IRS Increases Value of Production Tax Credit for Wind, Geothermal, Closed-Loop Biomass

On April 3, the IRS announced an increase in the value of the production tax credit (PTC) for wind, geothermal, and closed-loop biomass projects, from 2.2 cents per kilowatt-hour to 2.3 cents per kilowatt hour. This increase in the PTC value may be especially valuable for Midwestern wind and biomass projects.

The PTC remains at 1.1 cents per kilowatt-hour for open-loop biomass, waste to energy, qualified hydropower, and marine and hydrokinetic energy.

This announcement follows the important extension of the PTC for renewable projects that begin construction before the end of 2013. Before this extension, wind projects needed to be completed before the end of 2012, and biomass and waste-to-energy projects needed to be completed before the end of 2013. Godfrey & Kahn continues to monitor IRS and Treasury announcements for anticipated guidance on the "begin construction" standard. We will provides updates regarding this standard as soon as guidance is available.

All of the above types of renewable energy projects can take advantage of a 30% investment tax credit in lieu of the PTC. Depending on the type of project, the 30% investment tax credit may provide substantially greater value than the PTC.

Please contact any member of Godfrey & Kahn's Renewable Energy & Energy Efficiency Practice Group if you have any questions about production tax credits or investment tax credits, or other questions about renewable energy development.