Stimulus Bill Provides Benefits for Renewable Energy Sources
April 23, 2009
By Phillip L. Jelsma
The American Recovery and Reinvestment Act of 2009 (“Act”) includes a number of benefits for renewable energy sources. Some of these provisions are described below.
Extended Placed in Service Dates for Renewable Electric Production Credits.
The Act extends the placed in service date for qualified wind facilities, qualified closed and open biomass, geothermal energy, landfill gas, trash and qualified hydropower facilities, and marine and hydrokinetic renewable energy facilities. In general, an income tax credit is allowed for the production of electricity from certain renewable energy sources including wind, closed biomass, open biomass, geothermal or solar energy, small irrigation power, municipal solar waste (trash), qualified hydropower production and marine and hydrokinetic renewable energy. The base amount of the electrical production credit is 1.5 cents per kilowatt hour. The credit amount for electricity produced from wind, close loop biomass, geothermal or qualified solar energy facilities is 2.1 cents per kilowatt hour and for open-loop biomass, small irrigation power, landfill gas, trash combustion, qualified hydro power and marine and hydrokinetic renewable energy facilities the amount is 1 cent per kilowatt hour. A taxpayer may generally take the credit during a 10-year period commencing on the date in which the qualified facility is placed in service.
The Act extends the qualified placed in service date three years through December 31, 2010. The placed in service date for closed and open end biomass, geothermal, landfilled gas, trash, qualified electric power facilities is extended three years through December 31, 2013.
Election of Investment Tax Credits in Lieu of Production Credits.
In addition, the Act permits a 30% investment tax credit for qualified property placed in service in 2009 and 2010 in lieu of the production tax credit. The Act also eliminates the $4,000 credit applicable to qualified small energy property. The Act also eliminates the rule that would have reduced the basis of the property for purposes of claiming the energy credit if the property was financed in whole or in part subsidized energy financing or proceeds of a private activity bond. The investment tax credit is recaptured if the project is sold within 5 years and recapture can apply if a partner in a partnership or member of an LLC that owns a facility reduces its interest by more than one-third.
Grants for Investments Specified to Energy Property.
The IRS is authorized to provide a grant to each person who places in service specified energy property that is either (1) an electrical production facility otherwise eligible for the renewable electricity production credit under Section 45 or (2) qualifying property otherwise eligible for the energy investment credit under Code Section 48. Applications for grants must be received by the Secretary of the Treasury by October 1, 2011. Qualified property generally includes wind facility, close looped biomass facility, open looped biomass facility, geothermal, electric facilities, landfill gas facilities, trash combusting facilities, qualified hydropower facilities, marine and hydrokinetic renewable energy facilities, qualified fuel cell property, solar property, qualified small wind energy property, geothermal property, qualified micro-turbine property, combined heat and power system property and geothermal heat property. If the developer of the renewable energy product receives a grant, then the project is not eligible for the production tax credit or the investment tax credit.
Residential Energy Property Credit.
The residential energy property credit is extended to include certain expenditures for energy property placed in service during 2010. The credit amount is 30% of the sum of expenditures for qualified energy efficiency improvements (building envelope components) and qualified energy property (furnaces, certain fans, central air conditioning, water heaters, certain heat pumps and biomass stoves). The credit is limited to $1,500 for tax years 2009 and 2010. Improvements which are entitled to the credit include the following: (1) qualified energy efficiency improvements such as exterior windows, skylight and doors that have a U-factor and solar heat gain coefficient of .3 or less; (2) insulation installed in or on a dwelling unit designed to reduce heat loss or gain of the dwelling unit and meets the criteria established under the 2009 International Energy Conservation Code; (3) qualified energy property with a minimum annual fuel utilization efficiency of at least 90, as required for any natural gas, propane or hot oil water boiler or oil furnace; (4) an energy efficient building property, an electric heat pump that achieves a highest efficiency tier established by the Consortium for Energy Efficiency (“CEE”), a central air conditioning that achieves the highest efficiency tier established by the CEE, or a natural gas, propane or oil water heater having a minimum energy factor of .82 or a thermal efficiency minimum of 90%.
