Redistribution of wealth is like cannibalism - once we agree that it is OK to eat someone else the debate switches from whether or not we should eat someone to who should we eat last.
Wednesday, October 22, 2008
Quote of the day
Monday, October 20, 2008
Code Sec. 48. Energy Credit
(a) Energy credit.
(1) In general.
For purposes of section 46 , except as provided in 1 2 paragraphs (1)(B) , and (2)(B) , (3)(B) , and (4)(B) of subsection (c) , the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.
(2) Energy percentage.
(A) In general. The energy percentage is—
(i) 30 percent in the case of—
(I) qualified fuel cell property,
(II) energy property described in paragraph (3)(A)(i) but only with respect to periods ending before 3 January 1, 2017, 4
(III) energy property described in paragraph (3)(A)(ii), and
(IV) qualified small wind energy property , and
(ii) in the case of any energy property to which clause (i) does not apply, 10 percent.
(B) Coordination with rehabilitation credit. The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.
(3) Energy property.
For purposes of this subpart, the term “energy property” means any property—
(A) which is—
(i) equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, excepting property used to generate energy for the purposes of heating a swimming pool,
(ii) equipment which uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight but only with respect to periods ending before 6 January 1, 2017,
(iii) equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2) ), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage, 7
(iv) qualified fuel cell property or qualified microturbine property, 8 9
(v) combined heat and power system property, 11 12
(vi) qualified small wind energy property, 14 or
(vii) equipment which uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure, but only with respect to periods ending before January 1, 2017,
(B)
(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or
(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer,
(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and
(D) which meets the performance and quality standards (if any) which—
(i) have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy), and
(ii) are in effect at the time of the acquisition of the property.
16 Such term shall not include any property which is part of a facility the production from which is allowed as a credit under section 45 for the taxable year or any prior taxable year.
(4) Special rule for property financed by subsidized energy financing or industrial development bonds.
(A) Reduction of basis. For purposes of applying the energy percentage to any property, if such property is financed in whole or in part by—
(i) subsidized energy financing, or
(ii) the proceeds of a private activity bond (within the meaning of section 141 ) the interest on which is exempt from tax under section 103, the amount taken into account as the basis of such property shall not exceed the amount which (but for this subparagraph) would be so taken into account multiplied by the fraction determined under subparagraph (B).
(B) Determination of fraction. For purposes of subparagraph (A), the fraction determined under this subparagraph is 1 reduced by a fraction—
(i) the numerator of which is that portion of the basis of the property which is allocable to such financing or proceeds, and
(ii) the denominator of which is the basis of the property.
(C) Subsidized energy financing. For purposes of subparagraph (A), the term “subsidized energy financing” means financing provided under a Federal, State, or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy.
(b) Certain progress expenditure rules made applicable.
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a).
(c) 17 Definitions.
For purposes of this section—
(1) Qualified fuel cell property.
(A) In general. The term “qualified fuel cell property” means a fuel cell power plant which—
(i) has a nameplate capacity of at least 0.5 kilowatt of electricity using an electrochemical process, and
(ii) has an electricity-only generation efficiency greater than 30 percent.
(B) Limitation. In the case of qualified fuel cell property placed in service during the taxable year, the credit otherwise determined under subsection (a) for such year with respect to such property shall not exceed an amount equal to 18 $1,500 for each 0.5 kilowatt of capacity of such property.
(C) Fuel cell power plant. The term “fuel cell power plant” means an integrated system comprised of a fuel cell stack assembly and associated balance of plant components which converts a fuel into electricity using electrochemical means.
(D) Termination. The term “qualified fuel cell property” shall not include any property for any period after 20 December 31, 2016.
(2) Qualified microturbine property.
(A) In general. The term “qualified microturbine property” means a stationary microturbine power plant which—
(i) has a nameplate capacity of less than 2,000 kilowatts, and
(ii) has an electricity-only generation efficiency of not less than 26 percent at International Standard Organization conditions.
(B) Limitation. In the case of qualified microturbine property placed in service during the taxable year, the credit otherwise determined under subsection (a) for such year with respect to such property shall not exceed an amount equal $200 for each kilowatt of capacity of such property.
