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Key Energy-Related Tax Provisions in the 2017 Budget Proposal

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.

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Senate Finance Committee Passes Bill to Extend Certain Lapsed Tax Breaks

The Senate Finance Committee passed the Expiring Provisions Improvement Reform and Efficiency Act (EXPIRE Act) on April 3, 2014.  The legislation would renew through 2015 more than 50 tax incentives that either have lapsed or will lapse at the end of 2014.  The EXPIRE Act is not yet scheduled for consideration by the full Senate.  The legislation includes a number of energy-related tax credits, including extensions for the renewable electricity production tax credit (PTC) and the new markets tax credit (NMTC).  The legislation also modifies the bonus depreciation rules under Section 168(k).

The EXPIRE ACT extends the PTC and the election to claim the energy investment tax credit (ITC) in lieu of the electricity production credit for two years, through December 31, 2015. The PTC expired for qualifying renewable energy facilities at the end of 2013 if construction of such facilities did not begin before January 1, 2014.  The PTC provided a credit that ranged from 1.1 cents to 2.3 cents per kilowatt-hour of renewable electricity produced, depending on the type of renewable energy.  If passed, the proposal would be effective as of January 1, 2014.

The legislation also includes an extension for bonus depreciation under Section 168(k).

  • The proposal extends the 50 percent additional first-year depreciation deduction through 2015 (and through 2016 for certain longer-lived and transportation property), and applies to property placed in service after December 31, 2013, in taxable years ending after such date.
  • The legislation also makes a conforming change to the percentage of completion rules under Section 460(b)(1)(A) for certain long-term contracts.
  • The EXPIRE Act extends the election to increase the alternative minimum tax (AMT) credit limitation in lieu of bonus depreciation for two years to property placed in service before January 1, 2016 (January 1, 2017, in the case of certain longer-lived property and transportation property).

The EXPIRE Act also extends the NMTC (which expired at the end of 2013) for two years, through 2015, permitting up to $3.5 billion in qualified equity investments for each of the 2014 and 2015 calendar years. The proposal extends for two years, through 2020, the carryover period for unused NMTCs. The proposal applies to calendar years beginning after December 31, 2013.

The EXPIRE Act also contains a variety of other energy extenders, including:

  • The  Section 30C credit for alternative fuel refueling property is extended for two years (one year in the case of hydrogen refueling property, the credit which continues under present law through 2014), through December 31, 2015.
  • The Section 30D credit for electric motorcycles and three-wheeled vehicles is extended for electric motorcycles for two years, through December 31, 2015. The credit for electric three-wheeled vehicles is not extended.
  • The Section 40(b)(6) second generation biofuel producer credit is extended for two years, through December 31, 2015.  The proposal is effective for fuel sold or used after December 31, 2013.
  • The Section 40A biodiesel fuel and renewable diesel fuel credit and the Section 6426 excise tax credit for biodiesel mixtures are extended for two [...]

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Key Energy Tax Provisions Included in ‘Fiscal Cliff’ Legislation

by Gale Chan, Madeline Chiampou, Martha Pugh, Philip Tingle and Brian Levy

On January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012 to address the tax rate hikes and expiring tax incentives to avert the “fiscal cliff.”  President Obama signed the legislation into law on January 2, 2013.  The legislation included important provisions to businesses, including extending the production tax credit for wind energy facilities through 2013 and requiring that a qualified facility begin construction (rather than be placed in service) before January 1, 2014, to claim the credit.

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