On April 12, 2017, the Internal Revenue Service (IRS) published the 2017 inflation-adjustment factors and reference prices used in the calculation of renewable energy production tax credits under IRC section 45. That guidance provides:

  • The tax credit for electricity produced from wind and closed-loop biomass increased to 2.4 cents per kilowatt hour (kWh) in 2017 from 2.3 cents per kWh in 2016.
  • The tax credit for electricity produced from open-loop biomass, small irrigation power, landfill gas, trash facilities, qualified hydropower, and marine and hydrokinetic remains at 1.2 cents per kWh for 2017.
  • The tax credit for refined coal increased to $6.909 per ton for 2017, up from $6.810 in 2016.

Background

IRC section 45 statutorily allows a renewable energy production credit for any taxable year of 1.5 cents per kWh produced by a taxpayer from wind or closed-loop biomass and sold to an unrelated person during the 10-year period beginning on the date on which the facility is originally placed in service. The credit amount is reduced by one-half for electricity produced from open-loop biomass, small irrigation power, landfill gas, trash, qualified hydropower, and marine and hydrokinetic resources.

IRC section 45 also statutorily allows a refined coal production credit of $4.375 per ton of qualified refined coal produced by a taxpayer and sold to an unrelated person during the 10-year period beginning on the date in which the facility is originally placed in service.

IRC Section 45 provides that the 1.5 cent amount and $4.375 amount are to be adjusted annually for inflation.

Impact of IRS Guidance

This IRS guidance provides the inflation-adjusted amounts of production credits available for sales of electricity or refined coal during 2017. For 2017, the statutory 1.5 cent credit for electricity generation is increased to 2.4 cents (and remains at 1.2 cents for specified resources), and the statutory $4.375 credit for refined coal is increased to $6.909.