The governor of Iowa has signed into law House File 645 (the “Act”) modifying statutory provisions related to Iowa’s renewable energy tax credits, effective June 26, 2015.1 There are four primary changes, three of which are beneficial to renewable energy investors and one of which is detrimental.
For taxpayers who decide to pursue Iowa’s solar energy system tax credits as opposed to Iowa’s renewable energy tax credits (you cannot claim both),2 the value of the solar energy system tax credits has been revised downward, from a rate of 60 percent, to a new rate of 50 percent, of the corresponding federal tax credits applicable to the taxpayer.3 The applicable federal tax credits a taxpayer would rely on to claim Iowa’s solar energy system tax credits would be either (1) the residential energy-efficient property credits related to solar energy provided in Sections 25E and 25D of the Internal Revenue Code, or (2) the energy credits related to solar energy systems provided in Section 48 of the Internal Revenue Code,4 which is commonly referred to as the “federal Investment Tax Credit,” or simply the “ITC.”
Three Favorable Changes
First, the Act increases the maximum cumulative value of solar energy system tax credits (Iowa Code Section 422.11L) that the Iowa Department of Revenue may issue annually to all applicants (who must apply for the credits with the Department of Revenue) from $4.5 million to $5 million.5 This change applies retroactively to January 1, 2015 (for tax years beginning on or after that date).6
Second, the Act expands the definition of “eligible renewable energy facility” with respect to renewable energy tax credits (Iowa Code Section 476C.1).7 Now included within the scope of such facilities is certain municipally owned city utilities and regulated public utilities.8 This revision is also retroactively effective as of January 1, 2015.9 Note that Iowa’s renewable energy tax credits can be calculated in one of four ways, each based on the amount of renewable energy purchased from an eligible renewable energy facility or used on-site by a producer:
- as $0.015 per kilowatt-hour of electricity
- as $4.50 per million British thermal units (Btus) of heat for a commercial purpose
- as $4.50 per million Btus of methane gas or other biogas used to generate electricity or
- as $1.40 per 1,000 standard cubic feet of hydrogen fuel.10
Third, the maximum allowable production capacity with respect to tax credits requested for “all other facilities” that Iowa’s review board might find eligible for the renewable energy tax credits has been increased.11 The increase takes the maximum from 53 megawatts of nameplate-generating capacity and 167 billion Btus of heat for commercial purposes to 63 megawatts of nameplate-generating capacity and, annually, 167 billion British units of heat for commercial purposes.12 This change applies retroactively to January 1, 2014, a year earlier than the effective dates for the first two changes mentioned above.
1 H.F. 645 (June 26, 2015).
2 “A taxpayer who is eligible to claim a credit under . . . section [422.11L] shall not be eligible to claim a renewable energy tax credit under chapter 476C.” Iowa Code § 422.11L (2015).
3 H.F. 645 (June 26, 2015).
4 Iowa Code § 422.11L (2015).
5 H.F. 645 (June 26, 2015).
7 Id. Note that Iowa includes the following sources of energies as within the scope of “renewable energy” for purposes of claiming this credit: biogas, biomass, methane gas, refuse, solar and wind. Iowa Code § 476C.1(6) (2015).
8 H.F. 645 (June 26, 2015).
10 Iowa Code § 476C.2(1) (2015).
11 H.F. 645 (June 26, 2015).