IRS Releases 2017 Annual Inflation Factor and Reference Prices for Section 45 Production Tax Credits
The IRS recently released the inflation adjustment factor and reference prices for the 2017 calendar year, which are necessary for calculating the Section 45 production tax credits. Based on the 2017 inflation factor of 1.5792, there is an increase for 2017 in the tax credit amounts for electricity generated from wind, closed loop biomass and geothermal. The 2017 tax credit amounts for renewable energy production and refined coal production are set forth below.
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2017 Reference Prices; No Tax Credit Phase-out
If the reference price for a particular energy source, as published by the IRS, exceeds a certain designated level, then the Section 45 production tax credit will be reduced or completely phased out. Based on the 2017 reference prices, there will be no phase-out for any of the renewable energy sources or refined coal production activities for the 2017 calendar year.
The 2017 reference price for wind is 4.55 cents/kilowatt hour. Since this reference price does not exceed 12.63 cents/kilowatt hour (i.e., 8 cents multiplied by the 1.5792 inflation factor for 2017), there will be no phase-out during 2017 of tax credits realized from the sale of electricity produced from wind energy. Similarly, the 2017 reference price for refined coal is $51.09/ton. Since this reference price does not exceed $85.64/ton (i.e., $31.90 multiplied by 1.5792 inflation factor and 1.7), there will be no phase-out during 2017 for tax credits realized from the sale of refined coal.
The IRS still has not determined reference prices for electricity produced from closed-loop biomass, open-loop biomass, geothermal, municipal solid waste, qualified hydropower and marine and hydrokinetic energy. Accordingly, there will be no phase-out during 2017 for tax credits realized from these renewable sources.