unfinished business on alternative energy policy, which may provide unusual legislative opportunities in an election year. While tax credits for wind and solar power received long-term extensions in the year-end omnibus legislation enacted at the end of 2015, other types of alternative energy were left out — reports have suggested unintentionally — spurring some in Congress to seek a remedy in 2016. Additionally, the Department of the Treasury (“Treasury”) and the Internal Revenue Service (IRS) initiated a rulemaking process to further define and clarify the types of property qualifying for the investment tax credit (ITC) under section 48 of the Tax Code. These developments, along with ongoing congressional interest in comprehensive energy policy legislation, could make 2016 a pivotal year for stakeholders in the alternative energy industry.

Read the full alert on K&L Gates HUB

Blumenauer Introduces Energy Tax Extenders Bill, Includes a Sought-After Amendment for Solar

On Thursday, September 18, Rep. Earl Blumenauer (D-OR) led a group of 18 House Democrats in introducing the Bridge to a Clean Energy Future Act of 2014 (H.R. 5559). The bill would extend several energy tax incentives—many of which Congress allowed to expire at the end of 2013—through the end of 2015. The bill would also extend the production tax credit (PTC), as well as the election to receive an investment tax credit (ITC) in lieu of the PTC, for facilities producing energy from renewable resources through the end of 2016. Read More

IRS Attempts to Clear the Air with Additional Guidance on Renewable Energy Tax Credits

On August 8, 2014, the IRS issued Notice 2014-46, which provides guidance on several issues relating to the implementation of recent changes to the renewable electricity production tax credit (PTC) under Section 45 of the Tax Code and the energy investment tax credit (ITC) in lieu of the PTC under Section 48. In particular, the Notice addresses the manner in which taxpayers can satisfy the “physical work” test and the effect of various types of transfers of ownership after the construction of a facility has begun. In addition, the Notice modifies the 5% safe harbor test included in previous notices. In light of the issuance of the Notice, the IRS says it will not issue private letter rulings on the topics addressed in the Notice.

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Energy Tax Incentives Prominent in Senate Finance Committee’s Extenders Package

The Senate Finance Committee approved its long-awaited tax extenders package on April 3, 2014. The Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act, which the Committee approved by voice vote, would extend dozens of temporary tax incentives that expired at the end of last year or are set to expire at the end of this year. Moreover, the package includes numerous energy tax incentives that lapsed at the end of last year.

The EXPIRE Act would extend the following energy tax provisions:

  • * Production tax credit and investment tax credit with respect to facilities producing electricity from certain renewable sources (e.g., wind) (Sections 45 and 48)
  • * Deduction for energy efficient commercial building property (Section 179D)
  • * Credit for residential energy efficient property (Section 25C)
  • Alternative fuel refueling property credit (Section 30C)
  • Credit for electric motorcycles and three-wheeled vehicles (Section 30D)
  • Second generation biofuel producer credit (Section 40)
  • Special depreciation allowance for second generation biofuel plant property (Section 168(l))
  • Tax credits for biodiesel and renewable diesel (Section 40A)
  • Credit for the production of Indian coal (Section 45(e)(10))
  • Credit for energy efficient new homes (Section 45L)
  • Alternative fuel and alternative fuel mixture credit (Sections 6426 and 6427(e))
  • Credit for new qualified fuel cell motor vehicles (Section 30B) (expires in 2014)

* Provision was not included in Senator Ron Wyden’s (D-OR) “Chairman’s mark” but was added to the package before the Committee’s mark-up.

That said, the EXPIRE Act is, for the most part, a “clean” extenders package, meaning that the proposal mostly changes termination dates and includes few changes to underlying policy. As a result, certain modifications sought by the renewable energy industry were not included. For example, the proposal would not expand Master Limited Partnerships (MLPs) along the lines of Senator Chris Coons’ Master Limited Partnerships Parity Act (S. 795). Additionally, the EXPIRE Act would not impose a “commence construction” requirement (as opposed to a “placed in service” requirement) with respect to solar projects under the investment tax credit under Section 48. Finally, it would not extend the credit for energy efficient appliances under Section 45M.

K&L Gates hosted Chairman Wyden for a breakfast meeting on April 8. Wyden stated that he is working with Senate leadership on a strategy that would bring the EXPIRE Act to the Senate floor. Some staff indicate that floor action could occur as early as the next congressional work period, during the weeks of April 28 or May 5. Meanwhile, the House Ways and Means Committee may also consider energy tax incentives soon as part of its planned series of hearings on tax extenders.

We will provide more updates as this debate unfolds over the coming months.

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