On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Bill”). The legislation extends the effectiveness of a wide range of tax provisions. Included in the Bill are numerous sections relevant to the renewable energy industry listed below.
Extension of Section 1603 Grants
Section 1603 of the American Recovery and Reinvestment Act of 2009 (“ARRA”) created an opportunity for renewable energy project developers to receive a cash grant in lieu of the investment tax credit. The grant is equal to an amount up to 30 percent of the tax basis of certain electricity-generating renewable energy projects. However, the ARRA limited the grant to energy projects either: (1) placed in service in 2009 or 2010, or (2) placed in service within a set number of years (depending on the type of project) after 2010 and for which construction begins by the end of 2010. Guidance on the program from the U.S. Treasury indicated that construction begins for this purpose if physical work of a significant nature had begun or if five percent or more of the total project costs were incurred. For more information on the specifics of the program, see our previous client alert.
The Bill extends the deadlines by one year for both placing the project in service and beginning construction. In other words, grants are available for projects placed in service in 2011 or for which construction begins in 2011.
Extension of Ethanol Blender Tax Credits and Tariffs
- Extends the Volumetric Ethanol Excise Tax Credit through 2011 at the current rate of 45 cents per gallon for blends of ethanol and liquid fuel, including gasoline.
- Extends the Small Ethanol Producer Tax Credit through 2011 at the current rate of 10 cents per gallon for up to 15 million gallons per year of ethanol produced by a person with production capacity at 60 million gallons per year or less.
- Extends through 2011 the tariff on imported ethanol at the current rate of 54 cents per gallon.
Other Biofuels Tax Credits
The Bill retroactively renews the tax credits available for production of biodiesel and biodiesel mixtures with diesel fuel. These tax credits expired at the end of 2009, but credits will now be available for production in 2010 and 2011 at the previous rate of $1.00 per gallon.
The Bill also extends through 2011: (1) tax credits available for alcohol and alcohol mixtures produced for fuel at the current rate of 60 cents per gallon, and (2) tax credits available for alternative fuels and alternative fuel mixtures (excluding ethanol, methanol, biodiesel or black pulp) at the current rate of 50 cents per gallon.
If you have any questions on these tax incentives or would like further information on the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, please contact one of the authors.