Production Tax Credits

Production Tax Credits

June 08, 2011 | By Keith Martin in Washington, DC

Production tax credits for generating electricity from wind, geothermal energy and “closed-loop” biomass are 2.2¢ per kilowatt hour in 2011.

They are 1.1¢ a kilowatt hour for generating electricity from “open-loop” biomass, landfill gas, incremental hydroelectric projects and ocean energy.

The credits are adjusted each year for inflation. They run for 10 years after a project is originally placed in service. The IRS said the credits this year are 2.17¢ per kilowatt hour. It made a similar mistake last year when announcing the credit amount for 2010. The tax code requires that the credit amount be rounded to the nearest tenth of a cent.

The credits phase out if contracted electricity prices from the particular resource reach a certain level. That level in 2011 is 11.5672¢ a kilowatt hour. The IRS said there will not be any phase out in 2011 because contracted wind electricity prices are 4.68¢ a kWh going into the year, and it does not have data on contracted prices for electricity from the other energy sources.

The information was published in the Federal Register on April 19.