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The Basics: Renewable Energy Tax Credits

The Basics: Renewable Energy Tax Credits

Empowering a more energy-independent and environmentally sustainable future.

Intended to promote production of energy from renewable energy resources, Renewable Energy Tax Credit (RETC) programs support the acquisition, installation and operation of commercial and residential renewable energy facilities, including solar, wind, biomass and geothermal energy.

RETC Overview

There are two primary types of RETCs: Investment Tax Credits (ITCs) and Production Tax Credits (PTCs).

  • Investment Tax Credits, which are utilized primarily for solar facilities, provide a tax credit equal to 30 percent of the eligible costs to the owners of certain renewable energy facilities that have been placed in service. This tax credit is available through 2016, at which point it is reduced to a permanent 10 percent credit.
    • 1603 Grants for Solar: In 2008, Congress passed the American Recovery and Reinvestment Act (ARRA), which gives owners of certain renewable energy facilities the option to receive a 30 percent, tax exempt grant in lieu of the ITC. Due to the program’s 2011 sunset, 1603 grants are currently only available for energy projects that have met specific safe-harbor rules (i.e. more than five percent of eligible project costs had been incurred in 2011) and only if such projects will be operational by the end of 2016.
  • Production Tax Credits, which are primarily available for wind, biomass, geothermal, and landfill gas facilities, provide a tax credit based on the amount of energy produced by renewable energy projects and are generally available to the owners of such projects. The PTC provides an inflation-adjusted cent per kilowatt-hour tax credit for the first 10 years of a renewable energy facility's operation and is available for projects that have “begun construction” before January 1, 2014.
    • ITC in lieu of PTC: Along with the creation of the 1603 grant, ARRA also permitted PTC-eligible projects to elect to receive the ITC in lieu of the PTC. Following the American Tax Relief Act of 2012, the election will be available for projects that have begun construction before January 1, 2014.

RETC Qualification Criteria

While qualifications differ for ITCs and PTCs, one or both forms of tax credits may be available for the following non-exhaustive list of technologies:

  • Solar: Conversion of solar energy into electricity through the use of photovoltaics
  • Solar Thermal Technologies: Generation of heat through the harnessing of solar energy using solar thermal collectors
  • Concentrated Solar Power ("CSP"): Generation of electricity using steam turbines via liquid that has been superheated by concentrated sunlight
  • Wind: Production of electricity from wind energy using a turbine
  • Biomass: Conversion of renewable biomass fuels from living or recently living organisms to heat and electricity using processes similar to that used with fossil fuels
  • Fuel Cells: Conversion of gas fuel into electricity using electrochemical means via an integrated system comprised of a fuel cell stack assembly and associated balance of plant components
  • Geothermal: Production of electricity derived from a geothermal deposit, where heat from the Earth is stored in rocks or in an aqueous liquid or vapor
  • Landfill Gas: Production of electricity from gas derived from the biodegradation of municipal solid waste

Although personal federal tax credits are available for some renewable energy facilities, our RETC staff partners exclusively with commercial owners and developers.

A Dedicated Team

Our experienced professionals are experts in RETCs and can help provide project financing to meet a range of needs.

Portfolio Highlights

Our work has provided investment capital and generated substantial returns for renewable energy projects nationwide.

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U.S. Bank and its representatives do not provide tax or legal advice. Each tax and financial situation is unique. Consult your tax and/or legal advisor for advice and information concerning a particular situation.

U.S. Bank is not responsible for and does not guarantee the products, services or performance of its affiliates and third parties.

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