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On Monday, December 21, 2020, the United States Congress passed a second large stimulus bill[1] (the “Relief Bill”) aimed at curtailing the economic disruptions caused by COVID-19. The Relief Bill, among other things, extends renewable energy tax credits for wind projects, solar projects and carbon capture and sequestration and contains specific provisions addressing offshore wind farms. These extensions include a one-year extension for wind projects, a two-year extension for solar projects and a two-year extension for carbon capture and sequestration projects.
Wind Tax Credits
Section 45 of the Internal Revenue Code (the “Code”) allows a production tax credit (“PTC”) against federal income tax for electricity produced by a taxpayer at a “qualified facility” during the 10-year period beginning on the date such facility is originally placed in service. A “qualified facility” includes wind facilities. The PTC rate is 1.5 cents per kilowatt hour of electricity, adjusted for inflation (2.5 cents per kilowatt hour in 2020). This credit is phased down for a facility using wind to produce electricity, with the PTC reduced by 20% for facilities for which construction began prior to January 1, 2018; 40% for facilities for which construction began prior to January 1, 2019; and 60% for facilities for which construction began prior to January 1, 2020.