In a major victory for the renewable energy industry, Congress recently passed, and the President signed into law, two significant pieces of tax legislation, the Protecting Americans from Tax Hikes (PATH) Act and the Consolidated Appropriations Act, 2016, which extend a series of tax credits for energy produced by wind, solar, biomass, landfill gas, geothermal, municipal solid waste, qualified hydropower and marine and hydrokinetic facilities.
The length of the extension, as well as whether it is phased out gradually or not, differs depending on the type of technology being used as part of the project.
- Solar. The investment tax credit (ITC) was slated to drop to 10 percent from 30 percent after 2016. The Appropriations Act provides that the credit will remain at 30 percent for projects that start construction before December 31, 2019. For projects beginning construction in 2020, it will be 26 percent. If construction begins in 2021 or 2022, the credit will be 22 percent. Thereafter, it will be 10 percent. The production tax credit (PTC) (which is usually not claimed on solar projects) is similarly extended, with a phase-out that begins in 2020.
- Wind. Prior to this extension, the PTC for wind provided a tax credit equal to 2.3 cents per kilowatt hour (adjusted for inflation) only if construction began in 2014 or earlier. The Appropriations Act extends the begin construction deadline through 2019. However, the credit is phased out as follows: it is reduced by 20 percent if construction begins in 2017, 40 percent if construction begins in 2018, and 60 percent if construction begins in 2019. A similar extension to the ITC, with a similar phase-out, is provided for wind projects that elect to take the ITC instead of the PTC.
- Biomass, landfill gas, geothermal, municipal solid waste, qualified hydropower and marine and hydrokinetic. Prior to this extension, for these technologies, the ITC and PTC were available only if construction began in 2014 or earlier. The PATH Act provides that a project will be eligible for the PTC (or ITC in lieu of the PTC) if construction begins before December 31, 2016.
There were no changes to tax credits available for other types of renewable energy, such as fuel cells, cogeneration plants, small wind, and geothermal that generates heat or cooling.
If you would like to learn more about the changes and what they mean for you and your business, please contact or Kris J. Eimicke at 207.791.1248 or email@example.com; Robert B. Ravenelle at 207.791.1378 or firstname.lastname@example.org; or Andrew O. Kaplan at 617.488.8104 or email@example.com.