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Heather Cooper works on federal income tax matters, with a focus on energy tax issues. She represents clients in restructurings, mergers and acquisitions, and other transactional energy related matters. Heather's national practice includes advising on all aspects of renewable energy transactions such as solar and wind projects. She provides advice on tax equity structures, refinancings, acquisitions and dispositions, restructurings and workouts. Read Heather Cooper's full bio.

As discussed in our post on March 16, the Congressional extension of the Production Tax Credit (PTC) under Internal Revenue Code (IRC) Section 45 and the Investment Tax Credit (ITC) under IRC Section 48 in December 2015 failed to include extensions for certain types of renewable energy property, including fuel cell power plants, stationary microturbine power plants, small wind energy property, combined heat and power system property, and geothermal heat pump property. Congressional leaders have stated that the omission was an oversight that would be addressed in 2016.

On March 30, 2016, President Barack Obama signed into law the Airway and Airport Extension Act of 2016 (H.R. 4721) (the Act), which extends certain Federal Aviation Administration (FAA) programs and revenue provisions only through July 15, 2016. Expiring in less than four months, the FAA extension was apparently crafted with an intentionally short timeframe to allow inclusion of the omitted PTC and ITC provisions in long-term FAA reauthorization legislation that will likely follow this summer.  Accordingly, while the Act does not directly address the energy tax provisions omitted from last year’s extenders package, experts hope that it paves the way to addressing the omission in a few months.

Senator Ron Wyden (D-WY) has said that he hopes to introduce a long-term FAA bill addressing the omitted energy tax credit extenders after the Senate returns this week. House Ways and Means Committee Chair Kevin Brady (R-TX) has expressed opposition to attaching energy credit tax extenders to the FAA reauthorization legislation. As developments occur, we will update this blog.

Renewable Energy Industry Seeks Additional Energy Credit Clarifications

On December 18, 2015, President Barack Obama signed into law the Consolidated Appropriations Act, 2016 (H.R. 2029) (the Act). The Act includes multi-year extensions of the Production Tax Credit (the PTC) under Internal Revenue Code (IRC) Section 45 and the Investment Tax Credit (the ITC) under IRC Section 48 for wind and solar projects—both of which are gradually phased out. The Act, however, did not extend the ITC for other types of renewable energy property, including fuel cell power plants, stationary microturbine power plants, small wind energy property, combined heat and power system property, and geothermal heat pump property. Read further discussion of the Act’s extension of renewable energy tax incentives. Continue Reading President Obama Signs Consolidated Appropriations Act

President Obama’s recently released budget proposal for the 2017 fiscal year repeats many of his past energy-related tax proposals, including a permanent extension of the renewable energy production tax credit and a provision making it refundable. Making the production tax credit permanent and refundable signals the administration’s continued strong support for renewable energy. This On the Subject summarizes the key energy-related tax provisions contained in the budget proposal and detailed further in the US Department of the Treasury’s general explanation of the proposal.

Read the full newsletter.

With the recent extension of the federal income tax credits available for renewable energy projects, practitioners and industry participants have raised questions as to how the “begun construction” rules will apply under these new regimes.  The new regimes refer to the dates on which construction on projects began for purposes of determining qualification for the credits and also provide for a phaseout or reduction in the available credits over time. (For more information on these extensions, see our previous article on the extensions.)

Industry participants expect that the Internal Revenue Service will soon issue guidance detailing when a project will be determined to have “begun construction” and when continuous construction efforts are required.  It is expected that this guidance will be similar to the beginning of construction guidance summarized here for wind projects.  However, in light of the different considerations for different technologies and the reduction in the credit amount over time, which differs from the prior credit for wind that expired in its entirety, a number of questions have been raised by industry participants.  It is hoped that some of these questions will be answered by any guidance that is issued with respect to the credit extensions.  Some of these questions include:

  • Will the beginning of construction tests be the same as they currently are for wind (e., a physical work of a significant nature test and a 5 percent safe harbor test)?
  • Will continuous construction efforts be required under the new regimes?
  • What is the consequence of failing to maintain a program of continuous construction? Will the project still be eligible for a reduced credit, and how will that credit amount be determined?
  • Will there be a placed in service safe harbor? The wind guidance had provided that continuous construction efforts would be considered maintained so long as projects were placed in service prior to a specific date.  That date was two years after the end of the year in which the project was required to be placed in service.  Most industry participants believe this safe harbor will be extended to apply to wind projects beginning construction through 2016.
  • If there is a placed in service “safe harbor,” will it apply to all technologies in the same manner? That is, will the safe harbor period be the same for all renewable technologies?
  • Will the guidance address and provide examples of “physical work of a significant nature” for solar projects?
  • How would the physical work and safe harbor tests apply in the context of residential or commercial and industrial solar projects?
  • In the solar context, what will be considered a single “facility” for purposes of the beginning of construction tests?