Extension and Modification of Credit for Non-Business Energy Property.
Current law provides a non-refundable personal credit equal to 30% of the eligible cost of solar water heaters, solar electrical equipment, fuel cells, energy property and qualified geothermal heat pumps installed on or in connection with a dwelling unit in the United States and used by residents of the taxpayer. The Act eliminates the caps on the credit limits of solar hot water heaters, wind turbines, geothermal heat pumps.
Increase in Credit for Alternative Refueling Property.
Under current law, a taxpayer may claim a 30% credit for cost of installing qualified clean fuel, vehicle refueling property used in a trade or business or installed in the principal residence of the taxpayer. Under prior law, the credit may not exceed $30,000 per taxable year in location or in the case of qualified refueling property used in a trade or business. $1,000 per taxable year per location. The Act increases the maximum amount of credit to $200,000 for qualified hydrogen refueling property and $50,000 for qualified refueling property. For nonbusiness property, the maximum credit is increased to $2,000 and the credit rate is increased from 30% to 50%, except in the case of hydrogen refueling property.
Parity for Qualified Transportation.
The exclusion amount for vanpool benefits and transit passes after February 17, 2008 is increased from $120 a month to $230 a month.
Tax Credit for Advance Energy Facilities.
The Act allows a credit equal to 30% of the qualified investment in advanced energy property. Advanced energy property includes a project that equips, expands or establishes a manufacturing facility for the production of: (1) property used to produce energy from sun, wind or geothermal deposits or other renewable sources; (2) fuel cells, microturbines or an energy storage system for use with electric or hybrid electric motor vehicles; (3) electric grids to support transmission sources of renewable energy, including the storage of such energy; (4) property designed to capture and sequester carbon dioxide emissions; (5) property designed to refine or blend renewable fuels or to produce energy conservation technologies (including energy conserving lighting technologies and smart grid technologies; (6) new qualified plug-in electric drive motor vehicles, qualified plug-in electric vehicles or components which are designed specifically for use in such vehicles, including electric motors, generators, and power control units; or (7) other advanced energy property designed to reduce green house gas emissions determined by the Secretary of the Treasury.
Tax Credit for Plug-In Electric Vehicles.
The Act creates new credit for the cost of acquiring a two-wheel, three-wheel or low-speed plug in electric vehicle. The credit is 10% of the cost of acquiring a qualified plug-in electric vehicle. The credit is capped at $2,500. This includes any 2-wheel or 3-wheel vehicle or low-speed vehicle defined under the federal motor vehicle safety standards. A low-speed vehicle must have 4 wheels, a minimum speed attainable of more than 20 miles per hour and a maximum speed of 25 miles per hour and a gross weight of less than 3,000 lbs. The credit is not allowed for a vehicle used predominantly outside the United States.
Tax Credit for Plug-in Electric Drive Motor Vehicles Enhanced.
The Act increases the credit for qualified plug-in electric drive motor vehicles equal to a base amount of $2,500, plus $415 for a vehicle drawing proportional energy from a battery at least 5 kilowatt hours of capacity, plus $417 for each additional kilowatt hour of capacity in excess of 5 kilowatt hours, up to a maximum of 5,000 hours. To qualify, the motor vehicle must have a gross vehicle weight of under 14,000 lbs and be self-propelled for transporting persons or properties on streets or highways and be propelled by electric motor drawing electricity from a battery having a capacity of at least 4 kilowatt hours that can be recharged from an external source.
Tax Credit for Converting Motor Vehicles.
The Act provides a credit for converting an existing motor vehicle into a qualified plugged-in electric drive motor vehicle equal to 10% of the costs of conversion with a maximum credit of $4,000. The credit must be claimed for property placed in service after February 17, 2009. A qualified plug-in electric drive motor vehicle is one that draws propulsion from a traction battery with at least 4 kilowatt hours in capacity, uses an off-source of energy to recharge, and in the case of a passenger vehicle like a truck, has a gross vehicle weight of not more than 8,500 lbs and has received a certificate if conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California Low Emission Vehicle Standard.