Production tax credits

Author: Keith Martin Publication | June 5, 2018

Production tax credits for renewable energy projects will remain unchanged in 2018 from 2017 levels, the Internal Revenue Service said in late May.

Credits for producing refined coal are increasing slightly in amount.

The credits for generating electricity from wind, geothermal steam or fluid or closed-loop biomass (plants grown to be used as fuel in power plants) are 2.4¢ a kilowatt hour in 2018. They are 1.2¢ a kilowatt hour for generating electricity from open-loop biomass, landfill gas, incremental hydropower and ocean energy.

The credits are adjusted each year for inflation as measured by the GDP price deflator. They run for 10 years after a project is originally placed in service.

The credits phase out if contracted electricity prices from a particular resource reach a certain level. That level in 2018 is 12.8576¢ a KWh. The IRS said there will not be any phase out in 2018 because contracted wind electricity prices are 4.85¢ a KWh going into 2018. It said it lacks data on contracted prices for electricity from the other energy sources.

Production tax credits for producing refined coal are $7.03 a ton in 2018. Refined coal is coal that has been treated with chemicals to make it less polluting than regular coal. The IRS said there will not be any phase out of refined coal credits in 2018. The refined coal credit phases out as the reference price for raw coal moves above 1.7 times the 2002 price of raw coal. The 2018 reference price is $51.09 a ton. A phase out would have started at $87.16 a ton.

The tax credit amounts are in IRS Notice 2018-50.


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Keith  Martin

Keith Martin

Washington, DC