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The IRS, in a recent private letter ruling (PLR 201035003) held that a sale of renewable energy certificates that creates value for the seller is income for tax purposes.
The private letter ruling was requested by a residential owner of renewable energy property that had sold renewable energy certificates to a local utility. Under the taxpayer’s deal with the utility, the taxpayer was required to sell all of the RECs associated with a new solar PV system to the utility in exchange for payments.
The IRS distinguished the utility’s payment for the RECs from indirect subsidies which are exempt from taxation under Section 136 of the Code. Reasoning that the sale of the RECs was like a sale of property, the IRS determined that the gain on the sale would be taxable as income to the taxpayer.
Corn prices have surged but, as Biofuels Digest reports, the culprit this time is a poor harvest and shutdown of grain exports from Russia.
U.S. ethanol production remains sluggish as low gas prices and a lack of investment capital have held back plans for new plants. In addition, Congress’ inability to extend biofuel subsidies that expired that the end of 2009 means that China has surged ahead of the rest of the G20 both in energy consumption and in clean energy investment.
Taylor English Attorney Aaron Kowan, spoke at the Reznick Group’s Real Estate and Renewable Energy Markets Forum at Lowe’s Hotel in Atlanta on August 24th.
Tax credits are a key element in many structured finance transactions involving real estate or renewable energy and Mr. Kowan’s practice focuses on ways to derive cash to fund project development from tax credits.
The Reznick Group is a national accounting firm that has been sponsoring symposiums on tax credit financings for several years. The meetings are generally attended by investors, project developers, bankers, accountants and lawyers looking for ways to structure financings for new projects.
Mr. Kowan is part of the renewable energy finance practice at Taylor English Duma which structures tax credit-driven financings for project developers, sponsors and investors.
Colorado Governor Bill Ritter this week signed into law an increase in that state’s renewable portfolio standard (RPS).
Colorado’s HB 10-1001 requires Colorado to produce at least 30% of its electricty from renewable sources by the year 2020. The state’s goal had previously been 20%, as established in a 2004 law.
At 30%, Colorado’s RPS is the second most agresssive in the nation, trailing only Maine which seeks to achieve 40% by 2017.
The bill requires a portion of the RPS to be met through a subset of renewable generation, or “distributed generation” (DG), which does not require additional transmission facilities to connect to the grid. By 2015 and through 2019, 20 percent of retail electricity sales in Colorado must be renewable with DG equaling at least 1¾ percent of retail electricity sales; 30 percent of its retail electricity sales by 2020 and thereafter with DG equaling at least 3 percent of its retail electricity sales.
The bill will apply to all providers of retail electric service in Colorado, other than municipally owned utilities that serve 40,000 or fewer customers.
The bill’s sponsors say that the measure will create thousands of new jobs as a result of the shift in sources of electrical generation.
After the House and Senate passed bills including an extension of the alternative fuel mixture and biodiesel tax credit program, alternative fuel producers assumed that Congress would act quickly to put the legislation into a form that could be signed by the President.
It has been more than two weeks now, however, and still Congress has not reconciled the two bills.
House Ways and Means Committee Chairman Sander Levin (D-Mich.) is quoted by BNA Daily Tax Reports (March 23) to say that if lawmakers must hold a formal conference committee to settle differences on legislation extending expired and expiring tax cuts, it could be a long time before a compromise is reached.
Levin’s comments came the day after he told the House Rules Committee that it is “uncertain” when the House will consider the $31 billion extenders package (H.R. 4213), telling that panel the Senate-passed legislation has “many other provisions in it we need to consider within the committee and I’m thinking we’re going to have a conference committee and if we do I think the likely result is it will take considerable time to complete it.”
According to Levin, the House and the Senate used different offsets to pay for AFM and biodiesel tax cuts that expired December 31, 2009.
Until the bills are reconciled and signed by the President, the AFM and biodiesel tax credit remain in abeyance and the alternative fuel industry remains in limbo.
Two bills have recently been introduced in the Senate that would expand or extend tax credit programs for offshore wind projects.
Senate Bill 3062 sponsored by Sen. Tom Carper (D-Del) would extend existing tax credits for offshore wind projects until January 1, 2020.
The Deepwater Offshore Wind Incentive Act (S. 3064 sponsored by Senators Carper and and Susan Collins (R-Maine) would offer tax credits to “deepwater offshore” wind projects. Some project developers believe that deepwater projects may be able to circumvent some of the environmental and NIMBY resistance tocloser-in offshore wind projects.
S. 3064 would increase the Section 45 production tax credit for “deepwater offshore” wind projects to 3.04 cents per kWh, with an inflation adjustment for years after 2010. The bill would also extend the placed in service date for qualifying projects to 2030 for Section 48 investment tax credit purposes.
The bill defines “deepwater offshore” projects as any project that is located in water with a depth of 60 meters or more (regardless of whether the project is in the internal or territorial waters of the U.S.)
Both bills have been referred to the Senate Finance Committee.
Blue Fire Ethanol and a consortium of 31 other alternative fuel producers have sent a letter to Congress asking for a 30% investment tax credit for biofuels. While alternative fuel producers were encouraged by last week’s passage of extenders legislation to extend the alternative fuel mixture and biodiesel excise tax credit programs, those extentions are temporary.
While the national renewable fuels standard contemplates increasing amounts of biofuels by 2010, there are no commercial scale cellulosic ethanol plants schedule to come online before 2011, according to one industry letter sent to Congress.
The U.S. Senate yesterday voted by a margin of 82-36 to pass the American Workers, State and Business Relief Act, which included H.R. 4213. That bill includes a one year extension of the biodiesel excise tax credit and the alternative fuel mixture credit.
Producers reacted with a sign of relief and reportedly have re-commenced or ramped up production in response to the news.
For more background on the biodiesel and alternative fuel excise tax credits, please check out our recent podcast on Lexis-Nexis.
On Friday, March 5, 2010, Senate Majority Leader Harry Reid (D. NV) filed a motion for cloture on H.R. 4213, the House tax extenders bill, which includes an extension of the biodiesel tax credit and alternative fuel mixture tax credit programs through December 31, 2010.
The Senate is expected to vote on the full bill in the coming week.