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Federal

Incentives/Policies for Renewable Energy

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Renewable Electricity Production Tax Credit (PTC)   

Last DSIRE Review: 10/02/2013
Program Overview:
State: Federal
Incentive Type: Corporate Tax Credit
Eligible Renewable/Other Technologies: Landfill Gas, Wind, Biomass, Hydroelectric, Geothermal Electric, Municipal Solid Waste, Hydrokinetic Power (i.e., Flowing Water), Anaerobic Digestion, Small Hydroelectric, Tidal Energy, Wave Energy, Ocean Thermal
Applicable Sectors: Commercial, Industrial
Amount:2.3¢/kWh for wind, geothermal, closed-loop biomass; 1.1¢/kWh for other eligible technologies. Generally applies to first 10 years of operation.
Eligible System Size:Marine and Hydrokinetic: Minimum capacity of 150 kW
Agricultural Livestock Waste: Minimum capacity of 150 kW
Carryover Provisions:Unused credits may be carried forward for up to 20 years following the year they were generated or carried back 1 year if the taxpayer files an amended return.
Expiration Date:Varies by technology
Web Site: http://www.irs.gov/pub/irs-pdf/f8835.pdf
Authority 1:
Date Enacted:
26 USC § 45
1992 (subsequently amended)
Authority 2:
Date Enacted:
Date Effective:
H.R. 8 (American Taxpayer Relief Act of 2012)
01/02/2013
01/02/2013
Authority 3:
Date Enacted:
IRS Notice 2013-29
04/15/2013
Summary:

Note: This credit expired at the end of 2013. Projects that were not under construction prior to January 1, 2014 are ineligible for this credit. See below for more information about determining when construction has commenced on a project. 

The federal renewable electricity production tax credit (PTC) is a per-kilowatt-hour tax credit for electricity generated by qualified energy resources and sold by the taxpayer to an unrelated person during the taxable year. Originally enacted in 1992, the PTC has been renewed and expanded numerous times, most recently by the American Recovery and Reinvestment Act of 2009 (H.R. 1 Div. B, Section 1101 & 1102) in February 2009 (often referred to as "ARRA") and the American Taxpayer Relief Act of 2012 (H.R. 6, Sec. 407) in January 2013.

The January 2013 legislation revised the credit by: (1) removing "placed in service" deadlines and replacing them with deadlines that use the beginning of construction as a basis for determining facility eligibility; (2) extending the deadline for wind energy facilities by one year, from December 31, 2012 to December 31, 2013; (3) extending the permission for PTC-eligible facilities to claim the ITC through 2013 (also using the start of construction rather than placed in service date as a reference); and (4) revising the definition of the term "municipal solid waste" to exclude "paper that is commonly recycled and which has been segregated from other solid waste". The definitional change for municipal solid waste applies to electricity produced and sold after the enactment date of the legislation (January 2, 2013) in taxable years ending after that date.

 
Credit Amount
The tax credit amount is 1.5¢/kWh in 1993 dollars (indexed for inflation) for some technologies, and half of that amount for others. The rules governing the PTC vary by resource and facility type. The table below outlines two of the most important characteristics of the tax credit -- the begin construction deadline and the credit amount -- as they apply to different facilities. The table includes changes made by H.R. 8 in January 2013 and the inflation-adjusted credit amounts are current for the 2013 calendar year, as published in the April 3, 2013 Federal Register. (See the history section below for information on prior rules.)
 
Resource Type Begin Construction Deadline Credit Amount
Wind December 31, 2013 2.3¢/kWh
Closed-Loop Biomass December 31, 2013 2.3¢/kWh
Open-Loop Biomass December 31, 2013 1.1¢/kWh
Geothermal Energy December 31, 2013 2.3¢/kWh
Landfill Gas December 31, 2013 1.1¢/kWh
Municipal Solid Waste December 31, 2013 1.1¢/kWh
Qualified Hydroelectric December 31, 2013 1.1¢/kWh
Marine and Hydrokinetic (150 kW or larger) December 31, 2013 1.1¢/kWh


The duration of the credit is generally 10 years after the date the facility is placed in service, but there are two exceptions:

  • Open-loop biomass, geothermal, small irrigation hydro, landfill gas and municipal solid waste combustion facilities placed into service after October 22, 2004, and before enactment of the Energy Policy Act of 2005, on August 8, 2005, are only eligible for the credit for a five-year period.
  • Open-loop biomass facilities placed in service before October 22, 2004, are eligible for a five-year period beginning January 1, 2005.

In addition, the tax credit is reduced for projects that receive other federal tax credits, grants, tax-exempt financing, or subsidized energy financing. The credit is claimed by completing Form 8835, "Renewable Electricity Production Credit," and Form 3800, "General Business Credit." For more information, contact IRS Telephone Assistance for Businesses at 1-800-829-4933.

 
Determination of Commencing Construction 
In April 2013 the IRS issued guidance on how it will evaluate whether construction has commenced for the purpose of the year-end 2013 deadline, which was later clarified by IRS Notice 2013-60. The guidelines establish two paths for meeting this benchmark, which are very similar to those used by the U.S. Department of Treasury under the former Section 1603 Grant in Lieu of Tax Credit program. Under one path, a project is considered to have begun construction when "physical work of a significant nature" has started. Under the other path, construction of a facility is considered to begun when five percent of the total cost of the facility has been incurred by the taxpayer, and the taxpayer makes continuous efforts to complete the facility thereafter. The guidance also provides that in certain circumstances the evaluation can take place on a project-wide basis rather than separately for each individual piece of equipment. For further information on this and other aspects of the IRS guidance please see the full text of IRS Notices 2013-29 and 2013-60

 
Contact:
  Public Information - IRS
U.S. Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, DC 20224
Phone: (800) 829-1040
Web Site: http://www.irs.gov
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Disclaimer: The information presented on the DSIRE web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.

While the DSIRE staff strives to provide the best information possible, the DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. make no representations or warranties, either express or implied, concerning the accuracy, completeness, reliability or suitability of the information. The DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. disclaim all liability of any kind arising out of your use or misuse of the information contained or referenced on DSIRE Web pages.

Copyright 2013 - 2014 North Carolina State University, under NREL Subcontract No. XEU-0-99515-01. Permission granted only for personal or educational use, or for use by or on behalf of the U.S. government. North Carolina State University prohibits the unauthorized display, reproduction, sale, and/or distribution of all or portions of the content of the Database of State Incentives for Renewables and Efficiency (DSIRE) without prior, written consent.