Schumer-Manchin Deal Includes Renewable Energy Provisions, Including ITC, PTC Extensions
Senate Majority Leader Chuck Schumer, D-New York, and Sen. Joe Manchin, D-West Virginia, announced a deal on sweeping reconciliation legislation that includes several major renewable energy provisions, including extensions of the production tax credit (PTC) and investment tax credit (ITC). The Inflation Reduction Act of 2022 also includes a 15% corporate minimum tax, reform to the taxation of carried interest, increased tax enforcement resources, an extension of the Affordable Care Act premium tax incentives and prescription drug reform.
Among provisions in the bill are extensions of the PTC and ITC at their 2022 levels–with the PTC at 0.3 cents per kWh and the ITC at 30% of eligible costs–as part of a $369 billion investment in green energy that also includes extension of other renewable energy tax credits. While the PTC and ITC are extended over 10 years as per previous iterations of the reconciliation bill, this version provides for an elective direct payment of certain clean and renewable energy tax incentives only through 2024, shorter than previous iterations. The provision to allow ITC not to reduce low-income housing tax credit (LIHTC) basis and the 20% bonus ITC for facilities on covered federal affordable housing programs remain in the announced deal. Like the direct payment provision, the 10% bonus ITC for facilities in low-income communities is reduced from 10 years to three years.
Along with the legislation, the Senate Democratic leadership provided a one-page summary, tax summary and energy security and climate change investments summary. The legislation is being considered under the budget reconciliation process, which means it still must be approved by the Senate parliamentarian, then passed by both houses of Congress and signed by President Joe Biden to become law. The parliamentarian review is expected to be completed by next week and if text is approved, then the Senate could begin to consider the bill before it is scheduled to depart for the summer recess on Aug. 5. The House is scheduled to depart for the summer recess by Friday, but if the Senate approves the bill, House Speaker Nancy Pelosi, D-California, is expected to bring the House back into session to consider the bill.
A Notes from Novogradac blog post with more details of bill will be posted soon. Novogradac’s renewable energy team provides a thorough understanding of how tax-incentive transactions work and can advise and guide clients.