On October 3, 2008, President Bush signed H.R. 1424, which includes the Energy Improvement and Extension Act of 2008 (the “Act”). Among many things, the Act creates, extends, and modifies several key energy tax credits, which are summarized below.
Renewable Energy Incentives
Production Tax Credit
- The Act extends the production tax credit for wind and refined coal through December 31, 2009. For other sources of energy, the tax credit is extended through December 31, 2010.
- The Act expands the types of facilities that qualify for the production tax credit to new biomass facilities and to those that generate electricity from marine renewables, which is energy derived from waves, tides, and currents.
Long-term Extension of Energy Credit
- The Act extends through 2016 the 30 percent tax credit for solar energy property and qualified fuel cell property, as well as the 10 percent investment tax credit for microturbines.
- The Act also expands the definition of energy property for tax credit purposes to include qualified small wind energy property and geothermal equipment.
- The Act increases the tax credit limitation for fuel cell property from $500 to $1,500 per half kilowatt of capacity.
- The Act provides a new 10 percent investment tax credit for combined heat and power systems and geothermal heat pumps.
- The Act provides, beginning October 3, 2008, that the investment tax credit for energy property shall be allowed as a credit against the Alternative Minimum Tax.
Sales of Electric Transmission Property
- The Act extends through 2009 the deferral of gain on sales of electric transmission property by vertically integrated electric utilities to Federal Energy Regulatory Commission approved independent transmission companies.
Public Utility Property Tax Credit
- The Act eliminates the restriction on tax credits for public utility property for periods after February 13, 2008. Previously, if energy property was largely used in a trade or business of a public utility it was generally not eligible for an investment tax credit.
Clean Renewable Energy Bonds
- The Act authorizes $800 million of new clean renewable energy bonds to finance facilities that generate electricity from wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, qualified hydropower, landfill gas, marine renewable and trash combustion facilities.
- The Act also extends the date of existing clean renewable energy bonds for one (1) year.
Carbon Mitigation and Coal
Carbon Capture and Sequestration
- The Act provides for new tax credits for the creation of advanced coal-fired electric generation projects and certain coal gasification projects that demonstrate the greatest potential for carbon capture and sequestration.
- The Act also provides for a $10 per ton credit for the first 75 million metric tons of CO2 captured and transported from an industrial source for use in enhanced oil recovery and $20 per ton for CO2 captured and transported from an industrial source for permanent storage in a geologic formation.
Transportation and Domestic Fuel Security
Plug-in Electric Drive Vehicle Credit
- The Act establishes a new credit for plugin electric passenger vehicles and light trucks ranging from $2,500 to $7,500.
Cellulosic Biofuels Property Credit
- The Act expands the depreciation credit for the cost of facilities that produce cellulosic biofuels ethanol to facilities that produce other cellulosic biofuels.
Biodiesel Tax Credit
- The Act extends the $1.00 per gallon production tax credit for biodiesel and the $0.10 per gallon credit for small biodiesel producers through 2009.
- The Act also extends the $1.00 per gallon production tax credit for diesel fuel created from biomass.
Alternative Fuels Credit
- The Act extends the alternative fuel excise tax credit through 2009 for all fuels except hydrogen since hydrogen has a current expiration date of September 30, 2014.
Alternative Refueling Stations Credit
- The Act extends the 30 percent credit for alternative refueling property through 2010.