Keywords: Tax Increase Prevention Act, tax benefits, renewable energy
President Obama signed into law H.R. 5771, the Tax Increase Prevention Act, which extends until December 31, 2014, more than 50 tax benefits that had expired on December 31, 2013. Signed on December 19, the law had been passed by Congress just days previously, after months of back-and-forth regarding the nature of the “extenders” package.1
One of the tax credits that was extended in the package was the production tax credit for electricity produced from certain renewable energy facilities. With the passage of the bill, a wind, biomass, geothermal, landfill gas, trash, hydropower, marine or hydrokinetic energy facility that “begins construction” by December 31, 2014 may claim a tax credit based on kilowatt-hours of energy produced for 10 years from the date it is placed in service.
Some in the renewable energy industry have argued that the passage of this legislation late in the year lessened its impact on the implementation of renewable energy technologies in 2014. With just a few weeks between passage of the legislation by Congress and the new date of expiration of the tax credits at the end of the year, many industry advocates expressed concerns over a lack of ability to plan for potential projects appropriately. Nonetheless, many in the renewable energy industry are acting quickly in the wake of the passage of the law to take actions that will allow them to be able to claim the production tax credit on projects that began construction in 2014.
The tax extenders package extends a number of additional energy-related tax provisions through the end of 2014. These extensions are:
Residential energy efficiency improvement tax credits;
Second generation biofuel production tax credits;
Income and excise tax credits for biodiesel and renewable diesel fuel mixtures;
Excise tax credits for alternative and liquefied hydrogen fuels;
The production tax credit for electricity from Indian coal facilities that were placed in service before 2009;
A tax credit for new homes that are energy efficient;
A tax deduction for commercial buildings that are energy efficient;
Second generation biofuel plant property special depreciation allowance; and
Tax deferrals for the sale or disposition of certain electric utilities.
The legislation addresses non-energy-related credits as well, extending a number of tax provisions claimed by a variety of businesses. Chief among these are the extensions of the ability for businesses to accelerate depreciation of certain property (also known as bonus depreciation) and the research and experimentation (also known as the research and development) tax credit. Both these provisions, along with dozens of others, were extended through December 31, 2014.
The debate over whether to extend these tax provisions—and the duration for which they should be extended—will begin anew with the 114th Congress in January. Given the Republican takeover of the Senate, and President Obama’s desire to make tax reform a legacy issue, there is likely to be a concerted effort early in 2015 to undertake broader tax reform. If this larger reform is addressed, the tax provisions mentioned above are likely to be wrapped into the discussion as well.
Learn more about Mayer Brown’s Tax Transactions & Consulting, Energy and Government Relations practices.
1 The Senate Finance Committee, for instance, passed S. 2260, the EXPIRE Act of 2014, earlier this year. This bill would have extended the expiring tax credit provisions through the end of 2015, one year longer than the law that was eventually enacted.
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