New Virus Relief Bill Extends Clean Energy Tax Break Timeline

By Morgan Conley
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Law360 (December 21, 2020, 10:36 PM EST) -- Eligibility deadlines for clean energy tax credits available to renewable energy developers have been extended as part of the $1.4 trillion federal spending and tax extension package expected to be passed late Monday night in conjunction with the $900 billion coronavirus rescue deal.

The sprawling omnibus legislation includes significant relief for renewable energy developers by extending multiple windows by which construction must begin on projects in order to qualify for tax credits. Also included in the energy legislation under the Consolidated Appropriations Act 2021 is a $35 billion commitment to energy research and development activities through the U.S. Department of Energy, according to a Monday statement by Senate Minority Leader Chuck Schumer. 

The tax provisions included in the text of the bill push back an impending deadline to give developers another year to take advantage of the production tax credit, which under the new legislation would stay at 60% before decreasing again at the beginning of 2021, instead of the previous deadline at the end of this year. The legislation also pushes back a deadline for the investment tax credit to apply to projects that break ground on construction prior to the end of 2022.

Carbon capture projects that begin construction by the end of 2025 will also qualify for a Carbon Oxide Sequestration Credit. Under the previous legislation construction on the carbon capture projects needed to begin by the end of 2023 to take advantage of the tax credit.

The American Clean Power Association said the inclusion of a 30% offshore wind investment tax credit for projects that began construction by 2017 through the end of 2025 is an important component of the legislation.

"As we enter the new year, stable policy support will help ensure that wind and solar can continue providing the backbone of our country's electricity growth," Heather Zichal, CEO of the group, said in a statement Monday. "We also applaud Congress for recognizing the enormous potential of offshore wind, America's largest untapped electricity source, as a brand-new provider of jobs for American workers and clean power for American families."

Warren Leon, the executive director of nonprofit Clean Energy States Alliance, told Law360 in an email Monday that the group strongly supports the extensions of the federal clean energy tax incentives. Leon said the novel coronavirus pandemic has left many developers with no choice but to alter their plans due to circumstances outside their control. Giving them more time to complete the projects is the fair and appropriate course of action, he said.

"Moreover, because solar, wind, and efficiency projects are capital-intensive, yet yield significant savings over time, their development will create jobs and provide benefits that will ripple through the economy," Leon said. "These extended tax incentives should not be seen as a special favor to an industry but rather as an economically beneficial investment in the nation's infrastructure and as a component of an overall national strategy for addressing climate change."

The energy legislation also includes a plan to "phase-down" the consumption and production of hydrochlorofluorocarbons, or HFCs, an ozone-depleting substance, as well as other efforts to update the country's energy policies, referred to as the Energy Act of 2020.

"The Energy Act represents the first modernization of our nation's energy policies in well over a decade," Alaska Sen. Lisa Murkowski, chairman of the Senate Energy and Natural Resources Committee, said in a statement Monday. "This bipartisan package will foster innovation across the board on a range of technologies that are critical to our energy and national security, our long-term economic competitiveness, and the protection of our environment."

According to Sen. Murkowski's statement, the legislation focuses on researching and developing innovative technology to reduce greenhouse gas emissions produced by the energy sector while "keeping American energy affordable and globally competitive."

Lawmakers announced late Sunday night the House and Senate agreed on roughly $900 billion in coronavirus relief as part of legislation to keep the federal government open and provide more tax incentives for individuals and businesses.

Many of the provisions in the agreement were based on the Emergency Coronavirus Relief Act of 2020, a bipartisan proposal unveiled Dec. 14 by Sens. Joe Manchin, D-W.Va., Susan Collins, R-Maine and other moderate legislators. It includes funding for the distribution of the coronavirus vaccines, virus testing and health care workers.

Lawmakers have debated a follow-up relief bill since the Coronavirus Aid, Relief and Economic Security Act was signed into law in March, but it wasn't until this week they abandoned provisions for more state and local funding and liability protections for businesses that had sidelined progress. Sunday, they were able to reach an agreement on several thorny issues left over from the earlier coronavirus relief bill.

--Additional reporting by Stephen Cooper. Editing by Jay Jackson Jr.

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