According to Latham & Watkins Client Alert Commentary Number 2578, a new law has extended tax credits for wind and other renewable energy projects, but solar energy and energy storage are left unchanged by the law.
The Fiscal Year 2020 Further Consolidated Appropriations Act (the Act), signed into law on December 20, 2019, extends the production tax credit (PTC) and the investment tax credit (ITC) for the following qualifying projects, provided they are under construction on/before December 31, 2020:
Municipal Solid Waste
Marine and Hydrokinetic Energy Projects
Qualifying wind projects with construction beginning after December 31, 2019, and before January 1, 2021, are eligible for 60% of the PTC, or an 18% ITC. For those other qualifying project types (listed above), with construction beginning after December 31, 2017, and before January 1, 2021, they are eligible for the full PTC or ITC.
Tax Credits for Wind
For qualifying wind projects, where construction commences in 2020, rather than 2019, the following step-up will occur:
The PTC increases from 40% to 60%.
The ITC, in lieu of the PTC, increases from 12% to 18%.
Tax Credits for Solar, Storage
As noted previously, the Act makes no changes to tax credits for solar or storage. Currently, taxpayers may claim the full 30% ITC for qualifying solar projects in service on/before December 31, 2023, which began construction prior to January 1, 2020. The ITC drops to 26% for qualifying solar projects in service on/before December 31, 2023, which begin construction before January 1, 2021. Following this, the ITC drops further to 22% for qualifying projects in service on/before December 31, 2023, where construction begins before January 1, 2022. For other solar projects, the ITC will be 10%.
As stated earlier, the Act offers no standalone tax credits for energy storage projects. Currently, energy storage systems are only eligible for tax credits if they are part of qualifying renewable energy projects, provided they satisfy certain other requirements.
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