Federal Tax

  • March 28, 2022

Slimmed Down Energy Tax and Social Spending Package Targeted for Vote Before August

Clean Energy, Development Incentives, Renewable Energy, Solar Power, Tax, Tax Credits
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A slimmed down version of the Build Back Better bill is reportedly in discussions between the Biden Administration and Senator Joe Manchin (D-W.Va). The Build Back Better bill has been stalled in Congress due to opposition by Senator Manchin. The new discussions come as welcomed news as the wind production tax credit is set to expire this year, and the solar investment tax credit continues to phase down. Current law also does not include tax incentives for stand-alone energy storage projects.  Experts generally agree that prices for renewable energy development will increase absent legislative action.

According to the Washington Post, Senator Manchin has said that he would seek to bring the package to a vote prior to the August recess. Following the recess it becomes more difficult to move major legislation in advance of midterm elections

The bill is said to include an extension of the solar investment tax credits and wind production tax credits along with other clean energy provisions contained in the

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  • June 26, 2018

IRS Issues Investment Tax Credit Guidance for Solar Projects

Development Incentives, Renewable Energy, Solar Power, Tax Credits
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On Friday, June 22, 2018, the Internal Revenue Service issued guidance clarifying when construction commences for purposes of qualifying for the investment tax credit (“ITC”) for solar photovoltaic facilities. The ITC is a dollar-for-dollar reduction in federal income tax due by the taxpayer equal to a specified percentage of the eligible basis (generally the cost) of an energy project originally placed in service by the taxpayer.  The percentage of the ITC depends on when construction begins on the eligible project, and hence the guidance received by the IRS is critical.

As a result of the PATH Act, the ITC percentage for solar facilities, which traditionally has been 30 percent of the eligible basis, phases out as follows:

  • 30% for projects that begin construction by the end of 2019
  • 26% for projects that begin construction in 2020
  • 22% for projects that begin construction in 2021
  • 10% for projects that begin construction in 2022 or after

The

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  • March 28, 2018

Tax Reform’s Changes to the Treatment of Non-Shareholder Contributions to Capital

Development Incentives, Financing, Tax
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The 2017 tax reform act amended Section 118 of the Internal Revenue Code, to dramatically reduce the ability of a corporation to exclude from its gross income grants that the corporation receives from federal, state, or local governments or from civic groups to incentivize corporate investments. Many energy infrastructure projects benefit from exactly these kinds of incentives. Now and in the future, project developers need to be aware of and understand these changes, so that they can work to minimize the adverse consequences of the tax reform act’s amendment.

Before Tax Reform. Before the passage of the tax reform act, Section 118 provided that a corporation’s gross income did not include any contribution to the capital of the corporation. The regulations that accompanied this section explained that this exclusion applied to contributions received from persons other than shareholders (i.e., so-called “non-shareholder contributions to capital”). Thus, for example, if the government or a civic group contributed property to a corporation in order to

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  • March 15, 2018

Carbon Dioxide Capture Credit Enhanced

Biomass, Clean Energy, Development Incentives, Financing, Tax, Tax Credits
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The Bipartisan Budget Act of 2018 extended and enhanced a tax credit that incentivized carbon dioxide capture, storage, and utilization.

The enhanced credit, known as the “45Q tax credit,” offers a tax credit of up to $50 per ton for carbon oxide (not just dioxide) that is sequestered and up to $35 per ton for carbon oxide that is reutilized.  The credit amounts began at $22.66 per ton of sequestered carbon oxide and $12.83 per ton of reutilized carbon oxide in 2017, and are set to increase linearly until hitting $50 and $35 per ton of sequestered and reutilized carbon oxide, respectively, in 2026.  Businesses have six years to begin qualifying projects and have twelve years from the time they begin operations to take advantage of the credits.  For sequestered carbon oxide to qualify for the credit, it must be:

  • captured from an industrial source,
  • amounts that would otherwise be released into the atmosphere as an industrial emission,
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  • March 09, 2018

A New Incentive for Energy Infrastructure?

Development Incentives, Financing, Renewable Energy, Tax, Tax Credits
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The Tax Cuts and Jobs Act of 2017 (better known as the tax reform bill) created a significant—and little-discussed—economic development program that encourages long-term investments in so-called “Opportunity Zones” by offering temporary tax deferral for capital gains re-invested in the Opportunity Zone and a permanent exclusion for gains from the Opportunity Zone investment.  This program has the potential to be one of the most significant economic development programs in the country and has broad applicability to a variety of industries.  Any person or business seeking to invest capital, raise capital, or that will recognize significant capital gains in the next few years should be aware of the benefits of this program.

What are Opportunity Zones?  Opportunity Zones are low-income areas (determined on a census tract basis), which are designated by the governor of each state as Opportunity Zones.  Each governor must designate his or her state’s Opportunity Zones from the pool of eligible low-income census tracts and certain contiguous tracts.[1] 

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