BTU ACT PROPOSED
BTU Act may pass in early 2021
NMTC
NMTC post election has potential if entity HUB Zone location is structured properly
ITC
Potential for ITC with counsel input and proper structure
2021
Our lobbying and legislative targets for 2021 regardless of election outcomes
Our Latest Works
1. Support an amendment to the Energy Policy Act to include thermal biomass.
2. Pursue comprehensive reform of all energy tax credits that emphasizes long-term predictability, government neutrality, and market-based competitive outcomes.
3. Ensure the inclusion of biomass in federal renewable energy mandates and continue the pursuit of opportunities to include pellets in portfolios for heating and cooling government facilities.
4. Promote the passage of the Biomass Thermal Utilization Act (BTU Act).
5. Continue to support the expansion and implementation of the densified biomass manufacturing reporting mechanisms proposed by the Energy Information Administration (EIA).
6. Work to promote the concept of biomass carbon neutrality in EPA emissions regulation, including the Clean Power Plan, ASHRAE standards, etc.
7. Ensure that the EPA’s New Source Performance Standard fuel grading requirements are reasonable and workable for the industry.
8. Open new market opportunities for densified biomass (e.g. regulatory approvals for blending with coal in electrical or CHP generation).
9. Continue collaboration with other renewable energy organizations with like-minded visions and priorities as well as federal and state government agencies.
NEW MARKET TAX CREDITS-HUB ZONE ENTITY ESTABLISHED1: Through Special Purpose Vehicles “SPV”, Long Term Offtake agreements are generated from organizations that sell natural gas in California or other county, state, federal and public traded companies; who need the KRNG product. Off take agreements: for Renewable Energy from BioMass.
The NMTC was authorized in the Community Renewal Tax Relief Act of 2000 (PL 106-554) as part of a bi-partisan effort to stimulate investment and economic growth in low income urban neighborhoods and rural communities that lack access to the patient capital needed to support and grow businesses, create jobs, and sustain healthy local economies.The NMTC program attracts capital to low income communities by providing private investors with a federal tax credit for investments made in businesses or economic development projects located in some of the most distressed communities in the nation – census tracts where the individual poverty rate is at least 20 percent or where median family income does not exceed 80 percent of the area median.
A NMTC investor receives a tax credit equal to 39 percent of the total Qualified Equity Investment (QEI) made in a Community Development Entity (CDE) and the Credit is realized over a seven-year period, 5 percent annually for the first three years and 6 percent in years four through seven. If an investor redeems a NMTC investment before the seven-year term has run its course, all Credits taken to date will be recaptured with interest.
The New Markets Tax Credit (NMTC) was designed to increase the flow of capital to businesses and low income communities by providing a modest tax incentive to private investors. Over the last 15 years, the NMTC has proven to be an effective, targeted and cost-efficient financing tool valued by businesses, communities and investors across the country.
The NMTC expires on December 31, 2019. The New Markets Tax Credit Extension Act of 2019 (H.R. 1680), introduced by Reps. Sewell (D-AL), and Reed (R-NY), would extend the NMTC indefinitely. Senators Blunt (R-MO) and Cardin (D-MD) introduced S. 750, which is nearly identical to its House counterpart.
Rural Jobs Zone Act of 2019 Introduced
On June 26, 2019, Senators Wicker (R-MS) and Warner (D-VA) joined Representatives Sewell (D-AL) and Smith (R-MO) to introduced the Rural Jobs Zones Act of 2019 (H.R. 3538 and S. 2028). The legislation would provide two years and $1 billion in additional NMTC allocation targeted to low-income rural areas, with a 25 percent set-aside for persistently poor or high out-migration counties.
NEW MARKET TAX CREDITS-HUB ZONE ENTITY ESTABLISHED
The Investment Tax Credit (ITC) Section 48 allows project owners or investors to be eligible for federal business energy investment tax credits for installing designated renewable energy generation equipment placed in service during the period 2006 through 2024.
Identifying and leveraging available tax credit programs can make a renewable project possible. The Investment Tax Credit (ITC) is designed to help incentive development. Oftentimes under these programs it can be hard to determine whether a project is eligible, how to take advantage of the benefits, and what are the requirements if a project does qualify. Our renewable energy team will engage counsel to use the ITC to make our project have a better ROI. Thorough assessments on qualifying projects allow for in-depth guidance on ITC opportunities are needed for this project.
Some projects are able to take advantage of investment-based credits up to 30 percent of eligible costs.
