SECTION 2. BACKGROUND

Section 38 allows certain business credits against the tax imposed by chapter 1 of the Code. Among the credits allowed by § 38 are the investment tax credit determined under § 46 and the renewable electricity production tax credit under § 45. The investment tax credit includes the energy credit under § 48. The credits under §§ 45 and 48 generally are referred to as the production tax credit (PTC) and the investment tax credit (ITC), respectively.

To qualify for the PTC, electricity must, among other things, be produced by the taxpayer at a qualified facility as defined in § 45(d). ³ The PTC for any taxable year is calculated by multiplying an inflation-adjusted credit rate by kilowatt hours of electricity produced and sold by the taxpayer to an unrelated person. The ITC is calculated as a percentage of the basis of energy property (as defined in § 48(a)(3)) placed in service during the taxable year. Additionally, under § 48(a)(5), a taxpayer may elect to treat certain renewable energy facilities that otherwise qualify under § 45(d) as energy property to claim the ITC in lieu of the PTC with respect to the facility. Both the PTC and the ITC have a beginning of construction requirement.

On December 20, 2019, the Further Consolidated Appropriations Act of 2020, Pub. L. 116-94, Div. Q, 133 Stat. 2534 (FCAA), enacted significant amendments to the PTC and the ITC. The FCAA amended the PTC by extending the beginning of construction deadline for certain qualifying facilities to December 31, 2020. This modification retroactively extended the beginning of construction deadline to qualify for the PTC by three years for 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. Additionally, the FCAA extended the beginning of construction deadline for the PTC for wind facilities by one year to December 31, 2020, and reduced the credit rate applicable to such facilities by 40-percent for facilities the construction of which begins after December 31, 2019, and before January 1, 2021. Under the FCAA, the 40-percent phaseout also applies to such wind facilities treated as energy property for purposes of the ITC. The FCAA also retroactively extended the election to claim the ITC in lieu of the PTC by three years with respect to certain renewable energy facilities if construction of such facility begins before January 1, 2021.