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.
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