Topic of the day / USA - IRS announcement regarding the inflation adjustment for Production Tax Credits

The following article comes from law firm Troutman Sanders and is authored by Craig M. Kline and David B. Weisblat

The Internal Revenue Service has released the adjustment factors and reference prices for 2013 to be used in determining the availability of the section 45 credits for the production of renewable energy and the production of refined coal.  The credit for the production of renewable energy for calendar year 2013 is 2.3 cents per kilowatt hour on the sale of electricity produced from qualified sources of wind, closed loop biomass, geothermal energy and solar energy and 1.1 cents/kWh on the sale of electricity produced in open-loop biomass facilities, small irrigation power facilities, landfill gas facilities, trash combustion facilities, qualified hydropower facilities, and marine and hydrokinetic renewable energy facilities. The credit for refined coal production for calendar year 2013 is $6.590 per ton on the sale of qualified refined coal.

The inflation adjustment factor for calendar year 2013 for renewable energy production and refined coal production is 1.5063. The reference price for wind facilities is $4.53 per kilowatt-hour. The reference prices for fuel used as feedstock within the meaning of section 45(c)(7)(A) (relating to refined coal production) are $31.90 per ton for calendar year 2002 and $58.23 per ton for calendar year 2013. The reference prices for facilities producing electricity from closed-loop biomass, open-loop biomass, geothermal energy, solar energy, small irrigation power, municipal solid waste, qualified hydropower production, and marine and hydrokinetic renewable energy have not been determined at the time of writing for calendar year 2013.

Because the 2013 reference price for electricity produced from wind does not exceed 8 cents multiplied by the inflation adjustment factor, the phase-out of the credit for electricity produced by wind does not apply to such electricity sold during calendar year 2013. Because the 2013 reference price of fuel used as feedstock for refined coal ($58.23) does not exceed the ($31.90) reference price of such fuel in 2002 multiplied by the inflation adjustment factor and 1.7, the phase-out of credit for refined coal does not apply to refined coal sold during calendar year 2013.Further, for electricity produced from closed-loop biomass, open-loop biomass, geothermal energy, solar energy, small irrigation power, municipal solid waste, qualified hydropower production, and marine and hydrokinetic renewable energy, the phase-out of credit provided in section 45(b)(1) does not apply to such electricity sold during calendar year 2013.

Troutman Sander