This notice publishes the inflation adjustment factors and
reference prices for calendar year 2012 for the renewable electricity
production credit, the refined coal production credit, and the Indian coal
production credit under section 45 of the Internal Revenue Code. The 2012
inflation adjustment factors and reference prices are used in determining the
availability of the credits. The 2012 inflation adjustment factors and reference
prices apply to calendar year 2012 sales of kilowatt-hours of electricity
produced in the United States or a possession thereof from qualified energy
resources and to calendar year 2012 sales of refined coal and Indian coal
produced in the United States or a possession thereof.
BACKGROUND
Section 45(a) provides that the renew-able electricity
production credit for any tax year is an amount equal to the product of 1.5
cents multiplied by the kilowatt hours of specified electricity produced by the
taxpayer and sold to an unrelated per-son during the tax year. This electricity
must be produced from qualified energy resources and at a qualified facility
during the 10-year period beginning on the date the facility was originally
placed in service.
Section 45(b)(1) provides that the amount of the credit
determined under section 45(a) is reduced by an amount which bears the same
ratio to the amount of the credit as (A) the amount by which the reference
price for the calendar year in which the sale occurs exceeds 8 cents, bears to
(B) 3 cents. Under section 45(b)(2), the 1.5 cent amount in section 45(a), the
8 cent amount in section 45(b)(1), the $4.375 amount in section 45(e)(8)(A),
and in section 45(e)(8)(B)(i), the $2.00 amount in section 45(e)(8)(D)(ii)(I),
the reference price of fuel used as feedstock (within the meaning of section
45(c)(7)(A)) in 2002 are each adjusted by multiplying the 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, the amount is rounded to the nearest multiple of 0.1 cent.
Section 45(c)(1) defines qualified energy resources as
wind, closed-loop biomass, open-loop biomass, geothermal energy, solar energy,
small irrigation power, municipal solid waste, qualified hydropower production,
marine and hydrokinetic renewable energy.
Section 45(d)(1) defines a qualified facility using wind to
produce electricity as any facility owned by the taxpayer that is originally
placed in service after December 31, 1993, and before January 1, 2013. See
section 45(e)(7) for rules relating to the inapplicability of the credit to
electricity sold to utilities under certain contracts.
Section 45(d)(2)(A) defines a qualified facility using
closed-loop biomass to pro-duce electricity as any facility (i) owned by the
taxpayer that is originally placed in service after December 31, 1992, and
before January 1, 2014, or (ii) owned by the taxpayer which before January 1,
2014, 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. Section 45(d)(2)(C) provides that in the case of a
qualified facility described in section 45(d)(2)(A)(ii), (i) the 10-year period
referred to in section 45(a) is treated as be-ginning no earlier than the date
of enactment of section 45(d)(2)(B)(i); and (ii) if the owner of the facility
is not the producer of the electricity, the person eligible for the credit
allowable under section 45(a) is the lessee or the operator of the facility.
Section 45(d)(3)(A) defines a qualified facility using
open-loop biomass to produce electricity as any facility owned by the taxpayer
which (i) in the case of a facility using agricultural livestock waste
nutrients, (I) is originally placed in ser-vice after the date of enactment of
section 45(d)(3)(A)(i)(I) and before January 1, 2014, and (II) the nameplate
capacity rating of which is not less than 150 kilowatts; and (ii) in the case
of any other facility, is originally placed in service before January 1, 2014.
In the case of any facility described in section 45(d)(3)(A), if the owner of
the facility is not the producer of the electricity, section 45(d)(3)(C)
provides that the person eligible for the credit allowable under section 45(a)
is the lessee or the operator of the facility.
Section 45(d)(4) defines a qualified facility using
geothermal or solar energy to produce electricity as any facility owned by the
taxpayer which is originally placed in service after the date of enactment of
section 45(d)(4) and before January 1, 2014 (January 1, 2006, in the case of a
facility using solar energy). A qualified facility using geothermal or solar
energy does 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.
Section 45(d)(5) defines a qualified facility using small
irrigation power to pro-duce electricity as any facility owned by the taxpayer
which is originally placed in service after the date of enactment of section
45(d)(5) and before October 3, 2008.
Section 45(d)(6) defines a qualified facility using gas
derived from the biodegradation of municipal solid waste to produce electricity
as any facility owned by the tax-payer which is originally placed in service
after the date of enactment of section 45(d)(6) and before January 1, 2014.
