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[1] See References in Text note below.
[2] So in original. The word “the” probably should follow.
§ 45. Electricity produced from certain renewable resources, etc.
(a)
General rule
For purposes of section
38, the renewable electricity production credit for any taxable year is an amount equal to the product of—
(b)
Limitations and adjustments
(1)
Phaseout of credit
The amount of the credit determined under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of the credit (determined without regard to this paragraph) as—
(2)
Credit and phaseout adjustment based on inflation
The 1.5 cent amount in subsection (a), the 8 cent amount in paragraph (1), the $4.375 amount in subsection (e)(8)(A), and in subsection (e)(8)(B)(i) the reference price of fuel used as a feedstock (within the meaning of subsection (c)(7)(A)) in 2002 shall each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale occurs. If any amount as increased under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.
(3)
Credit reduced for grants, tax-exempt bonds, subsidized energy financing, and other credits
The amount of the credit determined under subsection (a) with respect to any project for any taxable year (determined after the application of paragraphs (1) and (2)) shall be reduced by the amount which is the product of the amount so determined for such year and the lesser of 1/2 or a fraction—
(A)
the numerator of which is the sum, for the taxable year and all prior taxable years, of—
(i)
grants provided by the United States, a State, or a political subdivision of a State for use in connection with the project,
(ii)
proceeds of an issue of State or local government obligations used to provide financing for the project the interest on which is exempt from tax under section
103,
(B)
the denominator of which is the aggregate amount of additions to the capital account for the project for the taxable year and all prior taxable years.
The amounts under the preceding sentence for any taxable year shall be determined as of the close of the taxable year. This paragraph shall not apply with respect to any facility described in subsection (d)(2)(A)(ii).
(4)
Credit rate and period for electricity produced and sold from certain facilities
(A)
Credit rate
In the case of electricity produced and sold in any calendar year after 2003 at any qualified facility described in paragraph (3), (5), (6), (7), or (9) of subsection (d), the amount in effect under subsection (a)(1) for such calendar year (determined before the application of the last sentence of paragraph (2) of this subsection) shall be reduced by one-half.
(B)
Credit period
(i)
In general
Except as provided in clause (ii) or clause (iii), in the case of any facility described in paragraph (3), (4), (5), (6), or (7) of subsection (d), the 5-year period beginning on the date the facility was originally placed in service shall be substituted for the 10-year period in subsection (a)(2)(A)(ii).
(c)
Resources
For purposes of this section:
(2)
Closed-loop biomass
The term “closed-loop biomass” means any organic material from a plant which is planted exclusively for purposes of being used at a qualified facility to produce electricity.
(3)
Open-loop biomass
(A)
In general
The term “open-loop biomass” means—
(ii)
any solid, nonhazardous, cellulosic waste material or any lignin material which is derived from—
(I)
any of the following forest-related resources: mill and harvesting residues, precommercial thinnings, slash, and brush,
(II)
solid wood waste materials, including waste pallets, crates, dunnage, manufacturing and construction wood wastes (other than pressure-treated, chemically-treated, or painted wood wastes), and landscape or right-of-way tree trimmings, but not including municipal solid waste, gas derived from the biodegradation of solid waste, or paper which is commonly recycled, or
(III)
agriculture sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues.
Such term shall not include closed-loop biomass or biomass burned in conjunction with fossil fuel (cofiring) beyond such fossil fuel required for startup and flame stabilization.
(5)
Small irrigation power
The term “small irrigation power” means power—
(7)
Refined coal
(A)
In general
The term “refined coal” means a fuel which—
(i)
is a liquid, gaseous, or solid fuel produced from coal (including lignite) or high carbon fly ash, including such fuel used as a feedstock,
(ii)
is sold by the taxpayer with the reasonable expectation that it will be used for [2] purpose of producing steam,
(B)
Qualified emission reduction
The term “qualified emission reduction” means a reduction of at least 20 percent of the emissions of nitrogen oxide and either sulfur dioxide or mercury released when burning the refined coal (excluding any dilution caused by materials combined or added during the production process), as compared to the emissions released when burning the feedstock coal or comparable coal predominantly available in the marketplace as of January 1, 2003.
(8)
Qualified hydropower production
(A)
In general
The term “qualified hydropower production” means—
(B)
Determination of incremental hydropower production
(i)
In general
For purposes of subparagraph (A), incremental hydropower production for any taxable year shall be equal to the percentage of average annual hydropower production at the facility attributable to the efficiency improvements or additions of capacity placed in service after the date of the enactment of this paragraph, determined by using the same water flow information used to determine an historic average annual hydropower production baseline for such facility. Such percentage and baseline shall be certified by the Federal Energy Regulatory Commission.
