Editors Note: This article was contributed by Pennsylvania-based Herbein + Company, Inc., a certified public accounting firm with offices in Pittsburgh, Greensburg, and Reading. ShaleStuff.com has reported about taxation in the oil and gas industry, and we are pleased to feature contributed articles written by experts who are knowledgeable in various topics that affect the industry.
While most Americans were ringing in the New Year in the wee hours of January 1, 2013, Congress passed the American Tax Relief Act of 2012 (the Act). The so-called fiscal cliff was avoided when President Obama signed the bill into law on January 2, 2013.
Renewable energy producers, especially wind producers, and energy-efficient home builders and appliance manufacturers all breathed a sigh of relief when the Act extended various tax credits related to renewable energy, energy efficiency and alternative fuel vehicles.
Renewable Energy Tax Credit
This tax credit extension is frequently referred to as the wind tax credit, but it is applicable to various renewable energy projects including wind, geothermal, landfill gas, waste-to-energy and qualified hydropower.
Under the original legislation for the tax credit – equal to 2.2 cents per kilowatt-hour for 2012 – projects had to be placed in service by the end of 2012. That language has been replaced in the new legislation with language that makes projects eligible for the tax credit as long as construction is started by January 1, 2014.
Energy Efficiency Tax Credits
Some contractors may be eligible through December 31, 2013 for a tax credit of up to $2,000 for construction or renovation of apartments, condos or single-family homes that meet certain energy efficient standards.
This is not so much a tax credit extension as it is a tax credit revival. The prior expiration date for this tax credit was December 31, 2011. The Act is making this credit retroactive, meaning that homes built and acquired in both 2012 and 2013 will be eligible.
Another energy efficiency tax credit has been revived for individuals. A tax credit of 10 percent of the cost of certain energy efficient property improvements which expired on December 31, 2011 has been reinstated retroactively through December 31, 2013. The maximum credit is $500 or $200 for windows and skylights and can apply to insulation, windows and doors, and energy efficient heating, cooling and water heating appliances placed in service in both 2012 and 2013.
Alternative Fuel Vehicle Tax Credit
The tax credit for certain qualified alternative fuel vehicle refueling property has been extended through December 31, 2013 for up to 30 percent of the cost of refueling infrastructure. A cap is in place of $30,000 for business-use property and $1,000 for personal-use property.
The extension is retroactive to cover qualified alternative fuel infrastructure put into service in 2012 and includes equipment for compressed natural gas (CNG), liquefied natural gas (LNG), plug-in electric, propane and ethanol.
The Act does not include tax incentives for natural gas vehicle purchases or conversions, but it does extend a tax credit to certain 2- or-3 wheeled electric vehicles including motorcycles, bikes and scooters. For qualified vehicles, the tax credit is up to 10 percent of the cost of the vehicle or a maximum of $2,500.
Other Tax Breaks
The American Taxpayer Relief Act of 2012 extends many other business tax breaks including the 50 percent bonus depreciation provision that applied to qualified property acquired during 2012. The extension applies to property acquired and placed into service before January 1, 2014.
Another break for businesses is the increased expensing limitations and treatment of certain real property as IRS Code Section 179 property for 2012 and 2013. This allows qualified small business taxpayers to deduct as an expense, rather than depreciate, up to a specified amount of the cost of new or used tangible personal property placed in service during the tax year in the taxpayer’s business.
In its 154 pages, the Act also covers tax provisions directly related to the business community such as research, new markets and work opportunity tax credits and employer wage credit for employees who are active duty members of the uniformed services. To review your specific circumstances, contact a Herbein tax professional.
About the Author: Beth Bershok joined Herbein + Company, Inc. in 2009 as Regional Marketing Director focused on marketing and business development efforts in Western PA. Her responsibilities include guiding practice development plans for the professional staff, executing firm-wide marketing initiatives in the Pittsburgh and Greensburg offices and working directly with Herbein’s niche/service groups including Energy and Affordable Housing. Immediately prior to joining Herbein, Beth was the Marketing Director for a boutique law firm in Pittsburgh. Before that, she spent 20 years in Pittsburgh media as co-host of the morning radio show Gary & Beth in the Morning. With the visibility of that position, Beth was involved in many community and civic organizations including Toys for Tots, Louise Child Care, The American Heart Association, Girl’s Hope, Women’s Center & Shelter, The Lupus Foundation and Family Health Council. For additional information or if you have any questions, please contact Beth at firstname.lastname@example.org.
To learn more about Herbein + Company, Inc., visit http://www.herbein.com/.