Section 45(d)(7) defines a qualified facility (other than a
facility described in paragraph (6)) that burns municipal solid waste to
produce electricity as any facility owned by the taxpayer which is originally
placed in service after the date of enactment of section 45(d)(7) and before
January 1, 2014. A qualified facility burning municipal solid waste includes a
new unit placed in service in connection with a facility placed in service on
or before the date of enactment of section 45(d)(7), but only to the extent of
the increased amount of electricity produced at the facility by reason of such
new unit.
Section 45(d)(8) provides in the case of a facility that
produces refined coal, the term “refined coal production facility” means (i)
with respect to a facility producing steel industry fuel, any facility (or any
modification to a facility) which is placed in service before January 1, 2010,
and (ii) with respect to any other facility producing refined coal, and
facility placed in service after the date of the enactment of the American Jobs
Creation Act of 2004 and before January 1, 2012.
Section 45(d)(9) defines a qualified facility producing
qualified hydroelectric production described in section 45(c)(8) as (A) any
facility producing incremental hydropower production, but only to the extent of
its incremental hydropower production attributable to efficiency improvements
or additions to capacity de-scribed in section 45(c)(8)(B) placed in service
after the date of enactment of section 45(d)(9) and before January 1, 2014, and
(B) any other facility placed in service after the date of enactment of section
45(d)(9) and before January 1, 2014. Section 45(d)(9)(C) provides that in the
case of a qualified facility described in section 45(d)(9)(A), the 10-year
period referred to in section 45(a) is treated as beginning on the date the
efficiency improvements or additions to capacity are placed in service.
Section 45(d)(10) provides in the case of a facility that
produces Indian coal, the term “Indian coal production facility” means a
facility which is placed in service before January 1, 2009.
Section 45(d)(11) provides in the case of a facility
producing electricity from marine and hydrokinetic renewable energy, the term
“qualified facility” means any facility owned by the taxpayer which (i) has a
nameplate capacity rating of at least 150 kilowatts, and (ii) which is
originally placed in service on or after the date of the enactment of this
paragraph and before January 1, 2012.
Section 45(e)(8)(A) provides that the refined coal
production credit is an amount equal to $4.375 per ton of qualified re-fined
coal (i) produced by the taxpayer at a refined coal production facility during
the 10-year period beginning on the date the facility was originally placed in
service, and (ii) sold by the taxpayer (I) to an unrelated person and (II)
during the 10-year period and the tax year. Section 45(e)(8)(B) provides that
the amount of credit deter-mined under section 45(e)(8)(A) is reduced by an
amount which bears the same ratio to the amount of the increase as (i) the
amount by which the reference price of fuel used as feedstock (within the
meaning of section 45(c)(7)(A)) for the calendar year in which the sale occurs
exceeds an amount equal to 1.7 multiplied by the reference price for such fuel
in 2002, bears to (ii) $8.75. Section 45(e)(8)(D)(ii)(I) provides that in the
case of a taxpayer who produces steel industry fuel, subparagraph (A) shall be
applied by substituting “2.00 per barrel-of-oil equivalent” for $4.375 per
ton.” Section 45(e)(8)(D)(ii)(II) pro-vides that in lieu of the 10-year period
referred to in clauses (i) and (ii)(II) of sub-paragraph (A), the credit period
shall be the period beginning in the later of the date such facility was
originally placed-in-service, or October 1, 2008, and ending on the later of
December 31, 2009, or the date which is 1 year after the date such facility or
the modifications described in clause (iii) were placed in service. Section
45(e)(8)(D)(ii)(III) provides that subparagraph (B) (dealing with the phaseout
of the credit) will not apply.
Section 45(e)(10)(A) provides in the case of a producer of
Indian coal, the credit determined under section 45 for any tax-able year shall
be increased by an amount equal to the applicable dollar amount per ton of
Indian coal (i) produced by the tax-payer at an Indian coal production facility
during the 7-year period beginning on January 1, 2006, and (ii) sold by the
taxpayer (I) to an unrelated person, and (II) during such 7-year period and
such taxable year.
Section 45(e)(10)(B)(i) defines “applicable dollar amount”
for any taxable year as (I) $1.50 in the case of calendar years 2006 through
2009, and (II) $2.00 in the case of calendar years beginning after 2009.
