The Renewable Energy Tax Code Wilderness--Production, Investment and Grants OH MY!

Posted on February 8, 2010 by Shari Shapiro

I will make an admission.  I took tax in law school, and, it was the academic equivalent of having my left arm sawed off without anaesthesia.  Why? Mostly because things which should have been clear seemed hopelessly obscure.  Now I deal with advising clients on incentives available for sustainable projects, and the tax code and I have had to battle to a stalemate.  At least, I battle, and the tax code just sits there impentarably.

One of the features which is particularly difficicult is the relationship between 26 USC 45, which deals with tax credits for producing renewable energy (the "production tax credit" or PTC), 26 USC 48 which deals with tax credits for investing in renewable energy equipement (the "investment tax credit" or ITC) and the Renewable Energy Grant created by the ARRA.  All three of these relate to businesses which have installed renewable energy technologies, like solar, wind and geothermal.  It should be clear and easy to understand which ones apply to your business and what the incentive will be.  As with all things related to the tax code, however, it is not.

I am going to attempt to clear up some of the obscurity, but, as with all information on this blog, it is for informational purposes only, not legal advice; and you should consult your legal and financial advisor to provide you with proper advice for your business.

FEDERAL RENEWABLE ENERGY INCENTIVE CHART
Title Applies to Amount of Incentive
Production Tax Credit
  •  Wind
  • Biomass
  • Geothermal
  • Solar
  • Small Irrigation
  • Municipal solid waste
  • Hydropower
  • Marine and Hydrokinetic
  1.5 cents per kW of power generated at a qualified facility for the 10 years beginning on the date the facility was placed in service AND sold to an unrelated person during the taxable year
Investment Tax Credit
  •  Solar for heating, cooling, hot water, illumination or solar process heat
  • Fuel cell
  • Microturbine
  • Geothermal
  • Combined heat and power (cogeneration)
  • Small wind
  • Ground water thermal
  30% of the cost of the "energy property" for solar and small wind, 10% for geothermal and other renewable sources
Renewable Energy Grant  Applicable property under Section 45 or 48  10% or 30% of the basis of the property, depending on the type of property placed in service during 2009 or 2010 or after 2010 if construction began on the property during 2009 or 2010 and the property is placed in service by a certain date known as the credit termination date

The incentives are mutually exclusive--The PTC and the ITC cannot both be taken, and they can be swapped for the REG, but you cannot take the PTC/ITC and the REG.

In plain english, it appears that the PTC is designed for renewable energy sources where the power is designed to be sold to others as a Renewable Energy Credit, and the ITC is designed for renewable energy sources where the power is used on-site.  The Renewable Energy Grant allows companies which have invested in either type of renewable energy capacity to receive cash, as opposed to a tax credit, which is helpful particularly if the company has no tax liability or a tax loss. 

 There are some resources available to help you sort through this morass.  The DSIRE database has quick summaries of available state and federal incentives.  The Utah Clean Energy site has a nice summary of the renewable energy features of the ARRA.   The DOE site has a useful summary of renewable energy incentives for businesses as well.

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How the Stimulus Bill Shortchanged The EPA, And What It Means For Green Building

Posted on April 7, 2009 by Shari Shapiro

I have written before about the conflict between local and federal regulation of green building.  But the issue of jurisdiction is not restricted to intergovernmental conflict.  At the federal level,  resources for green building are being largely handled by the Department of Energy, and not by the Environmental Protection Agency. 

The DOE runs the Energy Star program, for example.  In its page on "buildings" the DOE states:

The Department of Energy, through the Office of Energy Efficiency and Renewable Energy’s (EERE) Building Technologies Program works closely with the building industry and manufacturers to conduct research and development on technologies and practices for energy efficiency. The Department also promotes energy and money-saving opportunities to builders and consumers and works with state and local regulatory groups to improve building codes and appliance standards.

As you might expect, the DOE information is all about energy efficiency.  By contrast, the EPA has an informative page about green buildings, including information on water efficiency, sustainable communities, indoor air quality, waste reduction, toxics reduction and other considerations.  In short, the EPA takes into consideration the multi-faceted ways in which buildings impact the environment. 

Why should you care? On the EPA page regarding funding for green building projects it states:

EPA does not currently provide funding to support green building projects.

In the stimulus bill, which, you recall had $60 billion for "green" programs, the EPA was allocated exactly $0 for green building, and a measley $7 billion over all.  Don't believe me? Look at the EPA's own assessment of the stimulus money.  By contrast, the DOE was allocated $32.7 billion, with $5 billion for weatherization alone. 

The government agency charged with protecting the environment was essentially shut out of the "green" stimulus bill, and as a result, I wonder whether the overall environmental impact of buildings will be promoted effectively through research, incentives and other mechanisms.

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Resource--Department of Energy Code Map

Posted on February 4, 2009 by Shari Shapiro

The Department of Energy has a map which identifies the Building Code Energy Codes for each state, along with the ASHRAE energy code standard they are currently using. 

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