US Fiscal Cliff Legislation Extends Production and Investment Tax Credits for Renewable Energy

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 On January 1, 2013, the Senate and the House of Representatives approved H.R. 8, the American Taxpayer Relief Act of 2012 (the Bill) by a vote of 89-8 and 257-167, respectively. The Bill is the long-awaited and much negotiated response to the numerous expiring tax cuts and automatic reductions to federal expenditures, known as the “fiscal cliff”, which were set to go into effect at the beginning of the year.

Among the Bill’s various amendments to the US Internal Revenue Code of 1986 (the Code), is section 407 of the Bill, which extends the production tax credit under section 45 of the Code and the 30% investment tax credit under section 48 of the Code to qualifying wind facilities that are under construction before January 1, 2014. The requirement that facilities be “under construction” replaces the previous requirement that facilities must be “placed in service” by January 1, 2014 to qualify for the credits. Proponents of the Bill believe the change is a result of industry concerns that a one-year extension of the December 31, 2012 “placed in service” requirement would provide little benefit to clean energy developers given the lead time needed to develop and construct such facilities.

Along with wind energy facilities, the Bill extends the “beginning of construction” requirement to other qualifying facilities, such as closed and open-looped biomass, geothermal, landfill gas, hydropower and marine and hydrokinetic renewable energy facilities.  The Bill does not, however, amend the current “placed in service” requirements under sections 45 and 48 of the Code for small irrigation power facilities, solar power facilities, refined coal production facilities or Indian coal facilities.

American Taxpayer Relief Act of 2012 biomass fiscal cliff geothermal hydro hydrokinetic Indian coal landfill gas marine refined coal renewable small irrigation power solar power U.S. House of Representatives U.S. Senate US Internal Revenue Code of 1986 wind energy facility

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