Renewable energy production tax credit renewed in tax bill

By Anna Simet | January 03, 2013

Besides an extension of current Farm Bill energy title programs sans mandatory program funding, among several biofuels industry-pertinent tax credits extended in the American Taxpayer Relief Act of 2012 are provisions that will allow biomass facilities to continue to qualify for renewable energy production tax credits (PTC).

The PTC has been a legislative priority for the Biomass Power Association, which President and CEO Bob Cleaves described the extension of as “a small accommodation that costs the government very little in additional revenue, but will make a tremendous difference for qualifying facilities.”

In early December, Biomass Power Association, along with the National Hydropower Association, Geothermal Energy Association and Energy Recovery Council sent a letter to the Administration on the importance of the production tax credits, urging for their renewal.

The tax bill, which was signed by Obama late Wednesday, includes language that alters the date by which a renewable energy facility can qualify for a PTC; instead of having to begin producing energy by a “placed-in-service” date to qualify, new facilities can become eligible for the credits based on the date they begin construction. Without these amendments, according to the Biomass Power Association, the current placed-in-service deadline of Dec. 31, 2013, would have made it nearly impossible for any new open-loop facility to qualify.

For wind, geothermal, landfill gas, municipal solid waste, marine and hydrokinetic facilities and certain closed-loop biomass, open-loop biomass and qualified hydropower facilities, the PTC will apply if construction begins before Jan. 1 of next year, rather than if the facilities are placed in service before that date, pointed out Stoel Rives’ energy development team. In a legislative overview of the bill, Stoel noted that the act does not specify what it means to begin construction for this purpose, although there are analogous authorities that have been adopted for other purposes that may be applied. A facility to which this extension applies may qualify for the PTC even if it is not placed in service before Jan. 1, 2014.

Law firm Milbank described the PTC as the most important feature of the tax bill, and predicted that as a result of the change of place-in-service date requirement, there may be “a big swoop of financings in 2013 to jump-start projects that may have been put on the shelf pending the outcome of the tax bill.”

The American Council On Renewable Energy, which labeled the PTC extension as a significant accomplishment, said that it expects to see slower first quarter growth in 2013, due to the long-standing 2012 uncertainty about the PTC extension, but now that now that policy is clear, strong growth will follow thereafter.