The American Recovery and Reinvestment Act of 2009, otherwise known as the “Stimulus Bill”, which President Obama signed into law on February 17, 2009, made significant changes in prior tax incentives for renewable energy, energy efficiency, and carbon capture and storage. Understanding these changes may provide opportunities for those companies that are engaged in these business areas, and provide significant assistance to municipalities that are looking for opportunities to address these issues. The Stimulus Bill should not be discussed alone, but should also be discussed in the context of the Emergency Economic Stabilization Act of 2008 (the “Bailout Bill”), that served as the vehicle for the economic rescue legislation signed into law on October 3, 2008 by President Bush. The legislation is organized into three (3) separate divisions, but the one that we will explore in this Alert along with the Stimulus Bill, is Division B, entitled the Energy Improvement and Extension Act of 2008. The Stimulus Bill and the Bailout Bill together have created significant incentives for renewable energy, energy efficiency, carbon capture and storage, and alternative transportation fuels.
Many of these projects will reduce greenhouse gas emissions, and may qualify for carbon credits through voluntary carbon credit programs or current or future state and federal climate change legislation. Combining both the incentives and carbon credit revenue may allow projects that would not otherwise be financially feasible to become economically sound or increase the rate of return on projects to make them attractive to project developers and investors.
The Bailout Bill provided significant tax incentives and extensions for tax credits for the following projects: (i) renewable energy, (2) energy efficient and conservation, (3) carbon capture and storage, and (4) transportation and domestic fuel. Below are examples of tax incentives and credits related to the foregoing projects:
Renewal Energy
· Extends through 2009 (placed in service before January 1, 2010) the tax credit for producing electricity from wind.
· Extends through 2010 (placed in service before January 1, 2011) such tax credit for other facilities, including closed and open-loop biomass, solar energy, small irrigation power, landfill gas, trash combustion, and hydropower. Modifies rules for and definitions of refined coal, trash and biomass facilities, and hydropower production.
· Includes marine and hydrokinetic renewable energy as a renewable resource for purposes of the tax credit for producing electricity from renewable resources.
Energy Efficiency and Conservation
· Allows a new tax credit for investment in qualified energy conservation bonds for capital expenditures to reduce energy consumption in public buildings, implement green community programs, develop alternative and renewable energy sources, and promote mass commuting facilities.
· Extends through 2009 the tax credit for non-business energy property expenditures. Includes energy-efficient biomass fuel stoves as property eligible for such tax credit. Modifies tax credit standards for water heaters, geothermal heat pumps, and energy efficiency improvements.
· Extends through 2013 the tax deduction for energy efficient commercial buildings.
· Extends through 2009 the tax credit for residential energy efficiency improvements.
Carbon Capture and Storage
· Allows a 30% investment tax credit rate for advanced coal-based generation technology projects and increases the maximum credit amounts allocable for such projects to $2.55 billion.
· Increases to 30% the investment tax credit rate for coal gasification projects and the aggregate credit amount for such projects.
· Sets forth special rules for refund claims of the coal excise tax by certain coal producers and exporters.
Transportation and Domestic Fuel
· Increases and extends through 2009 income and excise tax credits for biodiesel and renewable diesel used as fuel.
· Extends through 2009 the excise tax credit for alternative fuel and fuel mixtures. Requires such fuels to include compressed or liquefied biomass gas and to meet certain carbon capture requirements.
· Allows a new tax credit for new qualified plug-in electric drive motor vehicles. Limits the amount of such credit based upon the gross vehicle weight rating of such vehicles. Terminates such credit after 2014.
· Extends through 2010 the tax credit for alternative fuel vehicle refueling property expenditures. Includes electricity as a clean burning fuel for purposes of such credit.
· Provides for the treatment of certain income and gains from alcohol, biodiesel, and alternative fuels and mixtures as qualifying income for publicly traded partnerships.
· Extends through 2013 the taxpayer election to expense costs of certain refinery property.
The Stimulus Bill - tax credits, grants and other incentives
The Stimulus Bill contains more than $42 billion in energy-related investments from tax credits. More specifically, the Stimulus Bill extended renewable production tax credits for (1) wind projects through December 31, 2012 and (2) closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, waste-to-energy, and marine renewable facilities through December 31, 2013.
· Authorizes $1.6 billion in clean renewable energy bonds to finance facilities that generate electricity from wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, waste-to-energy, and marine renewable facilities, and trash combustion projects.
· Authorizes $2.4 billion in qualified energy conservation bonds to finance state, local, and tribal government programs designed to reduce greenhouse gas emission and other qualified conservation activities.
· Increases alternative refueling property credit for businesses to a 50 percent credit and increases the cap for these credits to $50,000, for hydrogen to $200,000, for 2009 and 2010. Increases the credit for individuals to 50 percent and the cap to $2000 for 2009 and 2010.
· Authorizes $3.1 billion for states to promote energy conservation and to reduce the rate of energy demand
· Authorizes $2 billion for manufactures of advanced vehicle batteries and components
· Authorizes $5 billion for installation of energy efficiency improvements in the homes of low-income families in order to reduce the energy bills of these families
· $2.5 billion for applied research, development, demonstration, and deployment activities, such as $800 million for biomass projects, $400 million for geothermal projects, $50 million for research to increase the energy efficiency of information and communications technology.
· $400 million for electrification of transportation.
· $300 million to create an alternative fuel vehicle pilot grant program.
· $300 million for the energy efficient appliance rebate program and the Energy Star Program
The Bailout Bill and Stimulus Bill provide significant opportunities for parties engaged in projects in renewable energy, energy efficiency, carbon capture and storage, and alternative transportation fuels. Coupled with the potential for carbon credit revenue, many projects in these areas may become increasingly attractive.