(C) Stationary microturbine power plant. The term “stationary microturbine power plant” means an integrated system comprised of a gas turbine engine, a combustor, a recuperator or regenerator, a generator or alternator, and associated balance of plant components which converts a fuel into electricity and thermal energy. Such term also includes all secondary components located between the existing infrastructure for fuel delivery and the existing infrastructure for power distribution, including equipment and controls for meeting relevant power standards, such as voltage, frequency, and power factors.
(D) Termination. The term “qualified microturbine property” shall not include any property for any period after 22 December 31, 2016.
(3) Combined heat and power system property.
(A) Combined heat and power system property. The term “combined heat and power system property” means property comprising a system—
(i) which uses the same energy source for the simultaneous or sequential generation of electrical power, mechanical shaft power, or both, in combination with the generation of steam or other forms of useful thermal energy (including heating and cooling applications),
(ii) which produces—
(I) at least 20 percent of its total useful energy in the form of thermal energy which is not used to produce electrical or mechanical power (or combination thereof), and
(II) at least 20 percent of its total useful energy in the form of electrical or mechanical power (or combination thereof),
(iii) the energy efficiency percentage of which exceeds 60 percent, and
(iv) which is placed in service before January 1, 2017.
(B) Limitation.
(i) In general. In the case of combined heat and power system property with an electrical capacity in excess of the applicable capacity placed in service during the taxable year, the credit under subsection (a)(1) (determined without regard to this paragraph ) for such year shall be equal to the amount which bears the same ratio to such credit as the applicable capacity bears to the capacity of such property.
(ii) Applicable capacity. For purposes of clause (i) , the term “applicable capacity” means 15 megawatts or a mechanical energy capacity of more than 20,000 horsepower or an equivalent combination of electrical and mechanical energy capacities.
(iii) Maximum capacity. The term “combined heat and power system property” shall not include any property comprising a system if such system has a capacity in excess of 50 megawatts or a mechanical energy capacity in excess of 67,000 horsepower or an equivalent combination of electrical and mechanical energy capacities.
(C) Special rules.
(i) Energy efficiency percentage. For purposes of this paragraph , the energy efficiency percentage of a system is the fraction—
(I) the numerator of which is the total useful electrical, thermal, and mechanical power produced by the system at normal operating rates, and expected to be consumed in its normal application, and
(II) the denominator of which is the lower heating value of the fuel sources for the system.
(ii) Determinations made on Btu basis. The energy efficiency percentage and the percentages under subparagraph (A)(ii) shall be determined on a Btu basis.
(iii) Input and output property not included. The term “combined heat and power system property” does not include property used to transport the energy source to the facility or to distribute energy produced by the facility.
(D) Systems using biomass. If a system is designed to use biomass (within the meaning of paragraphs (2) and (3) of section 45(c) without regard to the last sentence of paragraph (3)(A) ) for at least 90 percent of the energy source—
(i) subparagraph (A)(iii) shall not apply, but
(ii) the amount of credit determined under subsection (a) with respect to such system shall not exceed the amount which bears the same ratio to such amount of credit (determined without regard to this subparagraph ) as the energy efficiency percentage of such system bears to 60 percent.
(4) Qualified small wind energy property.
(A) In general. The term “qualified small wind energy property” means property which uses a qualifying small wind turbine to generate electricity.
(B) Limitation. In the case of qualified small wind energy property placed in service during the taxable year, the credit otherwise determined under subsection (a)(1) for such year with respect to all such property of the taxpayer shall not exceed $4,000.
(C) Qualifying small wind turbine. The term “qualifying small wind turbine” means a wind turbine which has a nameplate capacity of not more than 100 kilowatts.
(D) Termination. The term “qualified small wind energy property” shall not include any property for any period after December 31, 2016.
Effective Date: (Sec. 105(b) Div B, HR1424, 10/3/2008) effective for periods after 10/3/2008, in tax. yrs. end. after 10/3/2008, under rules similar to the rules of Code Sec. 48(m) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).
The following paragraph is not part of the Section 48 tax code, but outlines a change in the depreciation period for geothermal heat pumps that will follow as a result of their new status as “energy property:”
Section 168(e)(3)(B)(vi)(I) provides that any property which is described in Section 48(a)(3)(A) as Energy Property is 5-year depreciable property. GHPs placed in service after October 3, 2008 would therefore be subject to a 5-year depreciation period. GHPs owned by a public utility may also qualify as 5-year MACRS property on account of the flush language in Section 168(e)(3)(B) of the Code.
