Breaking News: Congress Set to Vote On Spending Bill Including 5 Year Extension of ITC and PTC
Congressional leaders reached a much anticipated bi-partisan agreement in an omnibus appropriations bill that includes an extension (with phasedowns) of the section 48 investment tax credit (ITC) for solar energy property and section 45 renewable electricity production tax credit (PTC) for wind. (The 2000+ page bill is available here.) A separate tax extenders bill (available here) negotiated in parallel with the omnibus appropriations bill includes a straight 2-year extension with no phase downs for other renewable energy facilities eligible for the section 45 credit including geothermal, biomass, landfill gas and certain qualified hydropower and marine hydrokinetic energy projects. The tax extenders bill also extends bonus depreciation for 5 years at 50% for the first 3 years and phased down to 40% in 2018 and 30% in 2019.
The tentative deal was brokered in exchange for lifting the ban on crude exports, a policy the oil and gas industry has been lobbying Congress to repeal ever since it was put in place in the 1970s. The bill is part of a roughly $1 trillion spending package to fund the government through September 2016, so there is plenty of momentum that this deal makes its way through Congress.
ITC
The bill provides that the ITC will stay at 30% through 2019 and then is gradually phased down by 2022 for projects that begin construction in 2020 according to the following schedule:
2017 through 2019 – 30%
2020 – 26%
2021 – 22%
2022 (and beyond) – 10%
The bill includes a January 1, 2024 placed in service deadline that reduces the ITC to 10% for any project which begins construction by January 1, 2022 but is not placed in service before January 1, 2024.
PTC
The bill provides that the 2¢/kWh PTC for wind will be extended to 2020, and phased out for projects beginning construction in 2017 according to the following schedule:
2017 – 80% (of present value)
2018 – 60% (of present value)
2019 – 40% (of present value)
The House and Senate will vote on the tax extenders bill this Thursday followed by the omnibus bill on Friday before Congress adjourns for the holidays. Stay tuned to our blog for more details as these bills work their way through Congress and hopefully to President Obama for his signature.