On December 20, 2017, the U.S. House of Representatives voted to send the Tax Cuts and Jobs Act (the “Act”) to the president for his signature, which is the final step required to make the Act effective. What does the final bill mean for the renewable energy industry? The Investment Tax Credit (“ITC”) and the Production Tax Credit (“PTC”) appear to remain unchanged (for now) and the Base Erosion and Anti-Abuse Tax (aka, the BEAT or International AMT) in the final version of the Act is better for the renewables industry than in previous iterations. Nevertheless, a handful of other provisions may significantly impact the renewable energy industry.
Late on November 16, 2017, Senate Finance Committee (“SFC”) Chair Orrin Hatch released amendments to the Senate Republicans’ tax reform proposal. Similar to the original version and the first amendment (released late on November 14, 2017), the amended proposal does not include provisions concerning the PTC or the ITC. In addition, the Enhanced Oil Recovery Credit, the Credit for Producing Oil and Gas from Marginal Wells, and the New Markets Tax Credit would all remain intact. Also similar to the prior version, the SFC proposal does not address expired energy credits for qualified fuel cell and small wind energy property, qualified microturbine property, or production from advanced nuclear power facilities. Recently, however, Senator Chuck Grassley announced publicly that Senate Republicans would address certain of those expired energy credits in a separate “extenders bill” apart from the “Tax Cuts and Jobs Act” at the end of the year.
Earlier today, the U.S. House of Representatives voted in favor of H.R. 1, the Tax Cuts and Jobs Act. As expected, the limitations on the Production Tax Credit and Incentive Tax Credit that we discussed in our post on November 3 remain in the House bill: the House Republicans would dramatically curtail the PTC, leave the ITC in respect of solar energy installations largely intact, and renew the ITC in respect of several “orphan” renewable energy technologies. However, as discussed in our post on November 15, the Senate Republicans would not change the existing PTC or ITC provisions in the Senate tax reform package. (According to recent news reports, the Senate Republicans intend to renew the ITC in respect of the “orphan” technologies in an extenders bill later this year.) The Senate has not yet voted on its separate tax reform proposal and, at this point, it is not clear whether a conference committee bill will include any provisions regarding 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.
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.
The Treasury Department and the Internal Revenue Service (IRS) are considering whether to release a third round of guidance on the production tax credit (PTC) for renewable electricity under Section 45 of the Tax Code and the investment tax credit (ITC) in lieu of the PTC under Section 48. The intent of the guidance would be to further clarify the changes in the PTC/ITC enacted as part of the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. No. 112-240). Read More