January 2, Congress passed the American Taxpayer Relief Act of 2012, which averted the so-called “fiscal cliff.” President Barack Obama signed the act into law the morning of January 3, according to the White House.
The act includes a number of energy-related tax provisions, including a one-year extension and modification of the production tax credit under Section 45 of the Internal Revenue Code (the PTC) for certain renewable energy facilities. The energy-related provisions in the act include:
PTC Extensions and Modifications — The PTC is extended and modified for certain types of facilities. These extensions and modifications include:
In the case of wind, geothermal, landfill gas, trash, marine and hydrokinetic facilities and certain closed-loop biomass, open-loop biomass and qualified hydropower facilities, the PTC will apply if construction begins before January 1, 2014 (rather than if the facilities are placed in service before January 1, 2014).
The act does not specify what it means to begin construction for this purpose, although there are analogous authorities that have been adopted for other purposes that may be applied. Note, however, that a facility to which this extension applies may qualify for the PTC even if it is not placed in service before January 1, 2014.
The PTC for municipal solid waste facilities is modified to exclude from the definition of municipal solid waste certain paper that is commonly recycled and that has been segregated from other solid waste.
The election to claim the investment tax credit rather than the PTC for certain facilities is extended to apply to certain facilities with respect to which construction begins prior to January 1, 2014.
The PTC for Indian coal production facilities is extended for one year, to apply to sales of qualified production during the eight-year period (rather than the previous seven-year period) beginning on January 1, 2006.
Fuel Incentives — The act extends and modifies the cellulosic biofuel producer credit and certain incentives for biodiesel and renewable diesel. These provisions include:
The cellulosic biofuel producer credit is redesignated “second generation biofuel producer credit” and is expanded to apply to liquid fuel derived from cultivated algae, cyanobacteria or lemna and extended to apply to qualified fuel production before January 1, 2014.
The biodiesel and renewable diesel income tax credit is retroactively extended to qualified fuels sold or used on or before December 31, 2013.
The excise tax credit for biodiesel mixtures is extended to qualified fuels sold or used on or before December 31, 2013.
The excise tax credit for alternative fuels is retroactively extended for two years, to apply to sales or use of alternative fuels or alternative fuel mixtures on or before December 31, 2013.
The additional depreciation deduction allowance for cellulosic biofuel plant property is extended for one year, to apply to property placed in service before January 1, 2014, and modified consistent with the expansion of the former cellulosic biofuel producer credit to apply to “second generation biofuel” facilities (i.e., to include fuels derived from algae).
Other incentives — The act extends and modifies a number of other energy-related federal income tax incentives. These include:
Extension of 50 percent bonus depreciation for property placed in service before January 1, 2014.
The nonbusiness credit for energy-efficient existing homes is retroactively extended for two years through 2013.
The alternative fuel vehicle refueling credit is retroactively extended for two years through 2013.
The credit for two- or three-wheeled plug-in electric vehicles is modified and retroactively extended for two years through 2013.
The credits for energy-efficient new homes and energy-efficient appliances are retroactively extended for two years through 2013.
The special accounting rule applicable to sales or dispositions of certain electric transmission facilities to implement FERC or state electric restructuring policies is retroactively extended to apply to sales or dispositions occurring prior to January 1, 2014.