USA: Funding Options for Renewable Energy Power Plants
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Business taxpayers who place in service facilities that produce electricity from wind and some other renewable resources can choose one of three options to fund the project: a tax credit based on the amount invested, a tax credit based on the energy produced or a grant.
The flexibility to choose among these options was enacted as part of ARRA.
Taxpayers may opt to claim the energy investment tax credit, which generally provides a 30 percent tax credit for investments in energy projects, instead of the production tax credit, which can provide a credit of up to 2.1 cents per kilowatt-hour for electricity produced from renewable sources.
Taxpayers making qualified investments that are placed in service after 2008 and before 2014 (or 2013 for wind facilities) can make an irrevocable election to claim the energy investment tax credit instead of the renewable electricity production tax credit. IRS will issue guidance explaining how to make the election.
Taxpayers also can claim a grant once the property is placed in service instead of claiming either the energy investment tax credit or the renewable energy production tax credit. For qualified renewable energy facilities, the grant is 30 percent of the investment in the facility as long as construction begins in 2009 or 2010 and the property is placed in service before 2014 (2013 for wind facilities). The Treasury Department will issue guidance explaining how the grant works and how to apply.
Taxpayers electing to receive the grant, created by the ARRA, will
not be eligible for either of the tax credits. Proceeds from the grants
are not includible in the taxpayer’s gross income, but the grant amount
is subject to recapture if the property is disposed of or otherwise
ceases to qualify.
For more information on the renewable electricity production tax credit under Section 45 see Notice 2008-60 and Notice 2008-48, and for more information on the energy investment tax credit under Section 48 see Notice 2008-68.
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