Determining the eligible basis of our property is among the keys to accurately calculating the value of the ITC, and of maximizing the realized credit while ensuring compliance with the rules. However, these credits are typically subject to expiration, and meeting certain “begun construction” and/or “placed in service” requirements before the regulatory deadline is often a key consideration to lock in your credit value. Our counsel will work with us to navigate the ITC program, including:
Determining eligibility
Establish ownership structure
Coordinate technology provider and construction teams
Assist with the ITC as part of the federal filing process
MORE BACKGROUND
The internal revenue code (IRC) Section 48 has historically provided an investment tax credit (ITC) for qualifying energy related investments. The credit is established as a percentage of the project owner’s (taxpayer) basis in the eligible property. The percentage amount is dependent upon the technology implemented. Legislation for this ITC has been updated several times over the past decade, with the most recent being an “extender” of the “Further Consolidated Appropriations Act, 2020” (H.R. 1865) in December 2019.
In response to COVID-19, an extension of the continuity safe harbor is available for projects that began construction in 2016 or 2017 (now 5 years). Also, an extension to the 3½ Month Rule for services or property paid for on or after September 16, 2019, is now extended to October 15, 2020 (Notice 2020-41).
Several technologies have benefited from the previously expired “begun construction” deadline retroactively extended from Jan. 1, 2018 to Jan. 1, 2021. Projects previously thought to have missed the deadline for related qualification activity could now be eligible for significant project capital support via a tax credit scenario. In addition, projects slated to break ground over the next several years could gain eligibility, if certain actions are taken this year.
While this legislation touches multiple energy technologies, a summary of the ITC opportunity, specific to wastewater facilities and energy production, are as follows:
Of the various qualifying facility types eligible for the ITC, anaerobic digestion systems producing electricity will typically qualify as a “trash” or “biomass” facility depending upon the feedstock that will be utilized
This type of facility is eligible for a 30% ITC that can be applied to the eligible basis of the project
This eligible basis can often exceed more than 85% of the total project cost and a hypothetical example is as follows:
-A $10 million total project cost with an eligible basis of $9 million
-This total project cost is often inclusive of design, equipment, infrastructure, and other investments that are “upstream” of the energy producing equipment, but ultimately defined as “integral to the production of the electricity”
-The hypothetical project could qualify for an ITC of $2.7 million
-Actual eligible basis will vary project to project depending on project specific factors
To preserve the potential to claim the ITC, companies must establish construction of a qualified facility began prior to the end of 2020 by using the following two methods:
-Physical work test
-5% safe harbor test
In order to retail eligibility to claim the credit and once either, or both, tests have been met, a project generally has four calendar years to be placed into service if the project began construction in 2018 or later, or five calendar years to be placed into service if the project began construction in calendar year 2016 or 2017.
The credit is typically claimed in the same year the project is placed in service
INVESTMENT TAX CREDITS - ITC COUNSEL NEEDS TO BE ACQUIRED FOR OPINION
Proposed 2021 Legislative Efforts
The BTU Act of 2019 seeks to recognize and promote the many economic and environmental benefits that biomass thermal energy provides by opening the door to two sections of the Internal Revenue Code that already incentivize renewable energy. Currently, a host of renewable energy technologies qualify for investment tax credits for capital costs incurred in residential and commercial installations. Simply, this legislation seeks to achieve parity between thermal biomass and other renewable systems.
Co-sponsored in the Senate by Susan Collins, Angus King and Jeanne Shaheen, the BTU Act extends to high efficiency, clean wood heating systems the investment tax credits that currently exist for every other renewable energy technology. Legislation similar to S.628 has been introduced every session of Congress since 2009 in an effort to address this omission from the 2005 Energy Policy Act, which codified investment tax credit for renewable energy technologies under sections 25D and 48 of the IRS Code.
Specifically, the BTU Act provides for a 30% investment credit against installed capital cost for residential installations (IRC section 25D), and a 15% or 30% credit against installed capital cost for business installations, depending on level of efficiency met by the system (IRC section 48).
For your convenience, a template for requesting support for the BTU Act from your elected representatives and a fact sheet with more information about both biomass heating and the bill specifically can be downloaded below.
All information contained in this website and any subsequent communications are confidential and covered by a Confidentiality Agreement and or Non-Disclosure Agreement.
PLEASE CONSULT YOUR OWN TAX COUNSEL WE MAKE NO OPINION TO THE ACCURACY OF THE INFORMATION HEREIN NOR DO WE PROVIDE ANY INVESTMENT ADVICE OR SERVICE.
The documents and content on our website have been prepared solely for informational purposes, and are not an offer to buy or sell or a solicitation of an offer to buy or sell any security, product, service or investment. The opinions expressed in this document do not constitute investment advice and independent advice should be sought. The information provided in the website and associated documents or in any communication containing an attachment or link to any Renewable Nut Energy llc, Hull and Shell llc, Shell Waste llc, OPS Pellet Manufacturing llc, and Nut Pellets Renewable Energy llc, document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject the author or its affiliates to any registration requirement within such jurisdiction or country. Neither the information nor any opinion contained in this document constitutes a solicitation or offer to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.
PROPOSED Biomass Thermal Utilization Act (BTU Act) - May, 2019