USA Trends and Developments Contributed by: Seward & Kissel LLP, Seward & Kissel LLP
certain tax-exempt entities that are eligible for direct payment of tax credits. The standard for eligibility comes down to whether these entities meet, in connection with a certain offshore wind project, prevailing wage and apprenticeship requirements, among other criteria. The investment tax credit (ITC), a federal income tax credit for capital investments in renewable energy projects, is a one-time credit based on the dollar amount of the investment and is earned only when the equipment is placed into service. Thus, the value of the credit depends on when the facility starts construction. For projects that begin construction by 31 December 2025, the IRA extends the ITC for up to 30% of the cost of installed equipment, subject to appren - ticeship and prevailing wage requirements. This is appealing for the offshore wind sector, which is more capital-intensive and will tend to benefit more from the up-front tax benefits than from the longer-term production tax credit (PTC). The PTC allows owners and developers of wind energy facilities (land-based or offshore) to claim a federal income tax credit on every kilowatt- hour of electricity sold to an unrelated party for a period of ten years after a facility is placed into service. PTCs previously expired for wind at the end of 2021; however, the IRA extended the renewable energy PTC through 2024. Wind energy projects placed into service after 31 December 2021 that satisfy the prevailing wage and apprenticeship requirements will receive an inflation-adjusted credit of 2.6 cents per kil - owatt-hour for the first ten years of electricity generation. Additionally, owners and developers of large land-based wind energy facilities can elect to claim the ITC instead of the PTC.
Finally, there are other, less popular, tax cred - its available for qualifying entities, such as the residential renewable energy tax credit and the advanced manufacturing tax credit. However, like their counterparts the ITC and the PTC, these tax credits require the entity to meet cer - tain requirements prior to receipt. Thus, despite the federal incentives for affordable clean energy, these incentives are not without rules and regu - lations set out under the IRA. Notwithstanding these strict regulatory regimes, those compliant with them will likely be part of an investment surge in the US offshore wind market, paving the way for innovation in the industry, such as that of the cutting-edge floating turbine technology under development on the West Coast.
615 CHAMBERS.COM
Powered by FlippingBook