On November 26, the House of Representatives released a tax bill (Extenders Bill) that, if enacted, would extend certain tax credits for the renewable energy and alternative fuels industries and would make other changes relevant to the energy sector. The Extenders Bill provisions include:

  • Extension of the production tax credit (PTC) (and investment tax credit (ITC) in lieu of PTC) for technologies for which the credit has expired.
  • A short-term extension of the alternative fuels credits.
  • A long-term extension of the biodiesel and renewable diesel credits.
  • Extension of many of the other energy tax credits and other provisions (no changes were proposed, however, for wind or solar, which had previously received long-term extensions).

Production Tax Credit

The Bipartisan Budget Act of 2018 (2018 BBA) passed by Congress and signed into law on February 9, 2018, extended the PTC under Section 45 (and ITC in lieu of PTC for facilities described in Section 45) retroactive to January 1, 2017, for the following facilities if construction began by December 31, 2017:

  • Closed-loop biomass facilities,
  • Open-loop biomass facilities,
  • Geothermal energy facilities,
  • Landfill gas facilities,
  • Trash facilities,
  • Qualified hydropower facilities, and
  • Marine and hydrokinetic renewable energy facilities.

The Extenders Bill would further extend the PTC (and ITC in lieu of PTC), retroactive to January 1, 2018, for these facilities if construction begins by December 31, 2018.

The Extenders Bill would not impact the PTC for wind projects since the PTC for wind was previously extended by the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act), which provided for wind projects as follows:

Eversheds Sutherland Observation: Consistent with the 2018 BBA and certain prior extensions, the Extenders Bill would only provide for these facilities a one-year extension of the PTC that would be primarily retroactive (or, if not passed until 2019, fully retroactive). It is unfortunate that the Extenders Bill fails to provide a longer-term extension for these facilities.

Biodiesel, Renewable Diesel, Alternative Fuels and Second Generation Biofuels

The 2018 BBA extended the Section 40A biodiesel and renewable diesel credits as well as the Section 6426 and Section 6427 biodiesel and alternative fuels credits (other than the Section 6427 credit for alternative fuel mixtures) for fuel sold or used by December 31, 2017, applicable retroactively to fuel sold or used in 2017. The 2018 BBA also extended the Section 40 second generation biofuel producer credit to biofuel produced through December 31, 2017, applicable retroactively to production in 2017.

The Extenders Bill would extend through 2024 the Section 40A biodiesel and renewable diesel tax credit as well as the Section 6426 biodiesel excise tax credit, but with a phase-out beginning in 2022. The Extenders Bill modifies the credit amount for each gallon of biodiesel or renewable diesel used by a taxpayer in the production of a qualified mixture as follows:

  • $1.00 for any sale or use through 2021;
  • $0.75 for any sale or use in 2022;
  • $0.50 for any sale or use in 2023; and
  • $0.33 for any sale or use in 2024.

The Extenders Bill would extend the Section 6426 and Section 6427 alternative fuels credits (other than the Section 6427 credit for alternative fuel mixtures) for fuel sold or used by December 31, 2018, applicable retroactively to fuel sold or used in 2018.

The Section 40 second generation biofuel producer credit would be extended by the Extenders Bill to biofuel produced through December 31, 2018, applicable retroactively to production in 2018.

Eversheds Sutherland Observation: Consistent with prior retroactive extensions of these credits, the Secretary of Treasury is directed to issue guidance, within 30 days after enactment, for making 2018 claims. This guidance is expected to be substantially similar to guidance provided for prior retroactive extensions.

Other Energy Credit Related Changes

Additionally, the Extenders Bill would:

  • Extend the Section 4611 oil spill liability trust fund rate through 2019.
  • Extend the Section 25C non-business energy property credit to property placed in service by December 31, 2018. The extension is retroactive to property placed in service in 2018.
  • Extend the Section 30B credit for fuel cell motor vehicles to property purchased by December 31, 2018. The extension is retroactive to property purchased in 2018.
  • Extend the Section 30C alternative fuel vehicle refueling property credit to property placed in service by December 31, 2018, applicable retroactively to property placed in service in 2018.
  • Extend the Section 30D credit for two-wheeled plug-in electric vehicles through 2018, applicable retroactively to vehicles acquired in 2018.
  • Extend the Section 45(e)(10) credit for Indian coal production facilities for coal produced by December 31, 2018, retroactive to production in 2018.
  • Extend the Section 45L credit for energy-efficient new homes acquired by December 31, 2018, applicable retroactively to homes acquired in 2018.
  • Extend the Section 168(l) special allowance for second generation biofuel plant property through 2018, applicable retroactively to property placed in service in 2018.
  • Extend the Section 179D energy efficient commercial buildings deduction through 2018, applicable retroactively to property placed in service in 2018.
  • Extend the Section 451(k) special rule for sales or dispositions to implement Federal Energy Regulatory Commission (FERC) or state electric restructuring policy for qualified electric utilities through 2018, applicable retroactively to dispositions in 2018.

Eversheds Sutherland Observation: The Extenders Bill would provide only a one-year retroactive extension of certain tax credits. Consequently, with respect to those provisions, they will again be expired for 2019. We do not anticipate that they will be extended for 2019 until, at the earliest, late 2019.