Last week, this Newsletter discussed the environmental and sustainability provisions of the appropriations portion of this economic stimulus package. This week, we focus on tax credits, bonds and grants available under the new law.
Numerous tax incentive and funding provisions are applicable to the sustainability and environmental areas, for both individuals and businesses. For example, an Advanced Energy Investment Credit establishes a 30% investment tax credit for facilities engaged in the manufacture of advanced energy property, including technology for the production of renewable energy, energy storage, energy conservation, efficient transmission and distribution of electricity and carbon capture sequestration.
Additionally, companies engaged in electricity-production activities are provided the opportunity to claim the Investment Tax Credit in lieu of the currently-available Production Tax Credit under the Act. Under existing laws, facilities producing electricity from solar power are eligible for a 30% investment tax credit in the year the facility is placed in service; yet, only a production tax credit was available for facilities producing electricity from wind, biomass, geothermal, hydropower and other renewable sources. The Act modifies this law so that qualified renewable-energy projects can claim the investment tax credit in lieu of the production tax credit.
Additional tax incentives under the Act include:
1. Extension and modification of the Renewable Energy Production Tax Credit;
2. Repeal of the subsidized energy financing limitation on the investment tax credit (which previously required a reduction in the investment tax credit if the property was financed with industrial development bonds or any other government-subsidized financing program);
3. Removal of the dollar cap on energy credits, so that eligible properties (small wind energy property, qualified solar water heating property and qualified geothermal heat pumps) can claim a 30% tax credit not limited by a dollar amount;
4. Increased allocations of new clean renewable energy bonds and qualified energy conservation bonds ($1.6 billion of new clean renewable energy bonds to finance facilities generating electricity from wind, open and/or closed loop biomass, geothermal, small irrigation, hydropower, landfill gas, marine renewable, and trash combustion faculties; and monies in the form of qualified energy conservation bonds to finance State, municipal and tribal government programs designed to reduce greenhouse gas emissions);
6. Extension of tax credits for improvements to energy-efficient existing homes;
7. Tax credits to businesses that install alternative fuel pumps;
8. Modification and increase in tax credits for qualified plug-in electric drive vehicles, which is allowed against the alternative minimum tax;
8. Tax credits for carbon dioxide capture, so long as the process meets certain permanent sequestration requirements; and
9. Transit benefits for employers to employees (including an increased exclusion amount for commuter transit benefits and transit passes).
Another major effect of the Act is to give tax incentive for banks to purchase–or fund as loans–bonds issued in 2009 and 2010. Jim Monacell, partner in the Corporate Section of SGR and whose practice is concentrated in the areas of bonds, public law, public finance and project finance, discussed the effects of the Stimulus on governmental and private activity bonds, respectively. To view them click here.
Many more tax credits, as well as other forms of relief, are contained within this stimulus package. Please get in touch with your SGR contact, or any member of the Sustainability Practice Group, to discuss any specific questions, or how the American Recovery and Reinvestment Act could affect you and your business.