(1) In general.
For purposes of section 46 , except as provided in 1 2 paragraphs (1)(B) , and (2)(B) , (3)(B) , and (4)(B) of subsection (c) , the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.
(2) Energy percentage.
(A) In general. The energy percentage is—
(i) 30 percent in the case of—
(I) qualified fuel cell property,
(II) energy property described in paragraph (3)(A)(i) but only with respect to periods ending before 3 January 1, 2017, 4
(III) energy property described in paragraph (3)(A)(ii), and
(IV) qualified small wind energy property , and
(ii) in the case of any energy property to which clause (i) does not apply, 10 percent.
(B) Coordination with rehabilitation credit. The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.
(3) Energy property.
For purposes of this subpart, the term “energy property” means any property—
(A) which is—
(i) equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, excepting property used to generate energy for the purposes of heating a swimming pool,
(ii) equipment which uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight but only with respect to periods ending before 6 January 1, 2017,
(iii) equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2) ), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage, 7
(iv) qualified fuel cell property or qualified microturbine property, 8 9
(v) combined heat and power system property, 11 12
(vi) qualified small wind energy property, 14 or
(vii) equipment which uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure, but only with respect to periods ending before January 1, 2017,
(B)
(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or
(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer,
(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and
(D) which meets the performance and quality standards (if any) which—
(i) have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy), and
(ii) are in effect at the time of the acquisition of the property.
16 Such term shall not include any property which is part of a facility the production from which is allowed as a credit under section 45 for the taxable year or any prior taxable year.
(4) Special rule for property financed by subsidized energy financing or industrial development bonds.
(A) Reduction of basis. For purposes of applying the energy percentage to any property, if such property is financed in whole or in part by—
(i) subsidized energy financing, or
(ii) the proceeds of a private activity bond (within the meaning of section 141 ) the interest on which is exempt from tax under section 103, the amount taken into account as the basis of such property shall not exceed the amount which (but for this subparagraph) would be so taken into account multiplied by the fraction determined under subparagraph (B).
(B) Determination of fraction. For purposes of subparagraph (A), the fraction determined under this subparagraph is 1 reduced by a fraction—
(i) the numerator of which is that portion of the basis of the property which is allocable to such financing or proceeds, and
(ii) the denominator of which is the basis of the property.
(C) Subsidized energy financing. For purposes of subparagraph (A), the term “subsidized energy financing” means financing provided under a Federal, State, or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy.
(b) Certain progress expenditure rules made applicable.
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a).
(c) 17 Definitions.
For purposes of this section—
(1) Qualified fuel cell property.
(A) In general. The term “qualified fuel cell property” means a fuel cell power plant which—
(i) has a nameplate capacity of at least 0.5 kilowatt of electricity using an electrochemical process, and
(ii) has an electricity-only generation efficiency greater than 30 percent.
(B) Limitation. In the case of qualified fuel cell property placed in service during the taxable year, the credit otherwise determined under subsection (a) for such year with respect to such property shall not exceed an amount equal to 18 $1,500 for each 0.5 kilowatt of capacity of such property.
(C) Fuel cell power plant. The term “fuel cell power plant” means an integrated system comprised of a fuel cell stack assembly and associated balance of plant components which converts a fuel into electricity using electrochemical means.
(D) Termination. The term “qualified fuel cell property” shall not include any property for any period after 20 December 31, 2016.
(2) Qualified microturbine property.
(A) In general. The term “qualified microturbine property” means a stationary microturbine power plant which—
(i) has a nameplate capacity of less than 2,000 kilowatts, and
(ii) has an electricity-only generation efficiency of not less than 26 percent at International Standard Organization conditions.
(B) Limitation. In the case of qualified microturbine property placed in service during the taxable year, the credit otherwise determined under subsection (a) for such year with respect to such property shall not exceed an amount equal $200 for each kilowatt of capacity of such property.
(C) Stationary microturbine power plant. The term “stationary microturbine power plant” means an integrated system comprised of a gas turbine engine, a combustor, a recuperator or regenerator, a generator or alternator, and associated balance of plant components which converts a fuel into electricity and thermal energy. Such term also includes all secondary components located between the existing infrastructure for fuel delivery and the existing infrastructure for power distribution, including equipment and controls for meeting relevant power standards, such as voltage, frequency, and power factors.
