Energy Tax Credits and Incentives

The Emergency Economic Stabilization Act of 2008 provides extensions and/or amendments to several tax breaks for utilities, businesses such as energy producers, and government entities originally included in the Energy Policy Act of 2005 (EPACT). The Stabilization Act specifically addresses incentives in three primary areas: renewable energy, transportation and domestic fuel security, and energy conservation and efficiency.

The American Recovery and Reinvestment Act (ARRA) made even more changes, as noted below.  (Note that general definitions are followed by a breakdown of incentives in each of those three areas with links to additional sources of information.)

General

·         Investment Tax Credit (ITC): The amount of money entities may deduct from their tax liability that is equal to the amount they reinvest in themselves, and applied to 30 percent of qualified costs. The American Recovery and Reinvestment Act (ARRA) removed a previous credit cap.

·         Production Tax Credit (PTC): A per kilowatt hour tax credit for electricity generated and sold by the taxpayer. PTCs are generally preferred by utility-scale energy providers. ARRA extended the PTC through 12/31/12.

·         President Obama tax credits and investment package: Announced in March, the president's plan called for $59 billion in new investment and tax credits for energy technologies. The money is part of the $787 billion economic stimulus plan devoted to energy and includes $39 billion in energy investments and $20 billion in tax incentives.

Learn more about tax incentives and credits

Bloomberg.com on the Obama plan

Renewable incentives

·         Wind and refined coal production tax credit: Extends the placed in service date one year to 1/1/10 for energy producers.

·         Geothermal, biomass, marine (wave and tidal) and other sources PTC: Extends the placed in service date two years to 1/1/11 for energy producers.

·         Solar energy and qualified fuel cell battery property: 30 percent ITC for facilities placed in service by 1/1/17. Energy producers and investors are eligible.

·         Qualified small wind energy property: 30 percent ITC for energy producers and investors.

·         Microturbines: 10 percent ITC for facilities placed in service by 12/31/16. Energy producers and investors are eligible.

·         Clean Renewable Energy Bonds (CREBs): Intended for wind, biomass, geothermal, small irrigation, qualified hydropower, landfill gas, marine renewables, and trash combustion. New bond authorization allocated into thirds for qualifying state, local, and tribal projects, public power providers, and electric coops. $800 million limit.

Learn more about tax breaks for utilities, businesses and governments

The Emergency Economic Stabilization Act of 2008: Energy Tax Credits

Transportation and Domestic Fuel Security Incentives

·         Cellulosic biofuels facilities (in addition to cellulosic methanol): Immediate write-off for eligible fuel producers of 50 percent of the cost of facilities placed in service before 1/1/13.

·         Biodiesel PTC: A $1.00 per gallon tax credit for fuel producers. Available through 12/31/09. Biodiesel imported and sold for export is not eligible.

·         Credit for small biofuels producers: A 10-cent per gallon tax credit available to small producers until 12/31/09.

·         Biomass diesel fuel PTC: A $1.00 per gallon tax credit for fuel producers.

·         Diesel fuel produced by coprocessing biomass with other feedstocks: A 50-cent per gallon tax credit for fuel producers.

·         Alternative fuel excise tax credit for all fuels (except hydrogen): Requires sequestration of at least 50 percent of carbon dioxide emissions for fuel created from coal through the Fischer-Tropsch process. Sequestration requirement will increase to 75 percent by 12/31/09.

·         Alternative refueling property (i.e., natural gas or E85 pumps): 30 percent tax credit available through 12/31/2010 for independent retailers and energy producers. Electric vehicle recharging facilities also are eligible for the credit.

Energy Conservation and Efficiency Incentives

·         Tax credit bonds to finance state and local government-led greenhouse reduction efforts: A limit of $800 million allocated to states, municipalities, and tribal government.

·         Energy-efficient property installed in commercial buildings: Deductible amount up to $1.80 per square foot of building floor area in buildings reaching a 50 percent energy savings. Savings must be from energy and power cost reductions for heating, cooling, lighting systems, etc. Available through 12/21/13.

·         Energy-efficient new homes: Credit equals $1,000 for homes meeting a 30 percent efficiency standard and $2,000 for homes meeting a 50 percent efficiency standard. Available to residential home builders. Available through 12/31/09.

·         Qualified green building and sustainable design project bonds: Available to real estate developers through 10/1/12.