Clean Energy Tax Proposals in Biden's "American Jobs Plan"
On Wednesday, March 31, 2021, President Biden introduced a $2 trillion “American Jobs Plan.” The American Jobs Plan, as outlined by the Administration in a simultaneously-released fact sheet, would contain a sweeping set of provisions to increase investment in infrastructure while offsetting those provisions with a “Made In America Tax Plan” that would (among other changes) increase the corporate income tax rate to 28%, as discussed in our separate alert.
Specific tax incentives for clean energy and energy infrastructure (and certain non-tax, clean energy-related incentives) would include the following:
- A 10-year extension and phase down of an expanded investment tax credit (ITC) and production tax credit (PTC) for clean energy generation and storage, as well as a direct-pay option. Exact terms have not yet been provided, but similar concepts are included in the GREEN Act of 2021, which was re-introduced in the House in February. The GREEN Act of 2021 includes (among other provisions) an 85% direct pay option, as well as provisions opening clean energy investment to MLPs. For more information, see our prior GREEN Act alert.
- A revised and expanded section 45Q tax credit for carbon capture and sequestration, making it direct pay and easier to use in industrial applications, for direct air capture activity and retrofits of existing power plants. While not specifically stated in the Administration’s release, the proposed legislation may mirror similar recently introduced legislation that would provide a 10-year extension of the beginning of construction deadline for carbon capture projects, direct pay at an 85% discount, allow MLPs to use the credit and, possibly, eliminate annual capture thresholds and extend the current 12-year credit period.
- A new investment tax credit to incentivize buildout of high-voltage capacity power lines.
- A new production tax credit that would be available to clean energy investments, such as decarbonized hydrogen projects, if located in distressed communities.
- Creation of a program with a $16 billion allocation of federal funds to incentivize the energy industry to clean up and plug abandoned oil and gas wells, coal mines and similar sites.
- Investment of $15 billion in demonstration projects for climate-focused research and R&D, including carbon capture, energy storage, hydrogen, floating offshore wind and electric vehicles. This appears to be a grant program but it is likely to be integrated with the R&D tax credit.
Companies that were considering investing in clean energy projects will want to evaluate the potential effect of these proposals on such projects and, where appropriate, may want to contact legislators about such impact. Baker Botts would be pleased to assist you in your analysis and communications regarding these proposals.
ABOUT BAKER BOTTS L.L.P.
Baker Botts is an international law firm whose lawyers practice throughout a network of offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy, technology and life sciences sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit bakerbotts.com.