Renewable Fuels Legislation Crib Sheet

Although the Taxpayer Relief Act is an all but done deal, stakeholders across numerous industries continue to pick at the legislation. This is particularly true for the renewable energy industry. Legislation can be hard to digest and so the law firm Milbank, Tweed, Hadley & McCloy created a “crib” sheet, or alert, giving a brief overview of how the Act will Screen Shot 2013-01-07 at 7.25.38 PMimpact current and future projects in the renewables space including wind, biomass, geothermal, landfill gas, hydropower, cellulosic and advanced biofuels, biodiesel and even marine and hydro projects.

According to Millbank, the most important feature was the extension of the production tax credit for qualifying wind projects. A project must begin prior to January 1, 2014. The alert notes, “any such qualifying facility (or the electricity generated and sold from it)” that can get off the ground in the next year will be eligible for the tax credit – “regardless of when the facility is placed in service.” That suggests a big financial infusion into the wind industry during 2013 to jump-start projects that may have been put on hold pending the outcome of the tax bill.

Milbank points out in the alert that the legislation does not modify the eligibility requirements for certain types of projects, including those generating power through small irrigation, solar energy, refined coal, or Indian coal, rather keeps the same requirements in place. In addition, the alert takes a close look at tax allowances, including the special first-year allowance, otherwise known as “50% bonus depreciation” to qualifying property placed in service before next January 1.

Across the board for renewable energy, the tax extenders only stay in place for one year. This means that the renewable energy industry will need to take advantage of the tax packages this year while also looking at how to continue growth as uncertainty about industry tax incentives remain on the “cliff” beyond this year.

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