Nebraska Wind Power Tax Credits | Alternative Energy Grants

Nebraska Net Metering

LB 436, signed in May 2009, established statewide net metering rules for all electric utilities in Nebraska. The rules apply to electricity generating facilities which use solar, methane, wind, biomass, hydropower or geothermal energy, and have a rated capacity at or below 25 kilowatts (kW). Electricity produced by a qualified renewable energy system during a month shall be used to offset any kilowatt-hours (kWh) consumed at the premises during the month.

Any excess generation produced by the system during the month will be credited at the utility's avoided cost rate for that month and carried forward to the next billing period. Any excess remaining at the end of an annualized period will be paid out to the customer. Customers retain all renewable energy credits (RECs) associated with the electricity their system generates. Utilities are required to offer net metering until the aggregate generating capacity of all customer-generators equals one percent of the utility's average monthly peak demand for that year. For additional information, visit the DSIRE link: http://www.dsireusa.org/incentives/incentive.cfm

Wind resource To Top

Southwest Windpower has unveiled a free wind resource analysis tool: http://www.skystreamenergy.com/mywindspeed.php

Wind Navigator is another helpful resource: https://www.windnavigator.com/cms/

Tax Credits, Depreciation, USDA Grants & Loans, & Nebraska Energy Loans To Top

With the passage of the “American Recovery and Reinvestment Act of 2009,” the United States Government put in place two great incentives that directly and positively impact Wind Turbine projects all around the country. The “Small wind ITC” and “Bonus Depreciation”

Programs make investing in wind power an excellent business decision on many levels, and getting access to these good-as-cash incentives is easy because it falls into the business processes that most organizations already in place.

With the questions and answers below, we have attempted to provide the basic information you need to make your business decision

IMPORTANT NOTICE: Bronte Windpower, LLC does not provide tax advice and nothing in this document is intended to constitute tax advice. Taxpayers should consult their own tax advisors with respect to any questions regarding the application of Federal or state or local tax law. Nothing contained in the body of this document is intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

SMALL WIND INVESTMENT TAX CREDIT

The Emergency Economic Stabilization Act of 2008, enacted on October 3, 2008, provided investment tax credits for small wind facilities placed in service before 2017 with respect to certain business and residential uses (sections 48 and 25D, respectively, of the Internal Revenue Code). The business and residential credits were subject to certain dollar limitations. On February 17, 2009 President Obama signed into law “The American Recovery and Reinvestment Act of 2009 (ARRA)” that, among many other things, removes the cost caps from the small wind investment tax credits. The ARRA legislation also provides a grant program in lieu of certain credits, whereby the ITC could be converted to an up-front grant from the US Treasury. The following are questions and answers related to the business and residential credits and the grant program.

AMOUNT OF INCENTIVES

What is the amount of the business and residential tax credits?
30% of the total installed cost of the system.

Can a system owner use the credit in addition to a state credit or rebate, federal grant, or other government incentive? If so, how does this work?
Pursuant to ARRA, for periods after December 31, 2008, a system owner can use either credit in addition to a state credit or rebate, federal grant, or other government incentive. Under prior law, in determining the amount of credit allowable with respect to certain government-subsidized projects, the taxpayer was required to reduce the cost of the project to reflect the government subsidy.

Can a system owner use the credit against the Alternative Minimum Tax?
The credit can offset the alternative minimum tax of the taxpayer.
If a system owner cannot use all of the credit in a single tax year, can the remainder be carried over to (a) following year(s)? If a system owner cannot use the entire amount of the residential credit in a taxable year because of insufficient tax liability in such year, the unused amount of the credit may be carried forward to and used in a succeeding taxable year (subject to similar limitations in such succeeding year.) The business small wind credit is part of the general business credit and may be carried forward 20 years.

OWNER AND EQUIPMENT ELIGIBILITY

What equipment qualifies for the credits? Is there any specific equipment that does not qualify?
In the case of the business credit the definition of qualified property is property that uses a wind turbine with a nameplate capacity of not more than 100 kilowatts to generate electricity. The property must be constructed or erected by, or the original use of the property must begin with, the taxpayer. The property must be of a character for which depreciation is allowed, must be used in the United States, and generally cannot be owned or used by a government agency, foreign person or other tax-exempt person. The Secretary of the Treasury, in consultation with the Secretary of Energy, may prescribe performance and quality standards for qualified property. Such regulations will be applied prospectively.

Can the credits be applied to used or refurbished equipment?
In general, the wind turbine must be new. Tax rules that determine when refurbished equipment is treated as new property are complicated and beyond the scope of this document. A consumer should consult a tax advisor with respect to this and any other issue involving the credit.

How is “business use” defined?
In the case of the “business” credit, the property must be of a character for which depreciation is allowed. This generally means that the property is used in a trade or business or held for the production of income.

Can utilities use the business credit?
For-profit utilities are eligible for the business credit. Municipal power systems are not eligible.
Can schools use the business credit?
For-profit schools are eligible for the business credit. Public and tax-exempt schools are not eligible.

In the case of a manufacturer leasing equipment to a third party, who claims the credit?
In general, the owner of the property may claim the credit. In the case of a lease, complicated tax rules determine the owner of the property for tax purposes. A consumer should consult a tax advisor with respect to this and any other issue involving the credit.

In the case of the residential credit, must the system be used for a primary residence only, or are second homes eligible?
The legislation does not distinguish between principal residences and second homes.

