The Energy Improvement and Extension Act of 2008 embedded in the economic stimulus legislation (H.R. 1424) that President Bush signed into law on October 3, 2008, provides nearly $17 billion in various tax credits to promote clean power generation technologies, alternative fuels, renewable energy and energy efficiency.
Renewable Energy Initiatives
While the 2008 Act provides notable incentives for investments in several emerging technologies such as hydrokinetics, fuel cells, geothermal and open-loop biomass facilities, solar and wind emerged as the biggest winners. For commercial-scale wind power producers, the Act provides a brief, although relatively costly, extension of the production tax credit as well as a variety of incentives for microturbines and residential-scale wind projects. For the solar industry, the Act extends the existing 30 percent investment tax credit for solar energy facilities and, perhaps most notably, eliminates the cap on the existing 30 percent tax credit for investments in residential solar.
Extension and Expansion of PTC — Section 45 of the Tax Code allows a production tax credit (PTC) for “qualified facilities” that generate electricity from “qualified energy resources.” The 2008 Act expanded the definition of “qualified energy resources” to include “marine and hydrokinetic renewable energy.” As a result, energy derived from marine resources such as waves, tides, and temperature differentials are now eligible for the PTC. The Act also expands the definition of “open-loop biomass facility,” “trash combustion facility,” and the definition of “non-hydroelectric dam.”
The 2008 Act extends the PTC for commercial wind by one year for facilities placed in service by January 1, 2010. The Act also extends the PTC for other types of qualified facilities such as biomass, geothermal, solar, small irrigation and landfill gas, for two years, to January 1, 2011 and for marine and hydrokinetic energy facilities until 2012.
Among the biggest beneficiaries are producers of energy-efficient appliances (e.g., stoves and water heaters) as well as producers of smart meters and smart grid systems. For example, the Act extends until 2009 existing tax credits for homeowner investments in energy-efficient appliances and extended until 2013 the existing tax credit for the costs of energy-efficient property installed in commercial buildings. The combined value of these tax credits is nearly $2 billion.
Coal Projects and Coal Gasification Investment CreditsThe 2008 Act provides new tax credits in section 48A of the Code for qualifying advanced coal electricity projects and in section 48B of the Code for qualifying coal gasification projects that demonstrate the greatest potential for carbon capture and sequestration. Credits are to be awarded through an application process, with priority given to projects demonstrating the greatest CO2 sequestration. To be considered qualifying, an advanced coal electricity project must capture at least 65percent of the facility’s CO2 emissions and a coal gasification project must capture and sequester at least 75 percent of the CO2 emissions.
Commuting by bike is also encouraged. The 2008 Act allows employers to provide fringe benefits of up to $20 a month to employees who bike to work. Bicycle commuters may spend the benefits on maintaining, repairing or buying bicycles.