(D) Termination. The term “qualified microturbine property” shall not include any property for any period after 22 December 31, 2016.
(3) Combined heat and power system property.
(A) Combined heat and power system property. The term “combined heat and power system property” means property comprising a system—
(i) which uses the same energy source for the simultaneous or sequential generation of electrical power, mechanical shaft power, or both, in combination with the generation of steam or other forms of useful thermal energy (including heating and cooling applications),
(ii) which produces—
(I) at least 20 percent of its total useful energy in the form of thermal energy which is not used to produce electrical or mechanical power (or combination thereof), and
(II) at least 20 percent of its total useful energy in the form of electrical or mechanical power (or combination thereof),
(iii) the energy efficiency percentage of which exceeds 60 percent, and
(iv) which is placed in service before January 1, 2017.
(B) Limitation.
(i) In general. In the case of combined heat and power system property with an electrical capacity in excess of the applicable capacity placed in service during the taxable year, the credit under subsection (a)(1) (determined without regard to this paragraph ) for such year shall be equal to the amount which bears the same ratio to such credit as the applicable capacity bears to the capacity of such property.
(ii) Applicable capacity. For purposes of clause (i) , the term “applicable capacity” means 15 megawatts or a mechanical energy capacity of more than 20,000 horsepower or an equivalent combination of electrical and mechanical energy capacities.
(iii) Maximum capacity. The term “combined heat and power system property” shall not include any property comprising a system if such system has a capacity in excess of 50 megawatts or a mechanical energy capacity in excess of 67,000 horsepower or an equivalent combination of electrical and mechanical energy capacities.
(C) Special rules.
(i) Energy efficiency percentage. For purposes of this paragraph , the energy efficiency percentage of a system is the fraction—
(I) the numerator of which is the total useful electrical, thermal, and mechanical power produced by the system at normal operating rates, and expected to be consumed in its normal application, and
(II) the denominator of which is the lower heating value of the fuel sources for the system.
(ii) Determinations made on Btu basis. The energy efficiency percentage and the percentages under subparagraph (A)(ii) shall be determined on a Btu basis.
(iii) Input and output property not included. The term “combined heat and power system property” does not include property used to transport the energy source to the facility or to distribute energy produced by the facility.
(D) Systems using biomass. If a system is designed to use biomass (within the meaning of paragraphs (2) and (3) of section 45(c) without regard to the last sentence of paragraph (3)(A) ) for at least 90 percent of the energy source—
(i) subparagraph (A)(iii) shall not apply, but
(ii) the amount of credit determined under subsection (a) with respect to such system shall not exceed the amount which bears the same ratio to such amount of credit (determined without regard to this subparagraph ) as the energy efficiency percentage of such system bears to 60 percent.
(4) Qualified small wind energy property.
(A) In general. The term “qualified small wind energy property” means property which uses a qualifying small wind turbine to generate electricity.
(B) Limitation. In the case of qualified small wind energy property placed in service during the taxable year, the credit otherwise determined under subsection (a)(1) for such year with respect to all such property of the taxpayer shall not exceed $4,000.
(C) Qualifying small wind turbine. The term “qualifying small wind turbine” means a wind turbine which has a nameplate capacity of not more than 100 kilowatts.
(D) Termination. The term “qualified small wind energy property” shall not include any property for any period after December 31, 2016.
Effective Date: (Sec. 105(b) Div B, HR1424, 10/3/2008) effective for periods after 10/3/2008, in tax. yrs. end. after 10/3/2008, under rules similar to the rules of Code Sec. 48(m) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).
The following paragraph is not part of the Section 48 tax code, but outlines a change in the depreciation period for geothermal heat pumps that will follow as a result of their new status as “energy property:”
Section 168(e)(3)(B)(vi)(I) provides that any property which is described in Section 48(a)(3)(A) as Energy Property is 5-year depreciable property. GHPs placed in service after October 3, 2008 would therefore be subject to a 5-year depreciation period. GHPs owned by a public utility may also qualify as 5-year MACRS property on account of the flush language in Section 168(e)(3)(B) of the Code.
