Congress Passes “Fiscal Cliff” Bill

After weeks of heated negotiations, both the House and the Senate passed The American Taxpayer Relief Act of 2012. This legislation (1) extends many tax cuts which expired at the end of 2012 and (2) avoids the mandatory spending cuts which would have taken effect on January 3, 2013. While there was widespread support for the bill in the Senate (passed 89-8), the vote in the House was much more mixed, with a majority of House Republicans voting against the measure (final vote was 257-167). Below is a summary of provisions which affect the solar industry. The full text of the bill can be found here.

Commence Construction Language
The production tax credit (PTC) for wind energy was extended by one year, to the end of 2013 (see Sec. 407 of the bill). In addition, the eligibility standard was changed for all Section 45 technologies to qualify for the PTC if the project commences construction by the end of 2013, rather than having to have the project placed in service by that date. Despite intense lobbying by SEIA and many individual solar companies, a similar change was not made for the Section 48 technologies, which would include solar. However, having the change made for other renewable energy technologies provides a precedent that the solar industry can build upon in future legislation.

Bonus Depreciation
The bill also extended, by one year, fifty percent accelerated bonus depreciation for qualifying property, so long as the property is purchased and placed in service before January 1, 2014.

Avoiding Sequestration Cuts to 1603 Treasury Grants
The White House Office of Management and Budget (OMB) previously announced that the mandatory, across-the-board spending cuts known as “sequestration” would include a 7.6% reduction or haircut for grants issued by the 1603 Treasury Program. The sequestration was scheduled to go into effect on January 3, however, this legislation prevents the sequestration from taking effect until March 1, 2013. SEIA is continuing to work with Treasury and OMB to avoid reductions in 1603 payments if sequestration is triggered on March 1. Further information on the potential sequestration can be found on SEIA’s website.

What’s next? Congress will be working on legislation related to the sequestration/budget cuts that are now scheduled to begin on March 1. SEIA will pursue the “commence construction” change for solar technologies as part of the sequestration legislation. In addition, we will work to prevent sequestration cuts from affecting the 1603 Treasury Program.