The American Taxpayer Relief Act (ATRA) of 2012, passed Jan. 2, 2013, includes a number of energy related provisions. The crux of the change is to accommodate renewable energy projects that would have been impacted by a 1/1/14 credit termination date (many projects needed to be placed in service before 1/1/14). Thus whenever a renewable energy project had a 1/1/14 credit termination date (or in the case of wind where that date was 1/1/13), the language was changed to remove the placed in service requirement and instead inserted: 'the construction of which begins before Jan. 1, 2014." Under this legislation, qualifying projects that start before 1/1/14 have no specific placed in service deadline and can qualify for energy credits even if placed in service after 12/31/13.
How will the IRS interpret "the construction of which begins before Jan. 1, 2014?" No definition is provided. The IRS may borrow language from the Treasury’s 1603 grant program ("physical work of a significant nature" or 5% "safe harbor"), but we do not know with certainty what standard they may apply here.
Although these changes impact both the IRC sec 45 PTC and the IRC sec 48 ITC, they are silent as to whether they apply to the 1603 grant program. Treasury has indicated via email, that in their view the previously defined credit termination dates still apply for 1603 purposes. Therefore the changes in ATRA only apply to the credits.
The old 1/1/17 "placed in service" deadline still applies to many IRC sec 48 ITC projects:
- Fuel cell property
- Small wind energy property
- Microturbine property
- Combined heat and power
- Equipment used in a geothermal deposit energy projects as defined in IRC sec 48(a)(3)(A)(iii)
- Equipment using ground or ground water as thermal energy as defined in IRC sec 48(a)(3)(A)(vi)
The new 1/1/14 "begin construction" deadline applies to:
- Open-loop biomass
- Closed-loop biomass
- Geothermal facility used to create electricity as defined in IRC sec 45(d)(4)
- Landfill gas
- Trash facilities
- Marine & hydrokinetic
(Note: most anaerobic digester projects are either trash or biomass projects)
Bonus Depreciation provisions were also extended. 50% bonus depreciation may be taken for qualifying property purchased and placed in service prior to Jan. 1, 2014.
Renewable Fuel Incentives
The American Taxpayer Relief Act of 2012 also includes important provisions regarding renewable fuel incentives. The following date updates have been made with the new legislation:
Dec. 31, 2013
- Biodiesel and renewable diesel income tax credit retroactively extended
- Excise tax credit for biodiesel mixtures and alternative fuels retroactively extended
Jan. 1, 2014
- Cellulosic fuel producer credit expanded and extended
- Cellulosic fuel plant property placed in service extended one year
The Renewable Energy Development Support team at Baker Tilly has the in-depth insight to guide you through the new legislation included in the American Taxpayer Relief Act of 2012. Contact one of our team members today.