• Stimulus Package Provides Wide Range of Energy Incentives
  • April 22, 2009 | Authors: J. Leigh Griffith; Shane Morris
  • Law Firm: Waller Lansden Dortch & Davis, LLP - Nashville Office
  • The American Recovery and Tax Reinvestment Act of 2009 (the “Act”) was passed by Congress on Friday, Feb. 13, 2009. The Act contains many provisions designed to encourage investment in “green” technologies. A summary of some of those provisions follows.
    Plug-in Vehicle Tax Credit. The existing tax credit passed late in 2008 is increased and permitted to be used against the AMT. The credit will apply not only to originally manufactured plug in vehicles but to plug-in electric drive conversion kits. Estimated to cost $2 billion over ten years.

    Energy Tax Credit for Individuals is Uncapped. The existing 30 percent tax credit for qualified solar water heating property, qualified small wind energy property and qualified geothermal heat pumps becomes unlimited for periods after Dec. 31, 2008. The estimated 10- year cost for the individual and business small wind energy property is $872 million.

    Extension and Increase of Existing Home Energy-Efficient Improvements Tax Credit. Present law has a 10 percent tax credit for various different qualified energy efficient improvements with each capped at specific dollar amounts. The Act increases the credit to 30 percent for 2009 and 2010 for such improvements, eliminates the property by property caps, imposes an aggregate cap of $1,500 for all qualifying property, and updates what property qualifies. This is estimated to cost $2 billion over 10 years.

    Investment Tax Credit. The Act establishes a new 30 percent investment tax credit for the manufacture of advanced energy property. The credits, however, are available only for projects certified by the Secretary of the Treasury through a competitive bidding process, and up to $2.3 billion of credits may be allocated. Advanced energy property includes technology for the production of renewable energy, energy storage, energy conservation, efficient transmission and distribution of electricity, and carbon capture and sequestration. The estimated cost is $1.6 billion over 10 years.

    Long-Term Extension and Modification of Renewable Energy Production Tax Credit. Certain wind facilities would qualify for the renewable energy production tax credit if placed in service by Dec. 31, 2012 and certain other qualifying facilities involving biomass, geothermal, small irrigation, hydropower, landfill gas, waste to energy and marine renewable facilities will qualify if placed in service by Dec. 31, 2013.   The estimated cost over 10 years is $13.1 billion.

    Temporary Election to Claim 30 Percent ITC in Lieu of Production Credit. Rather than taking the production credit over 10 years, a taxpayer may elect to take a 30 percent investment tax credit when a facility is placed in service. It should be noted that the prohibition of combining the ITC with exempt bond financing has been lifted by the Act as well so the credits can be used in conjunction with exempt bond financing. This has a small estimated cost of $285 million over 10 years as it is offset by the taxpayer not receiving a production tax credit.

    Energy Grants in Lieu of Tax Credits. The Treasury Department is authorized to give a grant equal to 30 percent of the cost of the renewable energy facility within 60 days of the facility being placed into service or, if later, within sixty days of receiving an application for such grant. The basis of the property is reduced by the grant.  Since this is in lieu of the tax credit, it is scored to cost only $5 million over 10 years.   

    Qualified Energy Conservation Bonds. The Act authorizes $2.4 billion of qualified energy conservation bonds to finance state, municipal and tribal programs designed to reduce greenhouse gas emissions and the bonds may be issued to make loans or grants for capital expenditures to implant green community programs. Proceeds of these bonds may also be used for utilities to provide ratepayers with energy-efficient property and recoup the costs over extended period of time. Estimated cost is $803 million over 10 years.