December 10, 2018

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Is Guidance on ITC-Qualified Storage Coming?

State level energy storage incentives have been proliferating in recent months, but it is still not clear exactly when the federal investment tax credit (“ITC”) is available in respect of storage assets. While certain aspects are well known, the industry has been waiting for several years for additional guidance from Treasury on this matter. On September 20, Senators Tim Scott (R-SC) and Michael Bennet (D-Co) sent a letter to Treasury Secretary Mnuchin nudging him to provide that guidance, particularly in regard to whether storage assets installed at operating ITC-eligible facilities qualify for the ITC.

Many readers will recall that earlier this year the Internal Revenue Service released a Private Letter Ruling concluding that the Code Section 25D credit–which bears striking similarities to the ITC–is available in respect of a battery installed after residential solar panels became operational. In our blog post and Energy Storage Handbook section describing that ruling, we noted that similar logic supports an argument that storage assets installed at an operating ITC-eligible facility should also qualify for the ITC. There are also arguments that the ITC should be available in respect of storage assets installed at a facility that produces power that qualifies for the production tax credit, at least if that facility would also qualify for the ITC.

Although storage has caught on or is taking off in many locations, a green light from Treasury regarding ITC qualification could help the industry and lawmakers accomplish many important and increasingly urgent goals, from flattening the duck curve(s) to increasing reliability in rural areas. We look forward to additional action by Treasury on this matter and hope to share it in the new version of our Energy Storage Handbook, which will be released soon.

Copyright 2018 K & L Gates

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About this Author

Elizabeth Crouse, KL Gates Law Firm, Tax Attorney
Associate

Elizabeth Crouse is an associate in the tax group of the Seattle office. She provides business-focused solutions for U.S. federal, state, and international tax matters pertinent to mergers and acquisitions, corporate divestitures, internal reorganizations, cross-border transactions, private equity and venture capital fund creation and investments, and start-up companies.

Ms. Crouse is also experienced with U.S. federal and state alternative energy tax incentive programs (including the investment tax credit, production tax credit, and 1603 cash...

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