As you may have heard, the Fiscal Cliff legislation contains
incentives targeted toward economic development in Indian country.
These include the extension of both the Indian employment tax
credit, which encourages businesses to hire tribal members and
their spouses, and the accelerated depreciation incentive, which
helps businesses located on Indian lands. Both of these incentives
can help encourage renewable energy development and energy
independence in Indian country, since they can lower both the
development and theoperating costs of energy facilities if Tribes
partner with taxable entities in developing energy
facilities.
Substantially more important to tribal renewable energy development
is the Fiscal Cliff legislation's extension of the production
tax credit and investment tax credit for renewable energy
facilities. For wind projects, these tax credits were only
available for facilities that were completed by the end of last
year. For biomass, landfill gas, waste-to-energy facilities, and
certain other renewable projects, facilities needed to be completed
by the end of this year to receive tax credits. The Fiscal Cliff
legislation substantially extends the time frame for these tax
credits (which, on a net basis, can pay for about 25% of a tribal
renewable energy facility) by only requiring that the facilities
begin construction by the end of this year. The IRS will likely
develop guidance soon regarding when construction on the projects
must be completed, but this change in the law provides an
opportunity for tribes if they partner with taxable partners, to
develop renewable energy projects now that are substantially funded
by investment tax credits.
In addition, tribes can potentially structure their energy
development projects so that they receive value from both the
investment tax credits and from grants and other incentives that
tribes can receive from the federal government, state governments,
and utilities. Combined, these credits and grants can fund a large
percentage of the energy projects.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.