Section 45(e)(2)(A) requires the Secretary to determine and
publish in the Federal Register each calendar year the inflation adjustment
factor and the reference price for the calendar year. The inflation adjustment
factors and the reference prices for the 2012 calendar year were published in
the Federal Register on April 11, 2012 (77 Fed. Reg. 21835). Corrections were
published on April 30, 2012 (77 Fed. Reg. 25538).
Section 45(e)(2)(B) defines the inflation adjustment factor
for a calendar year as the fraction the numerator of which is the GDP implicit
price deflator for the pre-ceding 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.
Section 45(e)(2)(C) provides that the reference price is
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. Only contracts entered into after
December 31, 1989, are taken into account.
Under section 45(e)(8)(C), the determination of the
reference price for fuel used as feedstock within the meaning of section
45(c)(7)(A) is made according to rules similar to the rules under section
45(e)(2)(C).
Under section 45(e)(10)(B)(ii), in the case of any calendar
year after 2006, each of the dollar amounts under section 45(e)(10)(B)(i) shall
be equal to the product of such dollar amount and the inflation adjustment
factor determined under section 45(e)(2)(B) for the calendar year, except that
section 45(e)(2)(B) shall be applied by substituting 2005 for 1992.
INFLATION ADJUSTMENT FACTORS AND REFERENCE PRICES
The inflation adjustment factor for calendar year 2012 for
qualified energy resources and refined coal is 1.4799. The inflation adjustment
factor for Indian coal is 1.1336. The reference price for calendar year 2012
for facilities producing electricity from wind (based upon information provided
by the Department of Energy) is 5.31 cents per kilowatt hour. The reference
prices for fuel used as feedstock within the meaning of section 45(c)(7)(A),
relating to refined coal production (based upon information provided by the
Department of Energy) are $31.90 per ton for calendar year 2002 and $58.49 per
ton for calendar year 2012. The reference prices for facilities producing
electricity from closed-loop biomass, open-loop biomass, geothermal energy,
solar energy, small irrigation power, municipal solid waste, qualified
hydropower production, marine and hydrokinetic energy have not been determined
for calendar year 2012.
PHASE-OUT CALCULATION
Because the 2012 reference price for electricity produced
from wind does not exceed 8 cents multiplied by the inflation adjustment
factor, the phaseout of the credit provided in section 45(b)(1) does not apply
to such electricity sold during calendar year 2012. Because the 2012 reference
price of fuel used as feedstock for refined coal does not exceed the $31.90
reference price of such fuel in 2002 multiplied by the inflation adjustment
factor and 1.7, the phaseout of credit provided in section 45(e)(8)(B) does not
apply to re-fined coal sold during calendar year 2012. Further, for electricity
produced from closed-loop biomass, open-loop biomass, geothermal energy, solar
energy, small irrigation power, municipal solid waste, qualified hydropower
production, marine and hydrokinetic energy, the phaseout of credit provided in
section 45(b)(1) does not apply to such electricity sold during calendar year
2012.
CREDIT AMOUNT BY QUALIFIED ENERGY RESOURCE AND FACILITY,
REFINED COAL, AND INDIAN COAL
As required by section 45(b)(2), the 1.5 cent amount in
section 45(a)(1), the 8 cent amount in section 45(b)(1), the $4.375 amount in
section 45(e)(8)(A) and the $2.00 amount in section 45(e)(8)(D) are each
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 is rounded to the
nearest multiple of 0.1 cent. In the case of electricity produced in open-loop
biomass facilities, small irrigation power facilities, landfill gas facilities,
trash combustion facilities, qualified hydropower facilities, marine and
hydrokinetic renew-able energy, section 45(b)(4)(A) requires the amount in
effect under section 45(a)(1) (before rounding to the nearest 0.1 cent) to be
reduced by one-half. Under the calculation required by section 45(b)(2), the
credit for renewable electricity production for calendar year 2012 under
section 45(a) is 2.2 cents per kilowatt hour on the sale of electricity
produced from the qualified energy resources of wind, closed-loop biomass,
geothermal energy, and solar energy, and 1.1 cent per kilowatt hour on the sale
of electricity produced in open-loop biomass facilities, small irrigation power
facilities, landfill gas facilities, trash combustion facilities, qualified
hydropower facilities, marine and hydrokinetic energy facilities. Under the
calculation required by section 45(b)(2), the credit for refined coal
production for calendar year 2012 under section 45(e)(8)(A) is $6.475 per ton
on the sale of qualified refined coal. The credit for Indian coal production
for calendar year 2012 under section 45(e)(10)(B) is $2.267 per ton on the sale
of Indian coal.
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