Saturday, January 26, 2013

"Fiscal Cliff" Legislation & Alternative Fuels


On January 1st Congress pulled an all-nighter to pass the American Taxpayer Relief Act of 2012, which was signed into Law on January 2nd by President Obama. In addition to dodging the “fiscal cliff” of across-the-board increase in taxes, Public Law 112-240 provides a number of energy tax benefits. Specifically, this legislation extends several tax credits and other incentive programs related to Clean Cities portfolio items. A summary of these extensions can be found below:

To view the full bill click here.  
IRS FAQs on claiming credits click here.

Extension of Credit for Alternative Fuel Vehicle Infrastructure
http://www.afdc.energy.gov/laws/law/US/10513
  • This credit was extended from December 31, 2011 to December 31, 2013 and effective to property placed in service after December 31, 2011.
  • This credit is equal to 30% of the cost of any qualified alternative fuel vehicle refueling property placed in service during the taxable year.
    • at a location shall not exceed—
      • (1) $30,000 in the case of a property of a character subject to an allowance for depreciation, and
      • (2) $1,000 in any other case.
  • 26 USC § 30C - Alternative fuel vehicle refueling property credit
    • the term “qualified alternative fuel vehicle refueling property” has the same meaning as the term “qualified clean-fuel vehicle refueling property” would have under section 179A if—
      • (1) does not apply to property installed on property which is used as the principal residence of the taxpayer, and
      • (2) the following were treated as clean-burning fuels:
        • (A) Any fuel at least 85 percent of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen.
        • (B) Any mixture—
          • (i) which consists of two or more of the following: biodiesel (as defined in section 40A (d)(1)), diesel fuel (as defined in section 4083 (a)(3)), or kerosene, and
          • (ii) at least 20 percent of the volume of which consists of biodiesel (as so defined) determined without regard to any kerosene in such mixture.
        • (C) Electricity.
    • (g) Termination. This section shall not apply to any property placed in service—
      • (1) in the case of property relating to hydrogen, after December 31, 2014, and
      • (2) in the case of any other property, after December 31, 2013.

Extension of Credit for 2- or 3-Wheeled Plug-In Electric Vehicles
http://www.afdc.energy.gov/laws/law/US/409
  • Previously, this credit was only applied to vehicles with at least 4 wheels. This is now extended to “qualified 2- or 3-wheeled plug-in electric vehicles.” The credit is in the amount of “the lesser of: (1) 10 percent of the cost of the qualified 2- or 3-wheeled plug-in electric vehicle, or (2) $2,500.” This vehicle must be capable of achieving a speed of 45 mph or greater and manufactured for primary use on public streets, roads and highways. It also must be acquired after December 31, 2011, and before January 1, 2014.
  • The 4 wheel credit applies to vehicles acquired after December 31, 2009 (the first 200,000 vehicles, with a phase out period after that).

Extension and Modification of Cellulosic Biofuel Producer Credit
  • Extends the date for credit from January 1, 2013 to January 1, 2014.
  • Algae is now considered a qualified feedstock for this credit; including any cultivated algae, cyanobacteria or lemna.
  • The word “Cellulosic” is struck from each of the places it appears in the text of this section of the code and replaced with “second generation.”
  • 26 USC § 40 Alcohol, etc., used as fuel -For purposes of section 38 (general business credit), the alcohol fuels credit determined under this section for the taxable year is an amount equal to the sum of—
    • (1) the alcohol mixture credit
      • 60 cents for each gallon of alcohol used by the taxpayer in the production of a qualified mixture,
    • (2) the alcohol credit,
      • 60 cents for each gallon of alcohol which is not in a mixture with gasoline or a special fuel (other than any denaturant) and which during the taxable year—
        • (i) is used by the taxpayer as a fuel in a trade or business, or
        • (ii) is sold by the taxpayer at retail to a person and placed in the fuel tank of such person’s vehicle.
    • (3) in the case of an eligible small ethanol producer, the small ethanol producer credit, plus
      • 10 cents for each gallon of qualified ethanol fuel production of such producer.
    • (4) the second generation biofuel producer credit.
      http://www.afdc.energy.gov/laws/law/US/10515
      • amount equal to the applicable amount for each gallon of qualified second generation biofuel production
        • the applicable amount means $1.01, except that such amount shall, in the case of second generation biofuel which is alcohol, be reduced by the sum of—
          • (i) the amount of the credit in effect for such alcohol under subsection (b)(1) (without regard to subsection (b)(3)) at the time of the qualified s second generation biofuel production, plus
          • (ii) in the case of ethanol, the amount of the credit in effect under subsection (b)(4) at the time of such production.

