Technical and administrative guidance released today by the Organization for Economic Co-Operation and Development (OECD)/Group of Twenty (G20) provides clarification on the treatment of key community development tax incentives concerning a global minimum tax (GMT) on multinational corporations. More than 140 nations agreed with the guidance, which will form a common approach for countries to implement the rules concerning the GMT.
The U.S. Department of the Treasury today announced plans to provide key guidance before the end of the year on specific clean energy tax provisions included in the Inflation Reduction Act of 2022.
The Internal Revenue Service (IRS) will publish a notice in Wednesday’s Federal Register providing guidance on the prevailing wage and apprenticeship requirements that allow bonus credit percentages for certain renewable energy provisions of the Inflation Reduction Act (IRA). The notice also provides guidance for determining the beginning of construction date for certain credits. Under the IRA, properties that meet prevailing wage and apprenticeship requirements qualify for the 30% renewable energy investment tax credit (ITC) and the $26 per megawatt-hour production tax credit (PTC).
Taxpayers must have profit as a primary objective of a venture to receive tax benefits that include renewable energy investment tax credits (ITCs), according to a decision issued this month by the U.S. Circuit Court of Appeals for the Tenth Circuit. The court upheld a lower court’s ruling that denied ITCs and depreciation deductions to a taxpayer, ruling that those benefits require a profit motive. The taxpayer entered a sale-and-leaseback transaction for solar lenses in a system that was never finished, yet the taxpayer claimed depreciation deductions and ITCs on the full price of the lenses, rather than the 30% that the taxpayer paid. The IRS ruled that the taxpayer lacked a profit motive and denied the depreciation deductions and ITCs.
The Internal Revenue Service (IRS) today issued an announcement with updated credit amounts for the renewable energy production tax credit (PTC) for facilities placed in service after Dec. 31, 2021. The changes are due to the Inflation Reduction Act. Announcement 2022-23 replaces the amounts published in Notice 2022-20 for those facilities. The total for such facilities is 2.75 cents per kilowatt hour for qualified energy resources of wind, closed-loop biomass, geothermal energy and solar energy. It is 1.25 cents per kilowatt hour on the sale of electricity produced by a qualified open-loop biomass, landfill gas, trash, qualified hydropower or marine and hydrokinetic renewable energy facilities.
The U.S. Department of the Treasury today issued three notices requesting public input on climate and clean energy incentives included in the Inflation Reduction Act, following six notices issued in October. Notice 2022-56 requests comments related to commercial clean vehicles and alternative fuel vehicle refueling property, Notice 2022-57 requests comments related to the credit for carbon capture and Notice 2022-58 requests comments related to clean hydrogen and clean fuel production. Those interested in providing feedback should follow instructions in the notices and send responses by Dec. 3.
The U.S. Department of the Treasury today issued six notices seeking public input on climate and clean energy incentives including renewable energy tax credits (RETCs) such as the production tax credit (PTC) and investment tax credit (ITC) related to the Inflation Reduction Act (IRA) passed in August. The notices, which cover energy generation incentives, credit enhancements, incentives for homes/buildings, consumer vehicle credits, manufacturing credits and credit monetization, request input on specific questions as well as solicit general comments. Further opportunities for public input will come at later dates. Today’s release also includes a fact sheet with additional information about the notices and the Internal Revenue Service’s plan for implementation. Treasury requested responses for the six proposals released today by Nov. 4.
Novogradac has resources available for private companies and nonprofits affected by Accounting Standards Codification (ASC) 842, which changed lease accounting standards. The change–which took effect Jan. 1 for fiscal years beginning after Dec. 15, 2021–affects the way certain contracts are accounted for under generally accepted accounting principles, particularly entities that are lessees. Rather than disclosing operating leases in notes to financial statements, but not on balance sheets, the new guidance requires lessees to record a right-of-use asset for the leased asset and a corresponding lease liability equal to the financial obligation over the lease term, as well as new disclosure requirements.
Internal Revenue Service (IRS)-published inflation adjustment rates for Internal Revenue Code Section 45Q carbon oxide sequestration for calendar year 2022 are a slight increase over 2021. Notice 2022-38 provides a 1.2534 adjustment multiplier, putting the credit for calendar year 2022 at $25.07 per metric ton of qualified carbon oxide under Section 45Q(a)(1) and $12.53 per metric ton of qualified carbon oxide under Section 45Q(a)(2). Those totals are $1.06 per ton and 48 cents per ton more than the 2021 figures.
The Financial Accounting Standards Board (FASB) today released an exposure draft of a proposed accounting standards update that would allow the expanded use of the proportional amortization method to account for investments in tax credit structures.
