Recent Changes to the PTC and Their Implications

Heralded by some, despised by others, whether you like it or not Congress recently passed an extension of production tax credits (PTCs) for renewable energy projects. Title IV, section 407 of the American Taxpayer Relief Act of 2012 included some modifications to the existing Section 45 Production Tax Credit and the Section 48 Investment Tax Credit (ITC). I’ve prepared a summary of the changes below; for more detailed history of the credits and a breakdown of eligible technologies, DSIREUSA.org is a great place to start (PTCITC).

Section 45 PTC:

1)      The bill changes the “placed in service” deadline from previous versions of the code to a “begins construction” deadline.  This effectively makes it a much lengthier and useful extension.

2)      For wind, the deadline extends from Dec 31, 2012, to Dec 31, 2013.  For other eligible technologies, the relevant date was already 12/31/13, but it’s now the construction start date, rather than placed in service deadline.

3)      The definition of MSW now excludes “paper that is commonly recycled and which has been segregated from other solid waste” for any electricity that is generated after January 2, 2013.

Section 48 ITC:

1)      Facilities that are qualified to claim the PTC, as described in Section 45 can alternatively claim the ITC if they begin construction before January 1 2014

Section 1603 Treasury Grant:

There were some technical corrections to the language of this section, but the dates were not changed- and therefore, it would not be applicable to new projects, as construction must have begun in 2009, 2010, or 2011 and the application deadline was 10/1/2012.

The biggest implication of these  modifications, other than extending the deadline for wind projects, is changing the language from a “placed in service” date to a “begin construction” date. With the last minute nature of this extension, large projects that had not already finalized power purchase agreements, secured financing, placed equipment orders, and lined up construction crews would have a very difficult, if not impossible task, to begin operation before the end of the year. Beginning construction will be challenge enough for many projects.

The Treasury Department is preparing a guidance document on what will qualify a project as having begun construction. It is very likely that the guidelines will be quite similar to those that were used by the Section 1603 Treasury Grant, available here, which required either beginning a significant amount of the physical work, or incurring at least 5% of the total project cost.

The full text of The American Taxpayer Relief Act of 2012 is available here: http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf

Although ANTARES is not a law firm that specializes in energy tax issues, we do consider ourselves sufficiently informed about the subject to help our clients understand the critical issues and seek the right advice when it is needed. If you find yourself in need of help on this or any other aspect of your renewable energy, alternative fuel or energy efficiency project, please contact us.

About Heidi Alsbrooks


Heidi Lestyan Alsbrooks is a project manager and lead technical analyst for ANTARES. Her experience includes resource assessments, performance evaluation, visualization studies and economic analyses. She specializes in wind energy, renewable energy policy, and GIS-based resource modeling.

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