First came the House of Representatives’ American Recovery and Reinvestment Tax Act of 2009 (H.R. 598) as part of the economic stimulus plan on 16 January.
The House bill includes a number of incentive provisions for renewable energy projects, including:
- extending of the production tax credit (PTC) sunset date;
- permitting tax payers to elect to claim the investment tax credit (ITC) in lieu of the PTC for certain projects;
- permitting tax payers to receive grants in lieu of claiming the ITC for certain projects; and
- extending bonus depreciation through 2009.
The bill would extend the placed-in-service sunset date for wind projects from 1 January 2010 to 1 January 2013. It would also extend dates for closed- and open-loop biomass, geothermal, landfill gas, waste, qualified hydropower from 1 January 2011, and marine and hydrokinetic renewable energy facilities from 1 January 2012, to 1 January 2014.
The bill would permit tax payers to elect to claim the ITC in lieu of the PTC for wind, closed- and open-loop biomass, geothermal, landfill gas, waste, qualified hydropower, and marine and hydrokinetic renewable energy facilities placed in service in 2009 or 2010. The amount of the ITC generally would be 30% of qualifying costs.
It would also permit tax payers to receive grants from the Department of Energy (DoE) in lieu of claiming the ITC and the PTC with respect to certain projects placed in service in 2009 and 2010 that otherwise would qualify for the ITC. It would be applicable to those allowed to claim the ITC in lieu of the PTC, but not for federal, state or local government, or tax-exempt entities. The grants would function similarly to a refundable tax credit.
Bonus depreciation would be extended to property placed in service in 2009. An owner of property qualifying for bonus depreciation would be entitled to deduct 50% of the adjusted basis of the property for 2009. The remaining 50% of the adjusted basis of the property would be depreciated over the ordinary tax depreciation schedule.
The Senate proposal
On 23 January, the Chairman of the Senate Finance Committee, Max Baucus, released his proposal for the economic stimulus bill, also called the American Recovery and Reinvestment Tax Act of 2009.
It contains the same proposals as the House of Representatives’ H.R. 598, minus permitting tax payers to receive cash grants in lieu of the ITC for certain projects. The Chairman’s proposal does, however, also contain energy-related provisions not included in the House Bill.
The proposal would modify the rules governing the general business credit, which includes the ITC and PTC as components. It would allow carryback of the credit from 2008 and 2009 for five years instead of the one-year carryback allowed under current law. The Senate proposal would also allow the general business credit carried over to, and carried back from, taxable years ending in 2008 and 2009 to offset 100% of a tax payer’s tax liability, and would expand its use against AMT liability.
It would also create a new 30% credit for investment in certain property used in a ‘qualified advanced energy manufacturing project.’ Qualifying projects would include any projects re-equipping, expanding or establishing a manufacturing facility for the production of property designed to:
- produce energy from the sun, wind or geothermal deposits;
- manufacture for fuel cells, micro turbines, or energy storage facilities;
- manufacture energy grids to support transmission of intermittent sources of renewable energy; or
- manufacture equipment for carbon capture or sequestration.
It is likely that the Chairman’s proposal will be modified as it makes its way through the Finance Committee and the Senate. Congress is targeting early February for final enactment.