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Renewable Electricity Production Tax Credit

On April 15, 2013, the IRS released guidance for how it will determine eligibility for the PTC for renewable energy projects for the year-end 2013 deadline. To qualify, a facility must have begun construction before January 1, 2014. A project is considered under construction if "physical work of a significant nature has begun" or at least 5% of the total cost of the project has been incurred.

The renewable electricity production tax credit (PTC) is a per kilowatt-hour (kWh) federal tax credit included under Section 45 of the U.S. tax code for electricity generated by qualified energy resources. The PTC provides a corporate tax credit of 1.1 cents/kWh for landfill gas, open-loop biomass, municipal solid waste resources, qualified hydropower and marine and hydrokinetic (150 kW or larger). Electricity from wind, closed-loop biomass and geothermal resources receive 2.2 cents/kWh. Projects that receive other government grants or subsidies receive a discounted tax credit.

Initially enacted as part of the Energy Policy Act of 1992, the credit has expired and been renewed on a number of occasions, including 2009, with the passage of the American Recovery and Reinvestment Act of 2009, and January 2013 with the passage of the American Taxpayer Relief Act of 2012. The January 2013 legislation revised the eligibility requirement that facilities "be placed into service" to "have begun construction" and revised the definition of "municipal solid waste" to exclude "paper that is commonly recycled and which has been segregated from other solid waste". On April 15, 2013, the Internal Revenue Service (IRS) released Notice 2013-29 which provided developers with guidance on the meaning of "begun construction". The guidance stipulates that taxpayers must demonstrate that renewable energy facilities have begun construction before January 1, 2014 via one of two methods: 1) show that "physical work of a significant nature" has begun, or 2) show that at least 5% of the total cost of the project has been incurred (referred to as "safe harbor"). Examples of "physical work of a significant nature" provided by the IRS include the 1) excavation of foundations, 2) installation of anchor bolts into the ground, 3) pouring concrete pads for foundations, and 4) building roads that are integral to the facility's equipment operation and maintenance. Additionally, "continuous efforts to advance towards completion of the facility" must be made after construction has begun. Notice 2013-29 is available online at http://www.irs.gov/pub/irs-drop/n-13-29.pdf (PDF). Additional information regarding the PTC can be found online using the Database of State Incentives for Renewables & Efficiency (DSIRE) at http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US13F&re=1&ee=1.

Typically, landfill gas energy project owners can claim the PTC for the first 10 years of operation and there is no maximum limit for credits claimed. To apply for the tax credit, a business must complete Form 8835, "Renewable Electricity Production Credit," and Form 3800, "General Business Credit." Form 8835 is available online at www.irs.gov/pub/irs-pdf/f8835.pdf (PDF); form 3800 is available online at www.irs.gov/pub/irs-pdf/f3800.pdf (PDF).

For More Information

Contact: Public Information - IRS
U.S. Internal Revenue Service
1111 Constitution Ave., NW
Washington, DC 20224
Phone:800-829-1040
Website:http://www.irs.gov

 

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Business Energy Investment Tax Credit

The American Recovery and Reinvestment Act of 2009 modified Section 48 of the U.S. tax code to allow owners of PTC-eligible renewable projects, such as landfill gas energy projects, to make an irrevocable election to earn a one-time corporate investment tax credit (ITC) in lieu of claiming the PTC. The ITC is equal to 30 percent of the costs attributable to the facility, which typically excludes other project costs, such as transmission equipment or ancillary site improvements. The ITC does not impose the third party power sale requirement that the PTC does.

To apply for the tax credit, a business must complete Form 3468, "Investment Credit," which is available online at www.irs.gov/pub/irs-pdf/f3468.pdf (PDF) (3 pp, 245 K, About PDF).

For More Information

Contact: Public Information - IRS
U.S. Internal Revenue Service
1111 Constitution Ave., NW
Washington, DC 20224
Phone:800-829-1040
Website:http://www.irs.gov

 

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Section 1603 Cash Grant for Renewable Energy

In April 2011, the U.S. Department of Treasury released an updated guidance document that summarizes revisions to Section 1603 Grants (PDF). (21 pp, 265 K, About PDF)

Administered by the U.S. Department of Treasury, Section 1603 of the American Recovery and Reinvestment Act of 2009 created a new grant program for taxpayers eligible for the Business Energy ITC. A facility owner can choose to receive a one-time grant equal to 30 percent of the construction and installation costs for the facility, as long as the facility is depreciable or amortizable. To be eligible, the facility must be placed in service in 2009, 2010, or 2011 or construction must begin in any of those years and be completed prior to the end of 2013. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extended the grant application deadline of Section 1603 one year to October 1, 2012.

For More Information

Contact: Grant Information
Department of the Treasury

 

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Qualified Energy Conservation Bonds

In 2008, Congress created Qualified Energy Conservation Bonds, a financing program similar to CREBs.

The Energy Improvement and Extension Act of 2008, created a funding mechanism similar to the Clean Renewable Energy Bond (CREB) model in which a bondholder receives tax credits in lieu of interest. The act authorizes state, local and tribal governments to issue energy conservation bonds to finance qualified projects. The bond proceeds can be used to finance capital expenditures that achieve the following goals, such as:

  • Reduction of energy consumption by at least 20 percent
  • Implementation of a green community program
  • Electricity generation from renewable resources in rural areas
  • Other qualified purposes

For More Information

Contact: Zoran Stojanovic
U.S. Internal Revenue Service
1111 Constitution Ave., NW
Washington, DC 20224
Phone:202-622-3980
Website:http://www.irs.gov/pub/irs-drop/n-09-29.pdf (PDF) (12 pp, 28K)

 

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