CONGRESS made several changes in tax law in early December that will affect power companies and project developers
It increased the “volume cap” — or the amount of tax-exempt bonds that a state can issue each year to finance private projects — to $225 million or $75 times the population, whichever is greater. The limit had been $150 million or $50 times the population. The new limit takes effect in 2002. The limit for 2001 is $187.5 million or $62.50 times the population. A state can carry unused volume cap over to the next year.
Congress also extended a tax deduction for the cost of cleaning up Superfund sites. The deduction had been scheduled to expire at the end of last year. It has been extended for spending on cleanup through 2003.
Finally, Congress restored the installment sale method that lets the seller of property report its gain from sale ratably over the same period that installment payments of purchase price are received. Unfortunately, sellers must pay an interest charge on the taxes that are considered “deferred” as a result. However, the option to pay taxes over time can still be useful, particularly in section 29 deals where most of the purchase price is paid as tax credits are earned over time.