IRS Clarifies and Expands Eligibility for the Federal Renewable Energy Production Tax Credit
Following the Congressional extension of the federal renewable energy production tax credit (“PTC”) for wind generation facilities in 2015, the Internal Revenue Service recently issued guidance giving qualified wind generation facilities up to two additional years (or four years after beginning construction) to qualify for the PTC. The notice also clarifies several issues relating to eligibility for the PTC, including the “beginning of construction” and “continuity” requirements.
As a result, wind facilities that begin construction before January 1, 2017, are eligible for the $0.023 per kilowatt hour PTC, while facilities that begin construction on or after January 1, 2017, are eligible for a smaller credit until the PTC sunsets on December 31, 2019. The amount of the smaller credit depends on the year in which the project qualifies for the PTC.
In addition to the extension of the federal PTC, developers in Nebraska face significantly less regulatory barriers in developing wind facilities due to legislation Governor Ricketts signed into law in 2016. Beginning July 2016, a private developer may commence construction on a renewable energy generation facility if, no less than 30 days prior to commencement, the owner provides certain notices to the Nebraska Power Review Board. Additionally, developers are no longer required to execute a power purchase agreement before commencing construction of a wind facility. Baird Holm was heavily involved in the development and passage of this legislation. To see our article on LB 824 for more details, click here.
Wind energy generation facilities in Nebraska remain exempt from personal property tax and are eligible for a refund of all sales and use tax paid on property located at a facility (for example, wind turbines, construction materials, and related materials). Wind facilities are subject to a nameplate capacity tax of $3,518 per megawatt, which is effectively an in-lieu payment of personal property tax. Turbine pads, roads, and supporting buildings are also subject to real property tax.
Guidance on Other Sources of Renewable Energy
Congress also extended the investment tax credit (“ITC”) for solar energy facilities that begin construction before January 1, 2022. The IRS anticipates issuing guidance addressing the extension of the ITC for solar energy facilities at a later date.
The Nebraska Department of Revenue recently issued guidance on the applicability of the nameplate capacity tax to other renewable generation sources—solar, biomass, and landfill gas—and assessment of real property taxes on renewable energy facilities other than wind facilities. This expansion of the nameplate capacity tax benefit arose from LB 424, for which Baird Holm lobbied.