Renewable Energy Production Tax Credits (Corporate)

Summary

Note: As of April 2015, capacity limits for both 476C and 476B tax credits had been reached or had applications pending approval that would result in the capacity limit being reached. Applications in excess of capacity limits will be placed on a waiting list. However, H.F. 645, enacted in June 2015 and effective beginning January 2015, added 10 MW of utility-owned (or contracted) solar for 476C eligibility. 

In June 2005, Iowa enacted legislation creating two separate production tax credit programs for energy generated by eligible wind and renewable energy facilities. An eligible facility can qualify for only one of the two credits.

Wind and Other Renewable-Energy Facilities Tax Credit (Iowa Code § 476C)

Eligible Technologies

Eligible types of renewable energy under this tax credit include wind, biogas recovery, biomass, methane gas recovery, solar, or “refuse”. Solar facilities taking a credit under this provision cannot claim a credit under the Solar Energy Systems Tax Credit.

Amount

The tax credit available to producers or purchasers of these types of renewable energy is in the amount of:

• $0.015 per kilowatt-hour (kWh) of electricity,
  
• $4.50 per million British thermal units (BTUs) of heat for a commercial purpose,
• $4.50 per million BTUs of biogas or methane gas used to generate electricity, or
• $1.44 per thousand cubic feet of hydrogen fuel generated by and purchased from an eligible renewable energy facility or used for on-site consumption.

Capacity Limits

The maximum total amount of wind-generating nameplate capacity eligible for this credit is 363 MW. The maximum total eligibility for other renewable technologies is 63 MW, with 10 MW of nameplate capacity reserved for natural gas, methane and landfill gas, or biogas cogeneration facilities incorporated within or associated with an ethanol plant engaged in the sale of ethanol to states to meet a low carbon fuel standard, and 10 MW of nameplate capacity reserved for solar with a generating capacity of 1.5 MW or less owned or contracted for by a utility. 

An individual facility's capacity eligibility is limited to 2.5 MW per qualifying owner, and facility owners may not have an ownership interest in more than two eligible facilities. In addition, for non-wind applications filed on or after July 1, 2011, the total nameplate capacity size of the facility may not exceed 60 MW, and the facility's total capacity eligibility is limited to 10 MW.

Process

This tax credit may be applied toward the state's personal income tax (see this entry), business tax, financial institutions tax, or sales and use tax.

To qualify for the credit, a renewable energy facility must be at least 51% owned by specifically defined qualifying owners, be approved as eligible by the Iowa Utilities Board (IUB), and placed into service within 30 months of IUB approval. Furthermore, facilities must be placed into service on or after July 1, 2005, and before January 1, 2017. Renewable energy facilities may use generated renewable energy for on-site consumption and still qualify for the tax credit unless they are smaller than 0.75 megawatts (MW) (see H.F. 672).

After eligibility status is granted, the facility may apply for tax credit certificates over a 10-year period, beginning when the facility initiates energy production. Credits will not be issued for renewable energy produced or purchased for on-site consumption after December 31, 2026. Credit certificates in excess of a taxpayer’s liability for a taxable year may be carried forward for a maximum of seven years. Certificates may be transferred or sold one time to a third party, and transferred certificates may be used against a different type of tax than that noted on the original certificate.

Wind-Energy Facilities Tax Credit (Iowa Code § 476B)

Amount, Eligible Technology, and Capacity Limit

A production tax credit of $0.01 per kWh is available for electricity generated by eligible wind energy facilities, including electricity that is sold or used for on-site consumption. In May 2011, the maximum total program eligibility was reduced from 150 MW to 50 MW.

Process

The tax credit may be applied toward the state's personal income tax (see this entry), business income tax, financial institutions tax, sales and use tax, or energy replacement generation tax.

To qualify for the credit, a wind energy facility must be approved as eligible by the IUB and placed into service on or after July 1, 2005 but before July 1, 2012. For applications filed on or after March 1, 2008, the total nameplate capacity of the facility cannot be less than 2 MW or greater than 30 MW. Applications from schools, colleges, universities, and hospitals filed on or after July 1, 2009 must have a minimum nameplate capacity of 750 kilowatts (kW). Facilities must be operational within 18 months of IUB approval to maintain eligibility status unless they file for an extension.

There are no specific ownership criteria for individual projects; however, facility owners may not own more than two eligible facilities, and must have an executed power purchase agreement or interconnection agreement (except when the electricity is used for on-site consumption).

Once the IUB determines that a facility is eligible, facility owners may apply for wind energy tax credit certificates over a 10-year period, beginning with the initial production of electricity. Credit certificates in excess of a taxpayer’s liability for a taxable year may be carried forward for a maximum of seven years. Certificates are freely transferable (i.e., they can be transferred more than once), and transferred certificates may be used against a different type of tax than that noted on the original tax credit certificate.