Green Technology and Renewable Energy Industry Tax Incentives extended by New Covid-19 Relief Legislation

Green Technology and Renewable Energy Industry Tax Incentives extended by New Covid-19 Relief Legislation

On 27th December, a new Covid-19 relief bill known as the Consolidated Appropriations Act, 2021, was signed into law. The Act provides tax provisions, allowing direct relief to individuals and different industries like renewable energy and technology industries. 

Wind Power Facilities

The Act allows the extension to particular eligibility requirements of the PTC (Production Tax Credit) from 1st January, 2021-1st January 2022 for wind power facilities and other renewable energy generation technologies. The Act also creates extended eligibility rules for the investment tax credit (ITC) to offshore wind facilities. The rules state that 30% ITC will be applied to the qualified offshore wind facility that starts its construction before 1st January 2026. 

Solar power facilities

The Act provides an extension of two years to particular stipulated requirements or money limitations regarding ITC for solar as well as other renewable energy generation technologies. This means that the Act extends the ICT phasedown schedule for all eligible solar energy stations by two years. The 26% ICT that was to be applied to the qualifying basis for taxes is now applicable to property that starts building after 31st December 2019 and before 1st January 2023. The 22% ICT is now applicable to property that starts building after 31st December 2022 and before 1st January 2024. 

Additional green technologies

The Act extends tax benefits that apply to a host of different green technologies such as the alternative fuel refuelling property credit, the residential energy-efficient property credit, the energy-efficient commercial buildings deduction and the energy-efficient homes credit. The Act also offers an extension to the growth and building criteria is two years. This means that the credit is typically applied to a qualified centre that starts construction before 1st January 2026. 

The tax credit extension is a great step towards the development of solar and wind facilities. Even though the industry has been expecting such extensions, it was not guaranteed that it would come to be. The Act also has a retroactive application. Apart from uplifting the installation of new wind schemes in the offshore market, the Act offers a major advantage to the on-going projects hoping to generate a decreased PTC or ITC amount from the existing wind power facility rules. The carbon capture as well as storage industry are happy with the Code Section 45Q carbon capture and the sequestration tax credit eligibility extension since the industry has been seeking it. 

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