The House and Senate have both passed H.R. 8, “The American Taxpayer Relief Act of 2012,” which was designed to avert the “fiscal cliff.” The President is expected to sign the bill. Among the provisions included in the bill was an extension of the production tax credit (“PTC”).
First, for wind facilities, the deadline for placing facilities in service was extended by one year through the end of 2013. Second, for wind, closed-loop biomass, open-loop biomass, geothermal facilities, landfill gas facilities, trash facilities, incremental hydropower facilities, and marine and hydrokinetic facilities, the deadline was effectively extended. As a result, these types of facilities will qualify for the PTC if construction begins before January 1, 2014.
Section 45 of the Internal Revenue Code provides a federal income tax credit for the production of electricity for qualified energy facilities. Additionally, Section 48 allows the owner of a wind energy facility that qualifies for the PTC to elect to claim an investment tax credit (“ITC”) in lieu of the PTC. Without changes to Sections 45 and 48, the PTC (and the ITC election) for wind energy facilities would have expired unless a facility was placed in service by December 31, 2012. Without changes, the PTC for the other types of facilities listed above would have expired unless a facility was placed in service by December 31, 2013.
As part of the newly passed bill, Congress extended both the PTC and ITC election for wind energy facilities for one year. The bill also provided an additional window for wind, closed-loop biomass, open-loop biomass, geothermal facilities, landfill gas facilities, trash facilities, incremental hydropower facilities, and marine and hydrokinetic facilities by allowing the PTC for projects the construction of which begins before January 1, 2014. Current law had allowed for a PTC only for a facility placed in service by the deadline. The one-year extension coupled with the “begin construction” language thus provides developers with a longer time frame to develop and complete their projects than the simple one-year extension.
In addition to these changes, the ability to claim an ITC in lieu of the PTC was also extended.
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