Fiscal Cliff Legislation Can Help Your Tribe Obtain Energy IndependenceJanuary 17, 2013
As you may have heard, the Fiscal Cliff legislation contains incentives targeted toward economic development in Indian country. These include the extension of both the Indian employment tax credit, which encourages businesses to hire tribal members and their spouses, and the accelerated depreciation incentive, which helps businesses located on Indian lands. Both of these incentives can help encourage renewable energy development and energy independence in Indian country, since they can lower both the development and theoperating costs of energy facilities if Tribes partner with taxable entities in developing energy facilities.
Substantially more important to tribal renewable energy development is the Fiscal Cliff legislation's extension of the production tax credit and investment tax credit for renewable energy facilities. For wind projects, these tax credits were only available for facilities that were completed by the end of last year. For biomass, landfill gas, waste-to-energy facilities, and certain other renewable projects, facilities needed to be completed by the end of this year to receive tax credits. The Fiscal Cliff legislation substantially extends the time frame for these tax credits (which, on a net basis, can pay for about 25% of a tribal renewable energy facility) by only requiring that the facilities begin construction by the end of this year. The IRS will likely develop guidance soon regarding when construction on the projects must be completed, but this change in the law provides an opportunity for tribes if they partner with taxable partners, to develop renewable energy projects now that are substantially funded by investment tax credits.
In addition, tribes can potentially structure their energy development projects so that they receive value from both the investment tax credits and from grants and other incentives that tribes can receive from the federal government, state governments, and utilities. Combined, these credits and grants can fund a large percentage of the energy projects.
Please free to contact any member of the Godfrey & Kahn Environmental & Energy Strategies Practice Group or the Indian Nations Law Practice Group for more information about how these new changes may provide greater opportunities for your tribal energy projects.
TRIBAL ENERGY INDEPENDENCE SERIES
This e-mail is part of a series that highlights tools available to help tribes to achieve energy independence. In particular, these e-mails focus on strategies to assist tribes in developing renewable and other energy resources, and implementing energy efficiency projects, so that they can work toward energy independence in a manner consistent with their environmental, economic and other goals. If any of these issues are of interest, please contact Godfrey & Kahn to discuss how your Tribe may be able to use these strategies.