In the case of multiple turbines on a single property, can the credit be used toward each installation or just one of them?
There is no limitation based on a single location.

APPLYING FOR THE CREDIT

To apply for the credit, what legal forms and documentation does a turbine owner(s) need to complete/provide?
The credit will be claimed on the tax return of the taxpayer for the year for which the credit is claimed. Business credits generally are claimed on Forms 3468 and 3800 and individual energy credits generally are claimed on Form 5695.

To whom?
The Internal Revenue Service

At what stage in the process?
With the filing of the tax return for the taxable year for which the credit applies.

Where are the forms available?
The forms are on the IRS website (www.irs.gov/formspubs/)

When are the due dates?
With the due date of the applicable tax return.

In the case of an installation for a business use, is the amount subject to depreciation affected by this law?
The taxpayer must reduce its depreciable basis in property by the half the amount of the credit. A full basis reduction is required for residential use property, although such property is not subject to depreciation.

Rural Energy For America Program Grants/Renewable Energy Systems/Energy Efficiency Improvement Program (REAP/RES/EEI)

The REAP/RES/EEI Grants Program provides grants for energy audits and renewable energy development assistance. It also provides funds to agricultural producers and rural small businesses to purchase and install renewable energy systems and make energy efficiency improvements.

How does the B&I Guaranteed Loan Program compare to the Rural Energy for America Program Guaranteed Loan and Grant?

To assist you in determining which program best fit your needs this comparison chart identifies the programs common and distinct requirements in an easy to read format.

How much are the grants?

The grants are awarded on a competitive basis and can be up to 25% of total eligible project costs. Grants are limited to $500,000 for renewable energy systems and $250,000 for energy efficiency improvements. Grant requests as low as $2,500 for renewable energy systems and $1,500 for energy efficiency improvements will be considered. At least 20% of the grant funds awarded must be for grants of $20,000 or less.

Who is eligible?

The program is designed to assist farmers, ranchers and rural small businesses that are able to demonstrate financial need. All agricultural producers, including farmers and ranchers, who gain 50% or more of their gross income from the agricultural operations are eligible. Small businesses that are located in a rural area can also apply. Rural electric cooperatives may also be eligible to apply.

What types of projects are eligible?

Most rural projects that reduce energy use and result in savings for the agricultural producer or small business are eligible as energy efficiency projects. These include projects such as retrofitting lighting or insulation, or purchasing or replacing equipment with more efficiency units. Eligible renewable energy projects include projects that produce energy from wind, solar, biomass, geothermal, hydro power and hydrogen-based sources. The projects can produce any form of energy including, heat, electricity, or fuel.
For all projects, the system must be located in a rural area, must be technically feasible, and must be owned by the applicant.

How to Apply

To apply for funding for the REAP Grant Program, please contact your Rural Development State Office.

GRANT PROGRAM

Payments for Specified Energy Property in Lieu of Tax Credits

What is the grant program?
ARRA provides that in lieu of certain business energy credits (including the small wind energy credit) an owner may elect to apply for a cash grant from the Department of Treasury in an amount equal to the foregone credit (i.e., 30% of the cost of a small wind facility).

Who is eligible for the grant?
In general, taxpayers that are eligible to claim the business tax credit for qualified properties may apply for the grant. Tax-exempt entities (e.g., governmental bodies, charities, co-operatives) or partnerships with a tax-exempt partner are not eligible for the grant.

What small wind properties qualify for the grant?
The property must otherwise qualify for the business credit described above and generally must be placed in service in 2009 or 2010. If the property is placed in service after 2010, and before 2017, construction of the property must have begun in 2009 or 2010.

How does one apply for the grant?
You can find out all information on how to apply for the grant at the U.S. Department of The Treasury's website here: http://www.ustreas.gov/recovery/1603.shtml

How is the grant treated for tax purposes?
The receipt of the grant is not taxable. In general, the rules otherwise applicable to the investment tax credit (recapture rules, no reduction for government subsidies, partial reduction in depreciable basis, etc.) apply to the grant.

DEPRECIATION ALLOWANCE INFORMATION

Under the federal Modified Accelerated Cost-Recovery System (MACRS), businesses may recover investments in certain property through depreciation deductions. The MACRS establishes a set of class lives for various types of property, ranging from three to 50 years, over which the property may be depreciated. A number of renewable energy technologies are classified as five-year property (26 USC § 168(e)(3)(B)(vi)) under the MACRS, which refers to 26 USC § 48(a)(3)(A), often known as the energy investment tax credit or ITC to define eligible property. Such property currently includes:

Is there a special form to use to claim my depreciation? You will use Federal IRS Form 4562

Nebraska Dollar & Energy Savings Loans

Nebraska Dollar and Energy Saving Loans are offered statewide by the Nebraska Energy Office and the state's lending institutions. The simple interest rate is 5%* or less. [*final annual percentage rate (APR) may vary by lender and loan fees charged].

Many common home, building or system energy improvements qualify for financing. These projects are generally cost-effective and can be financed with a low-interest loan for up to ten years, or for five years for appliances.

Fore more information visit the NE Energy Office website: http://www.neo.ne.gov/loan/index.html

For Additional Information

For what types of issues should a consumer consult a tax advisor?
A consumer should consult its tax advisor with respect to any issue involving either the ITC credit, the cash grant from the treasury, or depreciation.
A few helpful links:

This document contains inforrmation obtained from the following sources: