December 8, 2021

Volume XI, Number 342

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December 07, 2021

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December 06, 2021

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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.

*Placed in service deadline

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.

© 2021 BARNES & THORNBURG LLPNational Law Review, Volume VII, Number 111
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About this Author

William Ewing Energy Industry Tax Attorney
Partner

Bill Ewing advises and represents clients in a wide range of transactions with a particular focus on the energy industry. With over 25 years of experience, Bill understands the art of the deal and knows what it takes to close important transactions successfully in the most tax-advantageous manner — all while maximizing his client’s opportunity for success.

Co-chair of the firm’s Renewable Energy group, Bill represents clients in the energy industry in a variety of transactions, including partnership investments, sale/leaseback transactions, financings, acquisitions and sales of...

404-264-4050
James Jim Browne Tax Attorney
Partner

Jim Browne advises on the U.S. income tax aspects of domestic and international business transactions and matters involving federal, state and foreign taxes. A CPA and veteran tax law counselor in his fourth decade of practice, Jim is highly experienced at taking complex tax challenges and simplifying them into practical and actionable business solutions.

Jim’s ability to solve the puzzle of even the most complicated tax challenges has allowed him to assist businesses in a diverse range of industries, including healthcare, manufacturing, energy, public utilities, real estate and...

214-258-4133
Ralph Dudziak Corporate & Finance Attorney
Partner

Trusted adviser and legal counselor Ralph Dudziak advises on financing and other corporate transactions, with an emphasis on the renewable energy sector. Ralph cares deeply about the clients he serves and the results he cultivates and achieves.

Ralph’s experience includes project finance and development, renewable energy project construction and term lending, tax equity financings, back-leverage financings, additional forms of secured lending, credit warehouses and securitizations, private placements and leasing. He also represents a variety of other business clients in myriad...

312-214-5618
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