Agenda. Non-business tax incentivesBusiness tax incentivesNew Jersey energy incentive programCap and TradeStimulus Grant Opportunities. Residential Energy Property Credit. The credit is equal to 30% (up to $1,500) for:Qualified energy efficiency improvements (building envelope components):any insulation material or system specifically and primarily designed to reduce the dwelling unit's heat loss or gain when installed in or on the dwelling unit.exterior windows, skylights and, doors.a23
1. Alternative Energy and Energy Tax Incentives Anthony DiGiacinto
Senior Tax Manager
June 11, 2009
3. Residential Energy Property Credit The credit is equal to 30% (up to $1,500) for:
Qualified energy efficiency improvements (building envelope components):
any insulation material or system specifically and primarily designed to reduce the dwelling unit's heat loss or gain when installed in or on the dwelling unit.
exterior windows, skylights and, doors.
any metal roof or asphalt roof installed on a dwelling unit, but only if the roof has appropriate pigmented coatings or cooling granules that are specifically and primarily designed to reduce the dwelling unit's heat gain.
Qualified energy property:
Electric heat pumps.
Natural gas, propane, or oil hot water boilers and furnaces.
Stoves using biomass
Advanced main circulating fans.
4. Residential Energy Property Credit, continued Credit is for property placed in service in 2009 and 2010.
Each type of property must equal or exceed certain energy efficiency standards.
The use of subsidized energy financing no longer disqualifies the expenditure from the credit.
5. Residential Alternative Energy Credit The credit is equal to 30% of the cost of eligible:
Solar water heaters
Solar electricity equipment
Fuel cell plants
Wind energy property
Qualified geothermal heat pumps
Installed on or in connection with the taxpayer’s residence.
Fuel cell property is limited to $500 per half kilowatt and must be installed on the taxpayer’s principal residence.
6. Residential Alternative Energy Credit, Cont’d Break-even analysis
Variables; zip code, utility, average monthly electric bill (used $175).
Estimated system cost $52,300
NJ SREC (over life of program) $58,339
NJ Renewable Energy Incentive $ 8,835
Federal Credit $15,390
Cash break even point – near the end of year 4.
7. Automobile Credits Plug-in Electric Drive Motor Vehicle Credit
$2,500 plus $417 per kilowatt hour of battery capacity up to max of $7500 in total after 2009.
Max credit in 2009 $7,500 to $15,000 depending on weight of vehicle.
Phased out after a manufacturer sells 200K cars in the U.S. after 2009
Plug-in Electric Vehicle Credit
8. Automobile Credits, Cont’d Plug-in Electric Vehicle Credit
10% credit (capped at $2,500) for the purchase of 2 or 3 wheeled electric vehicles and low speed vehicles.
For vehicles purchased after February 17, 2009 and December 31, 2011
9. Alternative Fuel Refueling Station Credit Credit of 50% (up to $50,000) for the construction of an alternative fuel refueling station.
Credit if for property placed in service in 2009 and 2010.
Hydrogen related property remains at 30% up to max of $60,000.
10. Business Energy Tax Incentives Energy Investment Tax Credit (“the ITC”).
Grant in lieu of ITC.
Energy Production Tax Credit (“the PTC”).
Election to take ITC in lieu of PTC.
Credit for Investment in Advanced Energy Facilities.
11. Energy ITC The credit is equal to 30% of the cost of
Qualified fuel cell property.
Equipment using solar energy to produce electricity, to heat or cool water, or to provide solar process heat, except for heating a swimming pool.
Equipment that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight.
Qualified small wind energy property
10% for geothermal property, qualified microturbine, and property placed in service after 2016.
12. Grant in Lieu of ITC The ARRA turned the Energy ITC from income tax credits into a grant at the election of the taxpayer.
Not available to: governmental agencies, 501(c)(3) entities, issuers of clean renewable energy bond issuers, or a partnership (or LLC) that has one of the above as a partner.
The grant is available for projects that are placed in service in 2009 and 2010. Certain projects placed in service after 2010 will qualify if construction begins before 2011.
The Secretary of the Treasury must receive the grant application by October 1, 2011 for the grant to be made
13. Grant in Lieu of ITC, Cont’d The grant works the same way as the ITC (i.e. it is equal to 30% of the qualifying cost of the property) but it will be paid in dollars 60 days after the later of the date the project is completed or the application for the grant is filed.
Accordingly, the investor’s tax position becomes less relevant to the decision making process.
14. Energy PTC The PTC is an income tax credit based upon the amount of electricity sold from qualified facilities. The credit is generally claimed over a 10 year period for electricity produced from renewable resources. These include trash, biomass, wind, wave, geothermal, and hydropower facilities.
15. Claiming the PTC in lieu of the ITC Another change under the ARRA may enhance the tax benefits is an election that a taxpayer may make to take the ITC instead of the PTC for qualified projects.
