December 10, 2018

December 10, 2018

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Breaking News: Congress Set to Vote On Spending Bill Including 5 Year Extension of Investment Tax Credit and Production Tax Credit

Congressional leaders reached a much anticipated bi-partisan agreement in an omnibus appropriations bill that includes an extension (with phasedowns) of the section 48 investment tax credit (ITC) for solar energy property and section 45 renewable electricity production tax credit (PTC) for wind. (The 2000+ page bill is available here.) A separate tax extenders bill (available here) negotiated in parallel with the omnibus appropriations bill includes a straight 2-year extension with no phase downs for other renewable energy facilities eligible for the section 45 credit including geothermal, biomass, landfill gas and certain qualified hydropower and marine hydrokinetic energy projects. The tax extenders bill also extends bonus depreciation for 5 years at 50% for the first 3 years and phased down to 40% in 2018 and 30% in 2019.

The tentative deal was brokered in exchange for lifting the ban on crude exports, a policy the oil and gas industry has been lobbying Congress to repeal ever since it was put in place in the 1970s. The bill is part of a roughly $1 trillion spending package to fund the government through September 2016, so there is plenty of momentum that this deal makes its way through Congress.

ITC

The bill provides that the ITC will stay at 30% through 2019 and then is gradually phased down by 2022 for projects that begin construction in 2020 according to the following schedule:

2017 through 2019 – 30%
2020 – 26%
2021 – 22%
2022 (and beyond) – 10%

The bill includes a January 1, 2024 placed in service deadline that reduces the ITC to 10% for any project which begins construction by January 1, 2022 but is not placed in service before January 1, 2024.
PTC

The bill provides that the 2¢/kWh PTC for wind will be extended to 2020, and phased out for projects beginning construction in 2017 according to the following schedule:

2017 – 80% (of present value)
2018 – 60% (of present value)
2019 – 40% (of present value)

The House and Senate will vote on the tax extenders bill this Thursday followed by the omnibus bill on Friday before Congress adjourns for the holidays. Stay tuned to our blog for more details as these bills work their way through Congress and hopefully to President Obama for his signature.

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About this Author

David B. Weisblat, Foley Lardner, Transactional Tax Lawyer, Project Finance Attorney,
Of Counsel

David Weisblat is of counsel and a transactional tax lawyer with Foley & Lardner LLP focusing on federal and state tax issues arising in representing financial institutions, developers, utilities and other participants in energy, project finance and leveraged lease transactions. Mr. Weisblat regularly advises clients on renewable energy projects, including solar, wind and biomass projects. He is familiar with current tax equity structures with an emphasis on sale-leaseback and partnership-flip transactions and advises on utility, commercial and residential projects...

202.295.4176
John A. Eliason, Foley Lardner, Tax Lawyer, Energy Industry Attorney
Partner

John A. Eliason is a partner and business lawyer at Foley & Lardner LLP. He provides tax, legal, and business advice to financial institutions, equity investors, manufacturers, and project developers in the energy sector and is co-chair of the firm’s Energy Industry Team.

Mr. Eliason regularly represents clients participating in wind, solar, and other renewable energy transactions that rely on tax and other federal and state incentives such as investment tax credits, production tax credits, bonus depreciation, and other government incentive programs. He helps clients maximize benefits available through the use of sale-leasebacks, flip partnerships, and other tax-driven structures. Mr. Eliason also regularly represents energy clients in front of both the Department of Treasury and the Internal Revenue Service.

202-295-4100
Kurt R. Rempe, Foley Lardner, Energy, Tax Lawyer, Pipeline Industry
Associate

Kurt Rempe is an associate and business lawyer with Foley & Larder LLP where he focuses on energy and tax law. His experience includes representing clients in tax equity investments in renewable energy projects; and regulatory matters related to the electric, natural gas and oil pipeline industry. Mr. Rempe has electric experience in transmission service and interconnection agreements, power purchase agreements, open access requirements, market-based rates, qualifying facility certification, reliability rules, sales and acquisitions of electric generation assets,...

202.672.5326