Wednesday, October 15, 2008
Wednesday, October 8, 2008
H.R. 1424 tax credits for geothermal installation
President Bush last week signed into law H.R. 1424, which includes the Energy Improvement and Extension Act of 2008 (the Act). The Act contains a number of tax incentives for renewable energy and other energy activities, including the much-anticipated extension of the production tax credit (PTC) and investment-based energy tax credit (ITC) sunset dates. Notable provisions include:
PTC EXTENSIONS
Geothermal, Biomass, and Other Qualifying Facilities. The Act extends the placed-in-service sunset date for closed-loop biomass, open-loop biomass, geothermal, landfill gas, trash, and qualified hydropower facilities to December 31, 2010.
ITC MODIFICATIONS
A 10% credit for geothermal heat pump system property (equipment that uses the ground or ground water to heat or cool a structure). Under transition rules, the ITC for combined heat and power systems, qualified small wind energy facilities, and geothermal heat pump systems generally applies only to property placed in service after October 3, 2008, and for self-constructed property, only to the extent of the basis attributable to the period after October 3, 2008.
OTHER PROVISIONS
Residential Energy Credit. The Act extends through December 31, 2016 the 30% residential energy credit available to individuals for expenditures for qualified solar electric property, qualified solar water heating property, and qualified fuel cell property. The Act removes the $2,000 cap on the credit for solar electric property but does not modify the other applicable caps, effective with respect to taxable years beginning after December 31, 2008. The Act expands the credit to apply to qualified small wind energy property and to qualified geothermal heat pump property, subject to certain caps (effective with respect to taxable years beginning after December 31, 2007 for property placed in service on or before December 31, 2016). The Act provides that the credit may be used against AMT liability, effective with respect to taxable years beginning after December 31, 2007.
PTC EXTENSIONS
Geothermal, Biomass, and Other Qualifying Facilities. The Act extends the placed-in-service sunset date for closed-loop biomass, open-loop biomass, geothermal, landfill gas, trash, and qualified hydropower facilities to December 31, 2010.
ITC MODIFICATIONS
A 10% credit for geothermal heat pump system property (equipment that uses the ground or ground water to heat or cool a structure). Under transition rules, the ITC for combined heat and power systems, qualified small wind energy facilities, and geothermal heat pump systems generally applies only to property placed in service after October 3, 2008, and for self-constructed property, only to the extent of the basis attributable to the period after October 3, 2008.
OTHER PROVISIONS
Residential Energy Credit. The Act extends through December 31, 2016 the 30% residential energy credit available to individuals for expenditures for qualified solar electric property, qualified solar water heating property, and qualified fuel cell property. The Act removes the $2,000 cap on the credit for solar electric property but does not modify the other applicable caps, effective with respect to taxable years beginning after December 31, 2008. The Act expands the credit to apply to qualified small wind energy property and to qualified geothermal heat pump property, subject to certain caps (effective with respect to taxable years beginning after December 31, 2007 for property placed in service on or before December 31, 2016). The Act provides that the credit may be used against AMT liability, effective with respect to taxable years beginning after December 31, 2007.
Tuesday, October 7, 2008
Bailout bill directly affects geothermal heat pump industry!
YES! There is great news in store for the geothermal heat pump industry.
Whether you were for or against the signing of this $700 billion bail out bill, it's happened, and here's how it's going to affect the geothermal heat pump industry:
The Homeowner:
A residential tax credit of up to $2000 per household, through the year 2016, is available.
Buildings and Businesses:
The Emergency Economic Stabilization Act provides a new 10% investment tax credit for commercial geothermal heat pumps.
In addition to the new tax credits, geothermal heat pumps are now classified under federal renewable energy provisions with solar, wind, and others. This will have long-term implications for the industry. Why? $18 billion of tax incentives for investment in renewable energy, carbon capture and sequestration demonstration projects, energy efficiency and conservation has been earmarked.
Whether you were for or against the signing of this $700 billion bail out bill, it's happened, and here's how it's going to affect the geothermal heat pump industry:
The Homeowner:
A residential tax credit of up to $2000 per household, through the year 2016, is available.
Buildings and Businesses:
The Emergency Economic Stabilization Act provides a new 10% investment tax credit for commercial geothermal heat pumps.
In addition to the new tax credits, geothermal heat pumps are now classified under federal renewable energy provisions with solar, wind, and others. This will have long-term implications for the industry. Why? $18 billion of tax incentives for investment in renewable energy, carbon capture and sequestration demonstration projects, energy efficiency and conservation has been earmarked.
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