(C)
Nonhydroelectric dam
For purposes of subparagraph (A), a facility is described in this subparagraph if—
(i)
the facility is licensed by the Federal Energy Regulatory Commission and meets all other applicable environmental, licensing, and regulatory requirements,
(ii)
the facility was placed in service before the date of the enactment of this paragraph and did not produce hydroelectric power on the date of the enactment of this paragraph, and
(iii)
turbines or other generating devices are to be added to the facility after such date to produce hydroelectric power, but only if there is not any enlargement of the diversion structure, or construction or enlargement of a bypass channel, or the impoundment or any withholding of any additional water from the natural stream channel.
(9)
Indian coal
(A)
In general
The term “Indian coal” means coal which is produced from coal reserves which, on June 14, 2005—
(B)
Indian tribe
For purposes of this paragraph, the term “Indian tribe” has the meaning given such term by section
7871
(c)(3)(E)(ii).
(d)
Qualified facilities
For purposes of this section:
(1)
Wind facility
In the case of a facility using wind to produce electricity, the term “qualified facility” means any facility owned by the taxpayer which is originally placed in service after December 31, 1993, and before January 1, 2009.
(2)
Closed-loop biomass facility
(A)
In general
In the case of a facility using closed-loop biomass to produce electricity, the term “qualified facility” means any facility—
(i)
owned by the taxpayer which is originally placed in service after December 31, 1992, and before January 1, 2009, or
(ii)
owned by the taxpayer which before January 1, 2009, is originally placed in service and modified to use closed-loop biomass to co-fire with coal, with other biomass, or with both, but only if the modification is approved under the Biomass Power for Rural Development Programs or is part of a pilot project of the Commodity Credit Corporation as described in 65 Fed. Reg. 63052.
(3)
Open-loop biomass facilities
(A)
In general
In the case of a facility using open-loop biomass to produce electricity, the term “qualified facility” means any facility owned by the taxpayer which—
(4)
Geothermal or solar energy facility
In the case of a facility using geothermal or solar energy to produce electricity, the term “qualified facility” means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before January 1, 2009 (January 1, 2006, in the case of a facility using solar energy). Such term shall not include any property described in section
48
(a)(3) the basis of which is taken into account by the taxpayer for purposes of determining the energy credit under section
48.
(5)
Small irrigation power facility
In the case of a facility using small irrigation power to produce electricity, the term “qualified facility” means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before January 1, 2009.
(6)
Landfill gas facilities
In the case of a facility producing electricity from gas derived from the biodegradation of municipal solid waste, the term “qualified facility” means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before January 1, 2009.
(7)
Trash combustion facilities
In the case of a facility which burns municipal solid waste to produce electricity, the term “qualified facility” means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before January 1, 2009. Such term shall include a new unit placed in service in connection with a facility placed in service on or before the date of the enactment of this paragraph, but only to the extent of the increased amount of electricity produced at the facility by reason of such new unit.
(8)
Refined coal production facility
In the case of a facility that produces refined coal, the term “refined coal production facility” means a facility which is placed in service after the date of the enactment of this paragraph and before January 1, 2009.
(9)
Qualified hydropower facility
In the case of a facility producing qualified hydroelectric production described in subsection (c)(8), the term “qualified facility” means—
(A)
in the case of any facility producing incremental hydropower production, such facility but only to the extent of its incremental hydropower production attributable to efficiency improvements or additions to capacity described in subsection (c)(8)(B) placed in service after the date of the enactment of this paragraph and before January 1, 2009, and
(e)
Definitions and special rules
For purposes of this section—
(1)
Only production in the United States taken into account
Sales shall be taken into account under this section only with respect to electricity the production of which is within—
(2)
Computation of inflation adjustment factor and reference price
(A)
In general
The Secretary shall, not later than April 1 of each calendar year, determine and publish in the Federal Register the inflation adjustment factor and the reference price for such calendar year in accordance with this paragraph.
(B)
Inflation adjustment factor
The term “inflation adjustment factor” means, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 1992. The term “GDP implicit price deflator” means the most recent revision of the implicit price deflator for the gross domestic product as computed and published by the Department of Commerce before March 15 of the calendar year.
(C)
Reference price
The term “reference price” means, with respect to a calendar year, the Secretary’s determination of the annual average contract price per kilowatt hour of electricity generated from the same qualified energy resource and sold in the previous year in the United States. For purposes of the preceding sentence, only contracts entered into after December 31, 1989, shall be taken into account.
(3)
Production attributable to the taxpayer
In the case of a facility in which more than 1 person has an ownership interest, except to the extent provided in regulations prescribed by the Secretary, production from the facility shall be allocated among such persons in proportion to their respective ownership interests in the gross sales from such facility.
