Consolidated Appropriations Act Extends Production and Investment Tax Credits

On December 27, 2020, President Trump signed the Consolidated Appropriations Act (CAA). The CAA extends the production tax credits (PTC) and investment tax credits (ITC) available to eligible taxpayers developing eligible renewable energy projects.

In brief: The PTC, available under Section 45 and 38 of the Internal Revenue Code (Title 26), grants a tax credit to eligible taxpayers based on the per-kilowatt-hour electricity generated at qualified facilities using certain renewable sources. A facility is qualified depending on when construction began, and the PTC can be claimed for the first 10 years of production at such qualified facility. As a result of the PTC extension, taxpayers will continue to qualify for the PTC from qualified facilities if construction begins prior to January 1, 2022.

In brief: The ITC, available under Section 48 and 38 of the Internal Revenue Code, grants eligible taxpayers a tax credit for certain energy-related investments. The CAA extends the ITC for one year, allowing taxpayers to treat a qualified facility under the PTC rules as a qualified investment credit facility for tax credit purposes.

With these extensions, taxpayers in the near term may be less pressured to satisfy the “beginning of construction” requirement imposed by the PTC and ITC provisions.

A copy of the 2,124-page Act may be found through a link on this page:

https://www.congress.gov/bill/116th-congress/house-bill/133/text