This election will be attractive to the owners of such facilities if they do not expect to be profitable over the 10 year credit period.
Additionally, many of these projects are capital intensive and short on output making the PTC economically more attractive.
Also, see above for the grant in lieu of credit provision
16. Credit for Investment in Advanced Energy Projects The Credit for Investment in Advanced Energy Projects enacted as part of the ARRA adds a new tax credit designed to keep manufacturing jobs in the U.S.
The credit is equal to 30% of the taxpayer’s investment in any qualified advanced energy project.
The projects must be certified by the U.S. Treasury in conjunction with the Department of Energy by a process yet to be announced.
The total amount of credits awarded cannot exceed $2.3 billion.
Once the project is certified the taxpayer will have 3 years to place the project in service.
17. Credit for Investment in Advanced Energy Projects, Cont’d These projects include the establishment, expansion, or the re-quip of a manufacturing facility for the production of:
Property designed to be used to produce energy from the sun, wind, geothermal deposits, or other renewable resources,
Fuel cells, microturbines, or an energy storage system for use with electric or hybrid motor vehicles,
Electric grids to support the transmission of intermittent sources of renewable energy, including storage of that energy,
Property designed to capture and sequester carbon dioxide emissions,
Property designed to refine or blend renewable fuels, other than fossil fuels, to produce energy conservation technologies (including energy-conserving lighting technologies and smart grid technologies),
New qualified plug-in electric drive motor, qualified plug-in electric vehicles or components which are designed specifically for use with those vehicles, including electric motors, generators, and power control units, or
Other advanced energy property designed to reduce greenhouse gas emissions as may be determined by IRS.
18. New Jersey Incentives – SREC’s SREC stands for Solar Renewable Energy Certificate and is a tradable certificate that represents all the clean energy benefits of electricity generated from a solar electric system. Each time a solar electric system generates 1000kWh (1MWh) of electricity, an SREC is issued which can then be sold or traded separately from the power.
A market for SRECS is driven primarily by New Jersey's electricity suppliers who are required to purchase SRECs annually under New Jersey's Renewable Portfolio Standard (RPS).This requirement increases each year, so that SRECs from the equivalent of a total of 90MW of solar generation capacity will be required by 2009. Enough electricity to power approximately 8,000 homes.
All solar system owners in New Jersey with grid-connected generators can participate in New Jersey's SREC Program.
19. New Jersey’s Renewable Energy Incentive Program The Renewable Energy Incentive Program offers upfront incentives to customers of utilities regulated by the BPU who invest in eligible electricity-producing equipment for use in offsetting onsite electric consumption. REIP incentives improve the financial returns of renewable energy investments by offsetting the cost of system installation
20. New Jersey’s Renewable Energy Incentive Program, Cont’d
Customer-Sited Renewable Energy
Upfront Incentives RECs
Solar Electric – Small (up to 50 kW DC) X X
Solar Electric – Large (>50 kW DC) X
Sustainable Biomass X X
Wind – Terrestrial1 X X
Fuel Cell (if powered from a renewable resource) X X
21. New Jersey’s Renewable Energy Incentive Program, Cont’d REIP Solar Upfront Incentive Schedule (Effective February 3, 2009)
System Type Residential Non-Residential
Up to 10,000 watts w/ Energy Audit $1.75 per watt N/A
Up to 10,000 watts w/out Energy Audit $1.55 per watt N/A
Up to 50,000 watts N/A $1.00 per watt
> 50,000 Watts N/A N/A
Example: A home-owner wants to install a 4,000 watt system at their residence. To calculate the incentive, use column A in the table above for Residential Solar installations. The customer elects to have an energy audit performed by a certified performance contractor. The system is below 10,000 watts so the grant is $7,000 or 4,000 x $1.75.
22. Cap & Trade The government or other body sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances or credits which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emission allowance must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society.
There are active trading programs in several pollutants. For greenhouse gases the largest is the European Union Emission Trading Scheme. In the United States there is a national market to reduce acid rain and several regional markets in nitrogen oxides. Markets for other pollutants tend to be smaller and more localized.
23. ARRA Stimulus Grants NJ’s share of the stimulus $3.1 billion allocated to energy related projects is $73,643,000.
Energy Efficiency and Conservation Block Grants provide funds that will help the State and local governments in New Jersey reduce total energy use, cut fossil fuel emissions, and improve energy efficiency in their vehicle fleets and facilities. As the State awaits further guidance from the U.S. Department of Energy on program details, it is considering various approaches to allocating the funds that will achieve the goals of American Recovery and Reinvestment Act. The State is also considering matching programs, loan programs and other ways that it can help the counties and municipalities make the funds they receive directly achieve the highest possible energy efficiency and conservation benefits.
Go to NJ’s ARRA website for more information http://nj.gov/recovery/index.shtml