Congress Extends Some Energy Efficiency Credits Through 2011

The left is not fully satisfied. Neither is the right. However, the recently enacted “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” (Tax Relief Act) provides significant relief to the energy industry and alleviates the pressure of trying to seal the deal on many projects before the end of the year.

Of particular note, the grant in lieu of tax credit provisions related to the investment tax credit has been extended for one additional year. Now, qualifying property, including wind turbines and solar panels must be placed into service by the end of 2011 or satisfy the applicable requirements that construction began by the end of 2011. The stress of properly structuring a deal to qualify for the grant by the end of this year is now relieved. Have a great holiday!

The grant was not the only energy related provision extended. For individuals looking to make energy efficient improvements on their homes, the tax credit is extended for one additional year. However, the 30% tax credit (limited to $1,500) that existed for 2009 and 2010 is reduced to 10% (limited to $500) in 2011. In addition, the credit is limited to certain amounts based on the type of energy efficient improvement made.

Prior to 2010, contractors were eligible for maximum tax credit of $2,000 per home for construction of a new energy efficient home. This credit has now been extended retroactively for 2010 and renewed for 2011.

In addition, the Tax Relief Act extends the income and excise tax credit and refund provisions for bio-diesel and renewable diesel fuel. This extension is retroactive and applies for 2010 and 2011.

For those of you wondering if purchasing charging equipment for alternative fuel vehicles will get you a tax credit, the answer is yes. However, the credit for 2011 is reduced to 30%, limited to $30,000 for depreciable property (businesses) and $1,000 for non-depreciable property (individuals).

That is a quick run-down on some of the energy related provisions contained within the Tax Relief Act. The biggest impact will no doubt be extension of the grant provisions and extension of the bio-diesel related provisions, which will provide some certainty for the next year and should bolster further development.

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