Code Section 48
| Code Section | Effective Date | Name of Act | Name of Provision | 10yr Revenue Estimate ($millions) |
|---|---|---|---|---|
| 45, 48 | 1/2/2013 | The American Taxpayer Relief Act of 2012 | Extension and modification of incentives for renewable electricity property | -12,244 |
| 45, 48 | 2/17/2009 | The American Recovery and Reinvestment Act of 2009 (Public Law 111-5) | Grants for specified energy property in lieu of tax credits | -5 |
| 45, 48 | 12/31/2008 | The American Recovery and Reinvestment Act of 2009 (Public Law 111-5) | Election of investment credit in lieu of production tax credits | -285 |
| 48 | 12/31/2008 | The American Recovery and Reinvestment Act of 2009 (Public Law 111-5) | Modification of energy credit 223 | -604 |
Extension and modification of incentives for renewable electricity property
Explanation of Provision
The provision extends and modifies the expiration dates for the renewable electricity production credit and the 30-percent investment credit in lieu of such production credit. The provision extends the wind credits (production and investment) for one year, through December 31, 2013. In addition, the expiration date for all renewable power facilities (including wind facilities) is modified such that qualified facilities or property will be eligible for the renewable electricity production credit, or the investment credit in lieu of such credit, if the construction of such facilities or property begins before January 1, 2014.
The provision also modifies the definition of municipal solid waste to exclude commonly recycled paper that has been segregated from such waste for purposes of this credit.
Grants for specified energy property in lieu of tax credits
Explanation of Provision229
The provision authorizes the Secretary of the Treasury to provide a grant to each person who places in service energy property that is either (1) part of an electricity production facility otherwise eligible for the renewable electricity production credit or (2) qualifying property otherwise eligible for the energy credit. In general, the grant amount is 30 percent of the basis of the property that would (1) be eligible for credit under section 48 or (2) be part of a section 45 credit-eligible facility. For qualified microturbine, combined heat and power system, and geothermal heat pump property, the amount is 10 percent of the basis of the property. Qualifying property must be depreciable or amortizable to be eligible for a grant. In addition, the property must be originally placed in service in 2009 or 2010 or construction of the property must begin in 2009 or 2010 and be completed prior to 2013 (in the case of wind facility property), 2014 (in the case of other renewable power facility property eligible for credit under section 45), or 2017 (in the case of any specified energy property described in section 48).
It is intended that the grant provision mimic the operation of the credit under section 48. For example, the amount of the grant is not includable in gross income. However, the basis of the property is reduced by fifty percent of the amount of the grant. In addition, some or all of each grant is subject to recapture if the grant eligible property is disposed of by the grant recipient within five years of being placed in service.
Nonbusiness property and property that would not otherwise be eligible for credit under section 48 or part of a facility that would be eligible for credit under section 45 is not eligible for a grant under the provision. The grant may be paid to whichever party would have been entitled to a credit under section 48 or section 45, as the case may be.
Under the provision, if a grant is paid, no renewable electricity credit or energy credit may be claimed with respect to the grant eligible property. In addition, no grant may be awarded to any Federal, State, or local government (or any political subdivision, agency, or instrumentality thereof) or any section 501(c) tax-exempt entity.
The provision appropriates to the Secretary of Energy the funds necessary to make the grants. No grant may be made unless the application for the grant has been received before October 1, 2011.
Election of investment credit in lieu of production tax credits
Explanation of Provision
The Act allows the taxpayer to make an irrevocable election to have certain qualified facilities be treated as energy property eligible for a 30 percent investment credit under section 48. For this purpose, qualified facilities are facilities otherwise eligible for the section 45 production tax credit (other than refined coal, Indian coal, and solar facilities) with respect to which no credit under section 45 has been allowed. A taxpayer electing to treat a facility as energy property may not claim the production credit under section 45. Under the Act, facilities are eligible if placed in service during the extension period of section 45 as provided (generally, through 2013; through 2012 for wind facilities).
Property eligible for the credit is tangible personal or other tangible property (not including a building or its structural components), and with respect to which depreciation or amortization is allowable, but only if such property is used as an integral part of the qualified facility. For example, in the case of a wind facility, the conferees intend that only property eligible for five-year depreciation under section 168(e)(3)(b)(vi) is treated as credit-eligible energy property under the election.
Modification of energy credit 223
Explanation of Provision
The Act eliminates the credit cap applicable to qualified small wind energy property. The Act also removes the rule that reduces the basis of the property for purposes of claiming the credit if the property is financed in whole or in part by subsidized energy financing or with proceeds from private activity bonds.
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223- Additional provisions that (1) allow section 45 facilities to elect to be treated as section 48 energy property, and (2) allow section 45 and 48 facilities to elect to receive a grant from the Department of the Treasury rather than the section 45 production credit or the section 48 energy credit, are described by sections D.2 and D.4 of Part Two of this document.
-Return to Explanation of Provision
229- The provision was subsequently amended by section 707 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111–312, described in Part Sixteen of this document.
-Return of Explanation of Provision