We will provide additional updates as we get more information, so please stay tuned.

On December 18, 2015, President Barack Obama signed into law the Consolidated Appropriations Act, 2016 (H.R. 2029) (the Act), which included welcomed extensions to a number of energy tax incentives. The legislation includes multi-year extensions of the Section 45 Production Tax Credit (the PTC) and the Section 48 Investment Tax Credit (the ITC) for wind and solar projects tempered by a gradual phase out of the total credit available.

Read the full article.

The Internal Revenue Service issued Notice 2015-25 on March 11, 2015, to provide further guidance on meeting the beginning of construction requirements for wind and other qualified facilities. The Notice extends the date by which a facility can meet the beginning of construction deadline to correspond with the extension of Code Section 45 passed by Congress at the end of 2014.

Read the full article.

President Obama’s recently released budget proposal for the 2016 fiscal year repeats many of his past energy-related tax proposals, including a permanent extension of the renewable energy production tax credit and a provision making it refundable.  Making the production tax credit permanent and refundable signals the administration’s continued strong support for renewable energy.  This Special Report offers a summary of the key energy-related tax provisions contained in the budget proposal and discussed further in the U.S. Department of the Treasury’s general explanation of the proposal.

Read the full Special Report here.

On Tuesday, December 16, 2014, the U.S. Senate passed the tax extenders bill by a vote of 76-16, extending a number of energy tax incentives through the end of the year.  The Senate’s passage of H.R. 5771 followed the U.S. House of Representatives’ (House) approval earlier this month (see our post on December 8), and the bill is expected to be signed into law by President Obama as early as this week.

The $42 billion bill includes extensions through the end of the year of nearly $10 billion in energy tax incentives, including the New Market Tax Credit in Section 45D, the Production Tax Credit in Section 45 (the PTC), and the bonus depreciation rules in Section 168(k).

Many were disappointed that some of the tax incentives – including the PTC – were extended retroactively only through the end of the year, meaning that tax payers have just a few weeks left to take advantage of them. There would have been far more certainty for companies looking to invest in renewable energy projects if the tax incentives were extended for one or more years beyond the end of 2014.  Several lawmakers suggested that the two week extension was better than nothing, but the short extension period means that Congress has merely punted the need for greater tax reform in this area into 2015.  As it stands, the energy tax incentives extended by this bill will have expired by the time Congress returns to Washington, D.C., on January 6, 2015, following its winter break.  That means that Congress may be in the same place again next year under pressure to pass a year-end bill – instead of focusing on more comprehensive reform and a possible phase-out of the PTC.

Last week, the U.S. House of Representatives (House) overwhelming approved a $42 billion tax extenders bill.  The bill, H.R. 5771, includes extensions of nearly $10 billion in energy tax incentives through the end of 2014.  But by failing to extend the tax incentives beyond the end of this year, the House bill has been criticized by industry advocates that wanted stability and predictability as to the future availability of the incentives.

The bill extends the New Market Tax Credit in Section 45D, the Production Tax Credit in Section 45, the Research Credit in Section 41, the bonus depreciation rules in Section 168(k), the Energy Property Credit for individuals in Section 25C, the Second Generation Biofuel Producer Credit in Section 40(a)(4), the incentives for biodiesel and renewable diesel in Section 40A, the New Energy Efficient Home Credit in Section 45L, the Energy Efficient Commercial Buildings Deduction in Section 179D, the special rule for sales or dispositions to implement FERC or state electric restructuring policy for qualified electric utilities in Section 451 and the excise tax credits relating to certain fuels in Section 6427.

By extending the Production Tax Credit (PTC) and other incentives retroactively only through the end of this year, the House bill provides little reassurance to companies in the industry who are looking to invest in renewable energy products, given the long lead time required to get projects off the ground.  With only three weeks left before the PTC expires again, the extension is unlikely to provide much incentive to invest in new renewables projects.  The House Ways and Means Committee expects the extension to cost around $9.6 billion over the next 10 years.  But industry insiders argue that the expiration of the PTC last year and the resulting uncertainty has caused a drop off in new renewables (non-solar) projects, and have called for a multi-year extension that would phase out the PTC over three years.  This kind of phase-out generated bipartisan support in a Senate bill last month, but the bill ultimately died after the White House threatened to veto it over other matters.  Although some in the Senate are still pushing for a two-year extenders bill, it is currently expected that the extenders package will ultimately be passed in the form adopted by the House.