The Consolidated Appropriations Act of 2016 (P.L. 114-113) provided multi-year, phase-down extensions of both the Investment Tax Credit (ITC) and Production Tax Credit (PTC). It also extended bonus first-year depreciation for qualified energy properties to include property acquired before Jan. 1, 2020.
The Tax Reform Act passed by Congress at the end of 2017 preserves the ITC and PTC and improves bonus depreciation to allow a 100% deduction in the first year instead of 50% in the first year, with the balance taken over the next four years.
The Investment Tax Credit (ITC) reduces federal income taxes based on capital investment in innovative and renewable energy projects (measured in dollars). The ITC is earned when the equipment is placed into service. For information on these incentives, click on the buttons below.
The Production Tax Credit (PTC) reduces the federal income taxes of innovative and renewable energy projects based on the electrical output (measured in kilowatt-hours, or kWh) of grid-connected renewable energy facilities
Here are the funding options and incentives available through the Internal Revenue Service and U.S. Treasury:
Business Energy Investment Tax Credit
Renewable Electricity Production Tax Credit
Clean Renewable Energy Bonds (CREBs)
Clean renewable energy bonds (CREBs) can be used to finance renewable energy projects using technologies that also qualify for the federal renewable energy production tax credit (PTC): wind, closed-loop and open-loop biomass, geothermal energy resources, landfill gas, municipal solid waste, qualified hydroelectric, and marine and hydrokinetic energy resources.
CREBs may be issued by electric cooperatives, government entities (states, cities, counties, territories, Indian tribal governments or any political subdivision thereof), and certain lenders. The bondholder receives federal tax credits in lieu of a portion of the traditional bond interest, resulting in a lower effective interest rate for the borrower. The issuer remains responsible for repaying the principal on the bond.
Qualified Energy Conservation Bonds (QECBs)
Qualified Energy Conservation Bonds (QECBs) may be used by state, local and tribal governments to finance certain types of energy projects. QECBs are qualified tax credit bonds, and in this respect are similar to Clean Renewable Energy Bonds or CREBs.
The difference is that borrower who issues the bond pays back only the principal of the bond, and the bondholder receives federal tax credits in lieu of the traditional bond interest. The tax credit may be taken quarterly to offset the tax liability of the bondholder. Also, bondholders will receive only 70% of the full rate set by the Treasury Department under 26 USC § 54A. QECB rates are available here.
Credits exceeding a bondholder's tax liability may be carried forward to the succeeding tax year, but cannot be refunded. Energy conservation bonds differ from traditional tax-exempt bonds in that the tax credits issued through the program are treated as taxable income for the bondholder.
In contrast to CREBs, QECBs are not subject to a U.S. Department of Treasury application and approval process. Bond volume is instead allocated to each state based on the state's percentage of the U.S. population as of July 1, 2008