(4)
Related persons
Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section
52
(b). In the case of a corporation which is a member of an affiliated group of corporations filing a consolidated return, such corporation shall be treated as selling electricity to an unrelated person if such electricity is sold to such a person by another member of such group.
(5)
Pass-thru in the case of estates and trusts
Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section
52 shall apply.
(7)
Credit not to apply to electricity sold to utilities under certain contracts
(A)
In general
The credit determined under subsection (a) shall not apply to electricity—
(B)
Exception
Subparagraph (A) shall not apply if—
(i)
the prices for energy and capacity from such facility are established pursuant to an amendment to the contract referred to in subparagraph (A)(ii),
(ii)
such amendment provides that the prices set forth in the contract which exceed avoided cost prices determined at the time of delivery shall apply only to annual quantities of electricity (prorated for partial years) which do not exceed the greater of—
(iii)
such amendment provides that energy and capacity in excess of the limitation in clause (ii) may be—
(I)
sold to the utility only at prices that do not exceed avoided cost prices determined at the time of delivery, or
For purposes of this subparagraph, avoided cost prices shall be determined as provided for in 18 CFR 292.304(d)(1) or any successor regulation.
(8)
Refined coal production facilities
(A)
Determination of credit amount
In the case of a producer of refined coal, the credit determined under this section (without regard to this paragraph) for any taxable year shall be increased by an amount equal to $4.375 per ton of qualified refined coal—
(B)
Phaseout of credit
The amount of the increase determined under subparagraph (A) shall be reduced by an amount which bears the same ratio to the amount of the increase (determined without regard to this subparagraph) as—
(9)
Coordination with credit for producing fuel from a nonconventional source
(A)
In general
The term “qualified facility” shall not include any facility which produces electricity from gas derived from the biodegradation of municipal solid waste if such biodegradation occurred in a facility (within the meaning of section
45K) the production from which is allowed as a credit under section
45K for the taxable year or any prior taxable year.
(B)
Refined coal facilities
The term “refined coal production facility” shall not include any facility the production from which is allowed as a credit under section
45K for the taxable year or any prior taxable year (or under section
29,[1] as in effect on the day before the date of enactment of the Energy Tax Incentives Act of 2005, for any prior taxable year).
(10)
Indian coal production facilities
(A)
Determination of credit amount
In the case of a producer of Indian coal, the credit determined under this section (without regard to this paragraph) for any taxable year shall be increased by an amount equal to the applicable dollar amount per ton of Indian coal—
(B)
Applicable dollar amount
(i)
In general
The term “applicable dollar amount” for any taxable year beginning in a calendar year means—
(ii)
Inflation adjustment
In the case of any calendar year after 2006, each of the dollar amounts under clause (i) shall be equal to the product of such dollar amount and the inflation adjustment factor determined under paragraph (2)(B) for the calendar year, except that such paragraph shall be applied by substituting “2005” for “1992”.
(C)
Application of rules
Rules similar to the rules of the subsection (b)(3) and paragraphs (1), (3), (4), and (5) of this subsection shall apply for purposes of determining the amount of any increase under this paragraph.
(D)
Treatment as specified credit
The increase in the credit determined under subsection (a) by reason of this paragraph with respect to any facility shall be treated as a specified credit for purposes of section
38
(c)(4)(A) during the 4-year period beginning on the later of January 1, 2006, or the date on which such facility is placed in service by the taxpayer.
(11)
Allocation of credit to patrons of agricultural cooperative
(A)
Election to allocate
(i)
In general
In the case of an eligible cooperative organization, any portion of the credit determined under subsection (a) for the taxable year may, at the election of the organization, be apportioned among patrons of the organization on the basis of the amount of business done by the patrons during the taxable year.
(ii)
Form and effect of election
An election under clause (i) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year. Such election shall not take effect unless the organization designates the apportionment as such in a written notice mailed to its patrons during the payment period described in section
1382
(d).
(B)
Treatment of organizations and patrons
The amount of the credit apportioned to any patrons under subparagraph (A)—
(i)
shall not be included in the amount determined under subsection (a) with respect to the organization for the taxable year, and
(ii)
shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section
1382
(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.
(C)
Special rules for decrease in credits for taxable year
If the amount of the credit of a cooperative organization determined under subsection (a) for a taxable year is less than the amount of such credit shown on the return of the cooperative organization for such year, an amount equal to the excess of—
shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter.
(D)
Eligible cooperative defined
For purposes of this section the term “eligible cooperative” means a cooperative organization described in section
1381
(a) which is owned more than 50 percent by agricultural producers or by entities owned by agricultural producers. For this purpose an entity owned by an agricultural producer is one that is more than 50 percent owned by agricultural producers.
[1] See References in Text note below.
[2] So in original. The word “the” probably should follow.
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