october 3, 2008

CONGRESS INCLUDES ENERGY PROVISIONS IN THE EMERGENCY ECONOMIC STABILIZATION ACT

Congress has passed the Emergency Economic Stabilization Act, which includes numerous energy tax credits and other energy tax provisions. This legislation affects both businesses and individuals.

The energy provisions in this legislation include:

Energy Tax Credits: The tax credits for investment in solar energy, fuel cell and microturbine property are extended through the end of 2016, and the cap on the credit for fuel cells is increased from $500 to $1,500 per half kilowatt of capacity. The 30 percent credit is expanded to include small wind property. Public utilities are permitted to take the investment credit. A new 10 percent credit is provided for combined heat and power systems and geothermal pumps. These credits are available to offset the Alternative Minimum Tax.

Renewable Energy Production Tax Credit: The placed-in-service dates for wind and refined coal facilities are extended one year to December 31, 2009. The placed-in-service date for certain other qualifying facilities, such as closed-loop and open-loop biomass, geothermal, small irrigation, hydropower, landfill gas and waste-to-energy facilities, is extended three years to December 31, 2010. This credit also applies to a new category of facilities that generate electricity from marine renewables, such as waves and tides, which are placed-in-service before January 1, 2012.

Modification of the Deduction for Domestic Production of Oil
and Gas: The deduction for domestic production activities relating to oil, gas, and primary products produced from each under IRC section 199 is frozen at 6 percent of gross receipts from disposition of these products.

Publicly Traded Partnership Income from Alternative Fuels:
A publicly traded partnership may treat income derived from the transportation or storage of certain alternative fuels as qualifying income for purposes of testing whether it will be taxed as a corporation.

Residential Energy-Efficient Property Credit: The tax credit for residential solar property is extended through 2016, and the cap on the annual credit on solar electric investments is eliminated. The credit is also expanded to cover expenditures for residential small wind equipment (capped at $4,000) and geothermal heat pumps (capped at $2,000). These credits are available to offset the Alternative Minimum Tax.

Plug-in Electric Drive Vehicle Credit: A credit is provided for each qualified plug-in electric drive vehicle placed in service during the taxable year. The base amount of the credit is $2,500 and is increased by $417 for each kilowatt hour of battery capacity in excess of 4 kilowatt hours. The cap on the credit ranges from $7,500 to $15,000 based on the gross weight rating of the vehicle. This credit applies to vehicles purchased through 2014 and is available to offset the Alternative Minimum Tax.

Alternative Refueling Property Credit: The 30 percent alternative refueling property credit for businesses installing alternative refueling property is extended through 2010. The credit is expanded to include electric vehicle recharging property. The December 31, 2014 termination date for hydrogen related property remains unchanged.

Energy Efficiency Credits and Deductions: The energy-efficient commercial buildings deduction is extended five years, through 2013. Accelerated depreciation is provided for smart electric meters and smart electric grid systems, cutting the cost-recovery time in half, to 10 years.