The Senate Finance Committee recently approved the chairman's modification to the Senate extenders bill - the Family and Business Tax Cut Uncertainty Act of 2012 - that includes a one-year extension of the section 45 production tax credit (PTC) for wind facilities. The extension is currently scheduled to expire for facilities placed in service after December 31, 2012.
An earlier version of the bill did not include an extension of the PTC; however, the modified version of the legislation released by Senate Finance Committee Chairman Max Baucus (D-Mont.) on August 2, 2012, included the extension and modification of the PTC for wind facilities with some interesting features explained more fully in this KPMG Legislative Update.
The section 45 PTC provides a production tax credit for wind facilities placed in service by December 31, 2012. Under current law, taxpayers can claim 2.2 cents per kilowatt hour tax credit for a ten year period with the credit rate adjusted annually for inflation.
The bill would:
- Extend the placed-in-service date an additional year – i.e., to projects which are placed in service by December 31, 2013
- Modify the PTC to allow renewable energy facilities that “begin construction” before the end of 2013 to claim the PTC
Currently taxpayers may claim a 30% section 48 investment tax credit (ITC) for renewable energy projects in lieu of the PTC so long as such projects are placed in service during the applicable PTC expiration dates. The one-year PTC extension and “begin construction” provision would also apply to the ITC in lieu of PTC. The JCT estimates the 10-year revenue effect of this change to be $12.184 billion.
The legislative text is not yet available, so the discussions and observations in this KPMG Legislative Update are based on the Joint Committee on Taxation (JCT) description of the Chairman’s modifications.