On January 22, the House Ways and Means Committee favorably reported out of committee Chairman Rangel’s Amendment in the Nature of a Substitute to H.R. 598, the “American Recovery and Reinvestment Tax Act of 2009,” by a party line vote of 24 to 13. The renewable energy, energy conservation and energy research incentives included in the bill (the “Proposal”) are summarized below.  

  1. Extension of Renewable Electricity Production Tax Credits. The Proposal extends for three years (generally, through 2013; thought 2012 for wind facilities) the period during which qualified facilities producing electricity from wind, closed-loop biomass, openloop biomass, geothermal energy, municipal solid waste and qualified hydropower may be placed in service for purposes of the electricity production tax credit. The Proposal extends for two years (through 2013) the placed in service period for marine and hydrokinetic renewal energy resources.  
  2. Election of Investment Tax Credit in Lieu of Production Tax Credit. The Proposal allows the taxpayer to make an irrevocable election to have certain qualified facilities placed in service in 2009 and 2010 treated as energy property eligible for a 30% investment tax credit. For this purpose, qualified facilities are facilities otherwise eligible for production tax credits (other than refined coal, Indian coal and solar facilities) with respect to which no production tax credits have been allowed. A taxpayer electing to treat a facility as energy property may not claim the production credit.  
  3. Modifications in Respect of Energy Tax Credits. The Proposal eliminates the credit cap applicable to qualified small wind energy property. The Proposal also removes the rule that reduces the tax basis of property for purposes of claiming the energy (investment) tax credit if the property is financed in whole or in part by subsidized energy financing or with proceeds from tax-exempt private activity bonds.  
  4. Expansion of New Clean Renewable Energy Bond Program. New clean renewable energy bonds issued by qualified issuers to finance qualified renewable energy facilities are a type of qualified tax credit bond to which a holder is entitled to a tax credit or in respect of which credits may be separated from ownership of the underlying bond. The Proposal expands the new CREBs program.  
  5. Expansion of Qualified Energy Conservation Bond Program. Qualified energy conservation bonds used to finance qualified conservation purposes are also a type of qualified tax credit bond. The Proposal expands the qualified energy conservation bond program and includes loans and grants for capital expenditures to implement green community programs.
  6. Expansion and Modification of Tax Credits for Non Business Energy Property. The Proposal raises the 10% tax credit for the purchase of qualified energy efficiency improvements to existing homes to 30%. Additionally, energy property otherwise eligible for a $50, $100 or $150 credit is instead eligible for a 30% credit. The Proposal also extends the credit for one year, through 2010. The $500 lifetime cap (and the $200 lifetime cap with respect to windows) is replaced with an aggregate cap of $1,500 in the case of property placed in service in 2009 or 2010. The rule reducing the credit in the case of subsidized energy financing is eliminated.  
  7. Modifications in Respect of Tax Credits for Residential Energy Efficient Property. The Proposal eliminates the credit caps for solar hot water, geothermal and wind property, and eliminates the reduction in credits for property using subsidized energy financing.  
  8. Temporary Increase in Tax Credits for Alternative Fuel Vehicle Refueling Property. For property placed in service in 2009 or 2010, the Proposal increases the maximum tax credit available for business property to $200,000 for qualified hydrogen refueling property and to $50,000 for other qualified refueling property. For nonbusiness property, the maximum credit is increased to $2,000. In addition, the credit rate is increased from 30% to 50%, except in the case of hydrogen refueling property.  
  9. Energy Research Credit. The Proposal creates a new 20% tax credit for qualified energy research expenses paid or incurred in 2009 or 2010. Qualified energy research expenses are qualified research expenses related to the fields of fuel cells and battery technology, renewable energy, energy conservation technology, efficient transmission and distribution of electricity, and carbon capture and sequestration. 
  10. Grants for Specified Energy Property in Lieu of Tax Credits. The Proposal authorizes the Secretary of Energy to provide a grant to each person who places in service during 2009 or 2010 energy property that is either an electricity production facility otherwise eligible for renewable electricity (production) tax credits or qualifying property otherwise eligible for energy (investment) tax credits. In general, the grant amount is 30% of the tax basis of the property. For qualified microturbine, combined heat and power system, and geothermal heat pump property, the amount is 10% of the basis of the property. The grant is not includible in the taxpayer’s income, but the basis of the property is reduced by half of the amount of the grant. Some or all of each grant is subject to recapture if the grant eligible property is disposed of by the grant recipient within five years of being placed in service. Under the Proposal, production and energy tax credits may not be claimed with respect to the grant eligible property if a grant is paid. In addition, no grant may be awarded to any federal, state or local government or to any IRC §501(c) tax-exempt entity.