On January 2, 2013, President Obama signed into law H.R. 8, the American Tax Payer Relief Act, known more commonly as the Fiscal Cliff deal. The focus of the legislation was aimed at averting a complete expiration of the 2001 and 2003 Bush tax cuts. This law included the extension and modification of energy tax provisions impacting numerous industries. The following is a brief overview of those key provisions:
- Production Tax Credit (PTC) — The PTC is a per-kilowatt hour incentive for the generation of electricity from qualified, renewable sources. The wind PTC was extended through 2013. In addition, the trigger for eligibility was changed to the start of construction of the facilities instead of the production of the electricity which significantly extends the use of the credit. The Treasury Department and the Internal Revenue Service will issue rulemakings clarifying this important change. Finally, the law amends the definition of municipal solid waste facilities to remove recyclable paper as an eligible feedstock.
- Investment Tax Credit in Lieu of Production Tax Credit — Solar facilities can currently qualify for an investment tax credit of 30 percent of the cost of investment when a facility is placed in service. The law enables other renewable generation facilities to opt for this investment tax credit as opposed to the PTC mentioned above.
- Indian Country Coal Production Credit — The law extends a provision that enables Indian tribes to qualify for a PTC equal to $2 per ton of coal sourced through their land through the end of 2013.
- Energy Efficient Improvements to Existing Homes (25C) — The tax credit for installing energy efficient improvements to existing homes — such as improved HVAC units, windows, furnaces, and heat and water pumps — was extended through 2013 and is capped at $500. The law also updated the standards that such appliances would need to achieve to be eligible for the incentive.
- New Energy Efficient Homes Credit — The law extends through 2013 the tax incentive for the production of energy efficient homes. To be eligible, new homes must achieve a 30 percent or 50 percent improvement over heating or cooling energy usage of a comparable residence. The level of efficiency determines the value of the credit.
- Energy Efficient Appliance Credit — The tax credit for U.S.-manufactured, energy-efficient appliances was extended through 2013. This credit includes refrigerators, dishwashers and clothes washers.
Alternative and Renewable Fuels
- Alternative Fuel Vehicle Refueling Property — A two-year extension was provided for the 30 percent investment tax credit for alternative vehicle refueling property. Eligible property includes property used to dispense compressed or liquefied natural gas, E85 (85 percent ethanol blends), hydrogen and other "clean burning fuels."
- Plug-in Electric Motorcycles and Highway Vehicles — The law extends the income tax credit for plug-in motorcycles that are eligible for highway use as well as three-wheeled vehicles. The credit for such vehicles is the lesser of 10 percent or $2,500. Eligibility for "low speed" electric vehicles (e.g. golf carts) was repealed.
- Cellulosic Biofuel Producer Credit — The law extends the current $1.01 per gallon tax credit for the production of cellulosic biofuels through 2013. The law further expands eligibility of the credit to include transportation fuels derived from algae and algae oils.
- Biodiesel and Renewable Diesel Credits — The law extends through 2013 the $1.00 per gallon tax credit for the production of biodiesel and renewable diesel. The law also extends through 2013 the small agri-biodiesel producer credit of 10 cents per gallon.
- Alternative Fuel and Mixture Tax Credits — The law provides an extension through 2013 of the $0.50 per gallon tax credit for the sale and use of alternative fuels and alternative fuel mixtures. Eligible fuels include compressed and liquefied natural gas, P-Series fuel, liquid fuel derived from coal through the Fischer-Tropsch process and compressed or liquefied gas derived from biomass. The law also modified the alternative fuel mixture tax credit to prohibit the refundable portion of this provision.
- Cellulosic Bonus Depreciation — The law extends the current provision that enables cellulosic biofuel production facilities to expense 50 percent of their eligible capital investments in the first year that the facility is placed in service. This provision is also expanded to include algae-based fuel facilities.
General Business Incentives
- Bonus Depreciation — The law extends for one year the current provision that enables companies to expense up to 50 percent of their eligible capital investments in qualifying property placed in service prior to the end of 2013.