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In Budget Agreement, Congress Comes Through with Tax Equality for 'Orphan' Technologies

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In what is becoming a monthly ritual in DC, Congress passed a month-long spending bill late last week to avoid a government shutdown. While headlines captured the story of another dodged shutdown (at least until next month), the eyes of the advanced energy industry caught another storyline. Congress fulfilled a promise to level the playing field for a variety of advanced energy technologies, giving the industry a better chance to grow. The bill provides the market certainty that will support investment in technologies like fuel cells, combined heat and power, energy efficiency, geothermal, and advanced nuclear. Read on for the details of the tax deal, and how we got here. 

First, let’s rewind the tape. In December 2015, Congress passed an extension of the Investment and Production Tax Credits for wind and solar, providing a gradual and predictable phasedown to these credits over five years and paving the way for these industries to continue their rapid growth. At the time, AEE heralded the deal, but also noted that numerous technologies were not included. Lawmakers commented after the signing of the 2015 legislation that these technologies – deemed “orphans” – had been inadvertently left out of the bill. Lawmakers promised that a fix to this mistake would soon pass. But with the conclusion of the tax overhaul package passed in December, the tax credits for these advanced energy technologies were still orphaned.

Fortunately, Senate Finance Chairman Orrin Hatch (R-UT) and numerous other Republicans prioritized this fix in early 2018. While it took almost two months, Hatch and others were successful in leveling the playing field and providing market certainty across a wider range of the advanced energy industry in last week’s spending bill.

AEE issued a statement praising these tax-credit extensions, while noting that one promising, and growing, advanced energy technology – energy storage – still gets no support in the federal tax code.

Below are the details on how various technologies are treated by this legislation:

Fuel Cells and Distributed Wind

Eligibility for the Investment Tax Credit extended for construction beginning before January 1, 2022. As with the phasedown of the ITC for solar, the tax credit will decline under this schedule:

  • 30% ITC for construction beginning through December 31, 2019
  • 26% ITC for projects with construction beginning in 2020
  • 22% ITC for projects with construction beginning in 2021

Combined Heat and Power and Micro-turbines

Eligibility for 10% Investment Tax Credit extended for projects that begin before January 1, 2022

Energy Efficiency

Eligible technologies under the tax code 25(c), 45(L), and 179D were granted a one-year retroactive extension through December 31, 2017. Conversations continue about the future status of these credits. 

Nuclear

The Secretary of the Treasury can re-allocate any unused portion of the 6,000 MW nuclear PTC cap after 2020. The allocation by Treasury would first go to qualifying facilities that did not receive an allocation equal to their full capacity and then to facilities placed in service after such date, in the order in which such facilities are placed in service.

Residential Energy Property

Eligible residential energy property technologies received an extension through December 31, 2021. Technologies include: solar electric, solar water, fuel cell, distributed wind, and geothermal. While the level of the credit varies by technology, most receive a 30% credit.

Alternative Fuel Vehicles and Property

Eligible technologies under 30(b) and 30(c) for alternative motor vehicles and alternative fuel refueling property can receive a credit retroactive through December 31, 2017. Technologies include hydrogen, electric, and other alternative fuel technologies.

By Dylan Reed

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