Tuesday, April 30, 2013

The Latest Tax Breaks For Alternative Energy

by Contributing Authors
The bill passed by Congress in early 2013 to avoid the so-called fiscal cliff, the American Taxpayer Relief Act, included many provisions for alternative energy.
Production Tax Credits
The tax credits for producers of renewable energy, such as from wind energy, solar power, fuel cells,geothermal systems, and combined heat and power systems, were extended through the year 2013. Wind farms receive the largest tax credit – 2.2 cents per kilowatt-hour. Other producers receive a tax credit of 1.1 cents per kilowatt-hour.
These producers can now qualify for the production tax credit if construction of the facility begins in 2013. Previously, the facility had to be in-service and producing energy by the end of the calendar year when the credit was in effect.
Wind energy producers can now choose an investment credit instead of the production tax credit. This investment tax credit is 30% of the total facility cost. It is available once the wind farm starts producing power.
Tax Credits for Bio Fuels
Tax credits for bio fuels, which had expired at the end of 2011 or 2012, were extended through 2013. The cellulosic fuels credit is $1.01 per gallon sold. This credit now includes fuel extracted from algae. The retroactive biodiesel credit is $1.00 per gallon sold in 2012 or 2013. Tax credits also apply to other alternative fuel and fuel mixtures.
Tax Credit for Alternative Fueling Stations
The tax credit for commercial alternative fueling stations, which had expired at the end of 2011, was also extended through 2013. Alternative fuels include natural gas, propane, electricity, an ethanol fuel blend of 85% denatured ethanol, and diesel fuel containing a minimum of 20 percent of biodiesel.
This tax credit is 30 percent of the cost of alternative fueling equipment at a particular facility, up to a maximum credit of $30,000. Owners of multiple facilities can get the $30,000 maximum credit on each facility. Consumers can receive a tax credit of up to $1,000 on residential alternative fueling equipment they purchase.
Any unused tax credits that qualify as general business tax credits can be carried back one year and carried forward 20 years.
Final Thoughts
Industry groups have often complained about the on-again, off-again nature of tax breaks for alternative energy. It is very difficult for producers to formulate long-term plans when there is uncertainty about the future of a particular tax break. Members of Congress needs to set aside their differences and come up with sensible plans to phase out the various tax breaks.