The two primary tax credits that promote renewable energy development, the investment tax credit (ITC) and the production tax credit (PTC), were extended through two separate bills passed by Congress and signed into law by President Obama. In December 2015, Congress presented bills that would extend the credits for qualifying projects that begin construction before the given deadlines: The Consolidated Appropriations Act, 2016 (Appropriations Act) affects wind and solar technologies, and Protecting Americans from Tax Hikes (PATH) Act of 2015 extends the production tax credit for certain other technologies. Below is an overview of the impact of the acts on each tax credit.
Investment tax credit
As mentioned above, the primary changes affect wind and solar technologies. For wind projects, the 30 percent credit did not change for projects that begin construction prior to Dec. 31, 2016. For each year after, up to a “begun construction” deadline of Dec. 31, 2019, the credit will be reduced each year by a percentage.
For solar technologies, a sliding credit scale will be also be applied. The begun construction deadline for solar was extended through Dec. 31, 2022, with the full 30 percent credit offered to those projects that begin construction prior to Dec. 31, 2019. The energy credit for solar energy property will then be phased out, providing a 26 percent credit in 2020 and a 22 percent credit in 2021. For any property that is under construction before 2022, but not placed in service before 2024, the energy credit is reduced to 10 percent.
For technologies other than wind and solar, the ITC percentages remain unchanged with the begun construction deadline now uniform for all other technologies at Dec. 31, 2016. These technologies include biomass, municipal solid waste, landfill gas, hydropower, geothermal, fuel cells, combined heat and power, and micro turbines.
Production tax credit
The Appropriations Act provided changes to the PTC specific to wind projects. With a current credit of 2.3 cents per kilowatt hour remaining unchanged, the begun construction deadline was extended to Dec. 31, 2016. Wind projects will recognize a reduced credit percentage for projects that begin after 2016 through a begun construction deadline of Dec. 31, 2019.
Extensions for other PTC technologies include closed-loop biomass, geothermal, open-loop biomass, landfill gas, municipal solid waste, qualified hydroelectric, and marine and hydrokinetic. The estimated credit amount for these technologies remains unchanged with the begin construction deadlines extended through Dec. 31, 2016.
For more information on the implications of the recent ITC and PTC changes and to see if your project may qualify, contact a Baker Tilly renewable energy specialist.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.