The production tax credit (PTC) was enacted as part of the Energy Policy Act of 1992, and has been extended several times. The PTC is an income tax credit based on production of electricity from certain renewable energy sources. Eligible taxpayers receive a credit at an inflation-adjusted rate per kilowatt-hour of electricity generated from qualified resources and sold to unrelated persons. The credit is available for 10 years, beginning when the facility is placed in service.
For calendar year 2012, the Internal Revenue Service calculated the credit for the sale of electricity produced from wind, closed-loop biomass, geothermal energy, and solar energy at 2.2 cents per kilowatt hour and the credit for the sale of electricity produced from open-loop biomass facilities, small irrigation power facilities, landfill gas facilities, trash combustion facilities, qualified hydropower facilities, marine and hydrokinetic energy facilities at 1.1 cents per kilowatt hour.
Section 1102 of the American Recovery and Reinvestment Act of 2009 (ARRA) provided taxpayers with the right to elect to claim a 30 percent investment tax credit (ITC) in lieu of the PTC for wind, closed-loop biomass, open-loop biomass, geothermal, municipal solid waste , hydropower and marine and hydrokinetic energy facilities. Unlike the PTC, which is claimed over the 10 years after the facility is placed in service, the ITC is claimed in the year the facility is placed in service. Under the ARRA, the ITC and PTC were made available for wind energy projects placed in service before January 1, 2013, and other projects placed in service before January 1, 2014.
With respect to renewable energy and alternative fuels, ATRA extends and modifies several important benefits, including:
- The credit for cellulosic biofuel production and bonus depreciation for cellulosic biofuel plant property were both extended through 2013 and expanded to include algae; (The U.S. Court of Appeals for the D.C. Circuit has vacated the cellulosic biofuel portion of EPA’s 2012 Renewable Fuels Standard).
- The expired credits and payments for biodiesel and renewable diesel were resurrected, with expiration dates extended two years, to the end of 2013, as was the credit for property used to refuel alternative fuel vehicles;
- The credit for plug-in electric vehicles, which previously was restricted to vehicles with “at least 4 wheels,” was expanded to include plug-in electric vehicles with 2 or 3 wheels.[