Energy Tax Law Alert: Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

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Congress yesterday passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act), which extends several expiring renewable energy and fuel tax incentives and includes some new incentives that could provide significant benefits to renewable energy projects. The President signed the Act earlier today. Among the more significant provisions in the Act are:

Section 1603 Grant The Act extends the Section 1603 grant in lieu of tax credits. Under the extension, property will qualify if it is placed in service in 2011 or if construction begins before 2012 and the project is placed in service before the applicable credit termination date (i.e., January 1, 2013 in the case of large wind projects, January 1, 2014 in the case of biomass, trash, marine and certain other facilities, and January 1, 2017 in the case of solar, geothermal, fuel cells, microturbines, combined heat and power, small wind, and geothermal heat pump facilities). Under prior law, a facility was required to be placed in service, or construction must have begun, before January 1, 2011.

Bonus Depreciation The Act extends and temporarily increases bonus depreciation for investment in certain equipment. For qualifying property that is acquired after September 8, 2010 and placed in service after September 8, 2010 and before January 1, 2012, the Act provides for 100 percent bonus depreciation. For qualifying property placed in service in 2012, the Act provides for 50 percent bonus depreciation. To qualify for bonus depreciation, property generally must have a recovery period of 20 years or less. Thus, property that otherwise would qualify for 5-year MACRS depreciation, for example, generally will qualify for bonus depreciation. The Act also allows taxpayers to elect to accelerate certain AMT credits in lieu of bonus depreciation for taxable years 2011 and 2012.

Fuels Credits

  • The Act extends through 2010 and 2011 the $1.00 per gallon tax credits for the sale or use of biodiesel, renewable diesel, and biodiesel mixtures. The Act also extends through 2011 the $0.10 per gallon small agri-biodiesel producer credit.
  • The Act extends through 2010 and 2011, with some limitations, the alternative fuel credit and the alternative fuel mixture credit.
  • The Act extends through 2011 the alcohol mixture credit, the alcohol credit, the small ethanol producer credit and the cellulosic biofuel producer credit.

For a summary of the full Act, see

Please contact a key contributor if you have questions.

IRS Circular 230 notice: Any tax advice contained herein was not intended or written to be used, and cannot be used, by you or any other person (i) in promoting, marketing or recommending any transaction, plan or arrangement or (ii) for the purpose of avoiding penalties that may be imposed under federal tax law.

Key Contributors

Christopher K. Heuer
Kevin T. Pearson
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