Extension of Incentives for Biodiesel and Renewable Diesel.
  • This incentive is extended from December 31, 2011 until December 31, 2013.
  • 26 USC § 40A - Biodiesel and renewable diesel used as fuel
    http://www.afdc.energy.gov/laws/law/US/396
    • (a) General rule - For purposes of section 38 (general business credit), the biodiesel fuels credit is an amount equal to the sum of—
      • (1) the biodiesel mixture credit, plus
        • $1.00 for each gallon of biodiesel used by the taxpayer in the production of a qualified biodiesel mixture.
      • (2) the biodiesel credit, plus
        • $1.00 for each gallon of biodiesel which is not in a mixture with diesel fuel and which during the taxable year—
          • (i) is used by the taxpayer as a fuel in a trade or business, or
          • (ii) is sold by the taxpayer at retail to a person and placed in the fuel tank of such person’s vehicle.
      • (3) in the case of an eligible small agri-biodiesel producer, the small agri-biodiesel producer credit.
        • 10 cents for each gallon of qualified agri-biodiesel production of such producer.


Extension and Modification of Credits with Respect to Facilities Producing Energy from Certain Renewable Resources - Production Tax Credit
  • Definition of Municipal Solid Waste - Paper which is commonly recycled is now excluded from this definition.
  • Definition of Qualified Facility – previously said that facility must be placed in service after December 31, 1993 and before January 1, 2013. In order to be considered a qualified investment credit facility to be an energy property, the property must now be placed in service after 2008 and begin construction prior to January 1, 2014 (and meet the definitions described here)
    • o This new definition applies to wind facilities, closed loop biomass facilities, open loop biomass facilities, geothermal facilities, landfill gas facilities, trash facilities, qualified hydropower facilities, and marine and hydrokinetic renewable energy facilities.
    • o For closed loop biomass facilities, modification means if the construction of such modification begins before January 1, 2014.
    • o For incremental hydropower production, an efficiency improvement or addition to capacity shall be treated as “placed in service before January 1, 2014,” if the construction of such improvement or addition begins before such date.

Extension and Modification of Special Allowance for Cellulosic Biofuel Plant Property.
http://www.afdc.energy.gov/laws/law/US/413
  • This amendment extends the allowance from January 1, 2013 to January 1, 2014 (property placed in service after December 31, 2012).
  • Again, algae is treated as a qualified feedstock for purposes of bonus depreciation for biofuel plant property (cellulosic is replaced with “second generation”).

Extension of Special Rule for Sales or Dispositions to Implement FERC or State Electric Restructuring Policy for Qualified Electric Utilities.
  • Deadline to do this is extended from January 1, 2012 to January 1, 2014. This amendment applies to dispositions made after December 31, 2011

Extension of Alternative Fuels Excise Tax Credits.
http://www.afdc.energy.gov/laws/law/US/319
  • This Credit is extended from December 31, 2011 to December 31, 2013.
  • 26 USC § 6426 - Credit for alcohol fuel, biodiesel, and alternative fuel mixtures
    http://www.afdc.energy.gov/laws/law/US/417
    • (a) Allowance of credits - There shall be allowed as a credit—
      • (1) against the tax imposed by section 4081 an amount equal to the sum of the credits described in subsections (b), (c), and (e), and
      • (2) against the tax imposed by section 4041 an amount equal to the sum of the credits described in subsection (d).
    • No credit shall be allowed in the case of the credits described in subsections (d) and (e) unless the taxpayer is registered under section 4101.
    • (b) Alcohol fuel mixture credit
      • (1) In general - For purposes of this section, the alcohol fuel mixture credit is the product of the applicable amount and the number of gallons of alcohol used by the taxpayer in producing any alcohol fuel mixture for sale or use in a trade or business of the taxpayer.
      • (2) Applicable amount -
        • (A) In general - Except as provided in subparagraphs (B) and (C), the applicable amount is—
        • o (i) in the case of calendar years beginning before 2009, 51 cents, and
        • o (ii) in the case of calendar years beginning after 2008, 45 cents.
        • (B) Mixtures not containing ethanol
          • In the case of an alcohol fuel mixture in which none of the alcohol consists of ethanol, the applicable amount is 60 cents.
    • (c) Biodiesel mixture credit
      • (1) The biodiesel mixture credit is the product of the applicable amount and the number of gallons of biodiesel used by the taxpayer in producing any biodiesel mixture for sale or use in a trade or business of the taxpayer.
      • (2) Applicable amount is $1.00.
        http://www.afdc.energy.gov/laws/law/US/395
    • (d) Alternative fuel credit
      • (1) The alternative fuel credit is the product of 50 cents and the number of gallons of an alternative fuel or gasoline gallon equivalents of a nonliquid alternative fuel sold by the taxpayer for use as a fuel in a motor vehicle or motorboat, sold by the taxpayer for use as a fuel in aviation, or so used by the taxpayer.
    • (e) Alternative fuel mixture credit
      • (1) The alternative fuel mixture credit is the product of 50 cents and the number of gallons of alternative fuel used by the taxpayer in producing any alternative fuel mixture for sale or use in a trade or business of the taxpayer.

Extension of discretionary funding for the following U.S. Department of Agriculture programs through September 2013:


The changes outlined above became effective immediately. It may take time, however, for the relevant agencies to update documentation to reflect these extensions and changes. For further information, please refer:

A special thank you to the Clean Cities Technical Response Team and South Shore Clean Cities for their extensive informational resources. 
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