On December 11, 2021, the Senate Finance Committee released updates (the “Finance Markup”) to its title of the bill passed by the House, H.R. 5376, which, if enacted in its current form, will be known as the Build Back Better Act (the “House Bill”) (see here for our prior alert on green energy provisions in the House Bill). The Finance Markup makes few substantive changes to Subtitle F of the House Bill (the “Green Energy Subtitle”), which provides tax incentives for renewable energy, such as wind and solar, as well as clean energy activities such as carbon capture and low-carbon hydrogen production. Among the substantive changes in the Finance Markup are:
- “Energy communities” now include certain brownfield sites and census tracts in which at least 5% of employment is within the oil and gas industry. Qualified facilities located in energy communities are eligible for an enhanced investment tax credit (“ITC”).
- The phasedown of the production tax credit (“PTC”) for qualified hydropower facilities and marine and hydrokinetic renewable energy facilities is eliminated. Previously, the PTC for these facilities was slated to be reduced by half and the credit period reduced from 10 to five years.
- The ITC extension for combined heat and power system property and waste energy recovery property is reduced. Such projects are eligible if construction begins before January 1, 2027, as opposed to January 1, 2034 in the House Bill.
- Addition of a clarifying provision that existing hydrogen facilities retrofitted to be low-carbon facilities can be treated as newly placed in service in order to qualify for the production tax credit for low-carbon hydrogen under (renumbered) section 45W.
The Build Back Better Act’s path through the Senate is still uncertain. The form that reaches the Senate floor could differ from the Finance Markup and negotiations between the House and the Senate also may result in significant changes, including to the Green Energy Subtitle. We will continue to monitor developments and will provide further updates on the green energy tax incentives package as its final form is determined. In the meantime, Baker Botts would be pleased to assist you in your analysis of the Build Back Better Act and other green energy tax incentive matters.
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