Following up on last week's post on the extension of the production tax credit, there were a couple of interesting developments yesterday.
First, House Republicans offered to decouple the payroll tax cut from other measures to be considered in the payroll bill being negotiated by a House-Senate Conference Committee, and they may not require that the tax cut be offset by spending cuts or tax increases. Unfortunately, a “clean” payroll tax cut would not include an extension of the production tax credit. There will be more to come as this plays out in the halls of Congress.
Second, the President released his 2013 Budget which contains some interesting proposals regarding renewable energy that are likely to leave some folks happy and others feeling left out. The budget is not a great barometer of what will actually be passed later in the year, but it does signal the Administration's priorities.
The proposal would extend the production tax credit and the investment tax credit for wind facilities and wind property placed in service in 2013, but would not include extensions of the in-service date for any other type of property. The proposal would also extend Treasury's Section 1603 grant program to all otherwise qualifying property placed in service in 2012 (including property on which construction begins in 2012). The program currently only applies to property for which construction began in 2009, 2010, and 2011.
For property placed in service after 2012, the proposal would replace the grant with a refundable tax credit administered by the Internal Revenue Service. In other words, a developer would receive a tax refund from the IRS in much the same way the developer receives a grant from Treasury, except that it would be claimed on the developer’s tax return.
The refundable credit would be allowed with respect to property placed in service in 2013 in the case of wind, biomass, landfill gas, municipal solid waste, incremental hydropower, certain geothermal, and marine and hydrokinetic. The refundable credit would be allowed for property placed in service from 2013 through 2016 in the case of solar, fuel cells, microturbines, combined heat and power, small wind, and certain geothermal. Qualification requirements for the refundable credit would be the same (except for the effective date provisions) as the qualification requirements currently applicable under the Treasury grant program.