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GEA Forum 2014
Tax Incentives

Federal Tax Incentives:
A number of energy provisions were created, modified or expanded by the American Recovery and Reinvestment Act (ARRA) of 2009. The provisions listed below as described by the IRS are of particular interest to geothermal energy:

Residential Energy Efficient Property Credit (Section 1122): This nonrefundable energy tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines. The new law removes some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property. See Notice 09-41.

New Clean Renewable Energy Bonds (Section 1111): The new law increases the amount of funds available to issue new clean renewable energy bonds from the one-time national limit of $800 million to $2.4 billion. These qualified tax credit bonds can be issued to finance certain types of facilities that generate electricity from renewable sources (for example, wind and solar).

Extension of Renewable Energy Production Tax Credit (Section 1101): The new law generally extends the “eligibility dates” of a tax credit for facilities producing electricity from wind, closed-loop biomass, open-loop biomass, geothermal energy, municipal solid waste, qualified hydropower and marine and hydrokinetic renewable energy. The new law extends the "placed in service date" for wind facilities to Dec. 31, 2012. For the other facilities, the placed-in-service date was extended from December 31, 2010 (December 31, 2011 in the case of marine and hydrokinetic renewable energy facilities) to Dec. 31, 2013.

Advanced Energy Manufacturing Tax Credit (48C):The ARRA authorizes the Department of Treasury to award $2.3 billion in tax credits for qualified investments in advanced energy projects, to support new, expanded, or re-equipped domestic manufacturing facilities. The Advanced Energy Manufacturing Tax Credit (MTC) was authorized in Section 1302 of ARRA and requires the Secretary of Treasury to work in consultation with the Secretary of Energy. The MTC is also referred to as Section 48C of the Internal Revenue Code. The goal of the MTC is to grow the domestic manufacturing industry for clean energy, thereby supporting the larger goals of ARRA to stimulate economic growth, create jobs, and reduce greenhouse gas emissions. In short, the MTC will help secure American leadership in the clean energy sector. The MTC provides a 30% credit for investments in new, expanded, or re-equipped advanced energy manufacturing projects. Up to $2.3 billion in MTCs will be allocated for advanced energy projects, which will support total capital investments of almost $7.7 billion in new renewable and advanced energy manufacturing projects. Source: http://www.energy.gov/recovery/48C.htm.

Election of Investment Credit in Lieu of Production Credit (Section 1102): Businesses who place in service facilities that produce electricity from wind and some other renewable resources after Dec 31, 2008 can choose either the energy investment tax credit, which generally provides a 30 percent tax credit for investments in energy projects or the production tax credit, which can provide a credit of up to 2.1 cents per kilowatt-hour for electricity produced from renewable sources. A business may not claim both credits for the same facility.

Coordination With Renewable Energy Grants (Section 1104): Business taxpayers also can apply for a grant instead of claiming either the energy investment tax credit or the renewable energy production tax credit for property placed in service in 2009 or 2010. In some cases, if construction begins in 2009 or 2010, the grant can be claimed for energy investment credit property placed in service through 2016, and for qualified renewable energy facilities, the grant is 30 percent of the investment in the facility and the property must be placed in service before 2014 (2013 for wind facilities). A complete summary of key ARRA energy tax provisions is available online through the IRS at: http://www.irs.gov/newsroom/article/0,,id=206871,00.html.


Other Federal Financial Incentives:
The ARRA provided for a variety of additional financial incentives such as grants, loan grants, and loan guarantees. The Department of Energy is responsible under ARRA for appropriating funds for loan guarantees and grants for geothermal development. An expanded list of geothermal appropriations is available at: http://www.energy.gov/recovery/renewablefunding.htm#GEOTHERMAL.

  • Loan Guarantee: FIPP: Federal Loan Guarantee for Commercial Technology Renewable Energy Projects ($750 M)
  • Grant: Request for Information: Advanced Research Projects Agency – Energy (Round II) ($400 M)
  • Grant: Geothermal Technologies Program: Ground Source Heat Pumps ($50 M)
  • Grant: Enhanced Geothermal Systems Component Research and Development/Analysis ($56 M)
  • Grant: Geothermal Technologies Program: Validation of Innovative Exploration Technologies; Geothermal Energy Production; Geothermal Data Development, Collection, and Maintenance ($170 M)
  • Grant: Enhanced Geothermal Systems Demonstrations ($90 M)
  • Grant: Advanced Research Projects Agency – Energy ($400 M)
  • Loan Guarantee: 1703: Innovative Energy Efficiency, Renewable Energy and Advanced Transmission and Distribution Technologies (2009) ($8500 M)
  • Loan Guarantee: 1705: Financial Institution Partnership Program (FIPP) ($750 M)
  • Grant: Science: Small Business Innovation Research Phase I ($37 M)

State Level Tax and Financial Incentives:

At the state level, the most important laws are the renewable portfolio standards (RPS) that require electricity suppliers to incorporate a growing percentage of power generated from renewable sources into their energy mix. Today, 37 states, plus the District of Columbia, have some sort of renewable requirement or goal. These standards vary by state and consider a number of local objectives ranging from economic growth to resource availability. As a result, eligible sources of renewable energy also fluctuate by state, yielding different definitions of ‘renewable’ and ‘alternative’ energy sources.

Many states also provide personal, corporate, sales or property tax incentives for renewable energy for which geothermal projects may qualify. A database of state incentives is available online at: http://www.dsireusa.org. However, we encourage readers to check with energy offices in individuals states to ensure that the information on this database is accurate and timely.

One unique program worth noting is California's grant fund “to promote the development of new or existing geothermal resources and technologies” known as the Geothermal Resources Development Account. Funded from geothermal royalty revenues, more information about the GRDA account is available at: http://www.energy.ca.gov/geothermal/grda.html.

Small Power and Direct Use Incentives

In August, 2009 GEA produced a report on State and Federal Incentives for Small Power and Direct-Use Geothermal Production which examines energy policies in states with identified geothermal resources.

Table 1: Overview of State-Level Geothermal Incentives (Source: US Department of Energy, GEA)

Legend:
- absence of that particular incentive in the respective state
+ presence of one particular incentive/program within the state
+# more than one incentive of that particular type are available within the respective state

State

Personal Tax

Corporate Tax

Sales Tax

Property Tax

Rebates

Grants

Loans

Industry Support

Bonds

Production Incentives

Federal

-

+3

-

-

-

+3

+4

+

-

+

Alaska

-

-

-

-

-

+

-

-

-

-

Arizona

-

-

-

+

+3

-

-

-

-

-

California

+

-

-

-

-

-

-

-

-

+

Colorado

-

-

+2

+2

-

+

+

-

-

-

Hawaii

-

-

-

-

-

-

-

+

-

-

Idaho

-

-

+

+

-

-

-

-

+

-

Montana

-

+

-

+3

-

-

-

-

-

-

Nevada

-

-

+

+3

-

-

-

-

-

-

New Mexico

-

+

-

+

-

-

-

+

-

+

Oregon

-

+

-

+

-

-

+

-

-

-

Utah

+

+

+

-

-

-

-

+

-

-

Washington

-

-

+

-

-

-

-

-

-

+

Total

2

7

6

12

3

5

6

4

1

4

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