Massachusetts Gov. Charlie Baker signed into law a broad clean energy bill that creates a 50% investment tax credit (ITC) for large offshore wind facilities. H. 5060 allows the offshore wind tax credit to be taken ratably over five years and applies to properties where the owner or tenant has a total capital investment of at least $35 million and employs at least 200 new full-time employees by the fifth year. For tenants to take the credit, they must occupy at least 25% of the owner’s capital investment in the facility. The credit has a $35 million annual statewide cap.
President Joe Biden today signed into law the Inflation Reduction Act (IRA), a $750 billion budget reconciliation bill that includes $369 billion in clean and renewable energy provisions that feature extensions of the renewable energy production tax credit (PTC) and investment tax credit (ITC).
The U.S. House of Representatives today approved a $740 billion budget reconciliation bill that includes $369 billion in clean and renewable energy provisions as well as a 15% corporate minimum tax on book income. President Joe Biden is expected to sign the bill into law today. The legislation extends the renewable energy production tax credit (PTC) and investment tax credit (ITC), and expands the 30% ITC for stand-alone energy storage and interconnection property. The House approved the bill along party lines after the Senate approved it 51-50, with Vice President Kamala Harris providing the tie-breaking vote.
In a party-line vote, the U.S. Senate advanced sweeping $700 billion-plus legislation Sunday that includes $369 billion in clean and renewable energy provisions, including extensions of the production tax credit (PTC) and investment tax credit (ITC) for facilities that start construction after Jan. 1, 2022, and before Jan. 1, 2025. Under the reconciliation bill, the PTC is extended at $26 per megawatt-hour, adjusted by inflation annually, while the ITC is extended at 30% for projects that adhere to labor requirements on prevailing wages and apprenticeship programs. The legislation includes many other green energy provisions, including the expansion of the 30% ITC for stand-alone energy storage and interconnection property. The bill now goes to the House of Representatives, which will take up debate Friday.
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, increased tax enforcement resources, an extension of the Affordable Care Act premium tax incentives and prescription drug reform.
Legislation effective this week in South Carolina retroactively extends the state solar tax credit. S.901 reinstates the 25% state credit that expired Dec. 31, 2021, for solar energy property on specified locations and allows the credit to be taken by a partnership or limited liability company taxed as a partnership. The legislation increases the project cap from $2.5 million to $5 million and allows the credit to be taken in five equal installments beginning within three years of the year in which the property is placed in service.
The proposed global minimum tax and its potential effect on community development tax credit equity investments is the subject of this week’s Novogradac Tax Credit Tuesday podcast episode. Michael Novogradac, CPA, and Novogradac partner Brad Elphick, CPA, discuss the proposal and potential approaches to mitigate the damage to tax credit equity investment. They also examine next steps in the proposal and for community development tax credit stakeholders. Novogradac has also published a white paper on the subject called Pillar Two and Tax Credit Equity Investments and is seeking public comment on the paper. Comments may be sent to [email protected]
The weekly Tax Credit Tuesday podcast offers an in-depth discussion of various tax incentive topics with expert guests.
The three major federal bank regulatory agencies today issued a joint notice of proposed rulemaking to strengthen and modernize Community Reinvestment Act (CRA) regulations. The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Fed) and Federal Deposit Insurance Corporation (FDIC) jointly issued the proposal, which would be the first significant interagency revision to the CRA since 1995. The proposal would adopt a metrics-based approach to CRA evaluation of retail lending and community development financing that includes public benchmarks. The rule would also clarify eligible CRA activities that are focused on low- and moderate-income, rural and underserved communities, including affordable housing.
A bill introduced Tuesday in the U.S. House of Representatives aims to boost offshore wind construction and manufacturing through the investment tax credit (ITC) and production tax credit (PTC). H.R. 7388, The Offshore Wind American Manufacturing Act, would create a 30% ITC for qualified facilities that manufacture offshore wind components through Dec. 31, 2028, followed by a reduction of 30% for property placed in service in 2029, 65% for property placed in service in 2030 and 100% for property placed in service after Dec. 31, 2030. The bill would also create a new PTC that would range from approximately 2 to 5 cents per watt multiplied by the total rated capacity of the turbine, with components such as blades, towers, generators, gearboxes and foundations contributing to variable factors.
Legislation introduced in the Massachusetts House of Representatives would create a state investment tax credit (ITC) of up to 50% for capital investment in large offshore wind facilities. H.B. 4524 would create the state ITC for offshore wind facilities that cost at least $50 million and employ at least 200 new full-time employees by their fifth year. The state credit would be taken over five years and the annual statewide cap for the offshore wind credits would be $50 million.
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