The Renewable Electricity Production Tax Credit: In Brief
Congressional research reportApr 29, 2020
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The Renewable Electricity Production Tax
Credit: In Brief
Molly F. Sherlock
Specialist in Public Finance
Updated April 29, 2020
Congressional Research Service
7-....
www.crs.gov
R43453
SUMMARY
The Renewable Electricity Production Tax
Credit: In Brief
The renewable electricity production tax credit (PTC) is a per-kilowatt-hour (kWh) tax
credit for electricity generated using qualified energy resources. The credit expires at the
end of 2020, so that only projects that began construction before the end of 2020 qualify
for tax credits. Since the PTC is available for the first 10 years of production at a
qualified facility, PTCs will continue to be claimed after the PTC’s stated expiration
date. Whether the PTC should be extended, modified, or allowed to expire as scheduled
is an issue Congress may choose to consider.
R43453
April 29, 2020
Molly F. Sherlock
Specialist in Public Finance
-re-acte--@crs.loc.gov
For a copy of the full report,
please call 7-.... or visit
www.crs.gov.
Most recently, the PTC was extended in the Taxpayer Certainty and Disaster Tax Relief Act of 2019, Division Q
of the Further Consolidated Appropriations Act of 2020 (P.L. 116-94). For wind facilities, the PTC was extended
for one year. Previously, construction had to begin on qualifying wind facilities before the end of 2019, and
facilities that began construction in 2019 could claim a PTC that was reduced by 60% from the full PTC amount.
With the one-year extension, wind facilities starting construction in 2020 became PTC-eligible. The PTC is
reduced by 40% from the full PTC amount for wind projects beginning construction in 2020. For nonwind
facilities, P.L. 116-94 extended the start of construction deadline by two years, from December 31, 2018, to
December 31, 2020.
The PTC for wind and closed-loop biomass was first enacted in 1992. When first enacted, the PTC was scheduled
to expire on July 1, 1999. Since 1999, the PTC has been extended 12 times. On several occasions, the PTC was
allowed to lapse before being retroactively extended. In addition to being extended, the PTC has also been
expanded over time to include additional qualifying resources. In 2019, closed-loop biomass and geothermal
technologies qualified for the full credit amount of 2.5 cents per kWh. Other technologies (open-loop biomass,
small irrigation power, municipal solid waste, qualified hydropower, marine, and hydrokinetic) qualified for a
half-credit amount, or 1.2 cents per kWh in 2019. Wind facilities starting construction in 2019 will qualify for
40% of the full credit amount, whereas wind facilities that start construction in 2020 will qualify for 60% of the
full credit amount. Credit amounts are adjusted annually for inflation.
The Joint Committee on Taxation (JCT) estimates that in 2019, foregone revenues (or tax expenditures) for the
PTC were $5.1 billion. Before P.L. 116-94 was enacted, the JCT estimated that tax expenditures for the PTC
would be $19.3 billion between 2019 and 2023. It was later estimated that the PTC extension in P.L. 116-94 will
reduce tax revenue by an additional $2.1 billion between 2020 and 2029. Extensions or modification of the PTC
could increase or decrease the estimated tax expenditures associated with this provision.
The PTC has been important to the growth and development of renewable electricity resources, particularly wind.
Tax incentives for renewables, however, may not be the most economically efficient way to correct for distortions
in energy markets or to deliver federal financial support to the renewable energy sector. Tax subsidies reduce the
average cost of electricity, increasing demand for electricity overall, countering energy-efficiency and emissionsreduction objectives. Subsidies delivered as nonrefundable tax incentives often require renewable energy
developers to find “tax-equity” partners to provide equity investments in exchange for tax credits. The use of tax
equity reduces the amount of the incentive that flows directly to the renewable energy sector.
There are a number of policy options that might be considered related to the PTC. For example, the PTC could be
allowed to expire as scheduled. Alternatively, the PTC could be temporarily extended. Extensions of the PTC
might also include modifications to the phaseout for wind. Modifications to the PTC could include options that
could make it easier for certain projects to receive benefits directly, such as allowing the option of grants or direct
payments in lieu of tax credits. Another option would be to make the PTC a permanent feature of the tax code.
Congressional Research Service
The Renewable Electricity Production Tax Credit: In Brief
Contents
Description ...................................................................................................................................... 1
Legislative History .......................................................................................................................... 3
PTC Revenue Cost Estimates and Claims ....................................................................................... 6
Economic and Policy Considerations .............................................................................................. 9
Policy Options and Proposals .........................................................................................................11
Tables
Table 1. PTC Credit Rate and Eligible Renewable Technologies ................................................... 2
Table 2. Renewable Electricity PTC Expirations and Extensions ................................................... 4
Table 3. PTC Estimated Tax Expenditures ...................................................................................... 7
Table 4. Internal Revenue Service Statistics on PTC Claims .......................................................... 8
Contacts
Author Contact Information .......................................................................................................... 13
Congressional Research Service
The Renewable Electricity Production Tax Credit: In Brief
he renewable electricity production tax credit (PTC), a per-kilowatt-hour (kWh) tax credit
for electricity produced using qualified renewable energy resources, expires on January 1,
2021. Thus, under current law, the credit is not available for projects that begin
construction after December 31, 2020. Whether the PTC should be extended, be modified, or be
allowed to expire is an issue that may be considered in the 116th Congress.
T
Since being enacted in 1992, the PTC has been temporary, with the expiration date regularly
extended. At times, the PTC for wind has followed a different expiration schedule than the PTC
for other qualifying technologies. Most recently, the PTC was extended in the Taxpayer Certainty
and Disaster Tax Relief Act of 2019, Division Q of the Further Consolidated Appropriations Act
of 2020 (P.L. 116-94). For wind facilities, the PTC was extended for one year. Previously,
qualifying wind facilities had to start construction before the end of 2019, and facilities that began
construction in 2019 could claim a PTC that was reduced by 60% from the full PTC amount.
With the one-year extension, wind facilities starting construction in 2020 became PTC-eligible.
The PTC is reduced by 40% from the full PTC amount for wind projects beginning construction
in 2020. For nonwind facilities, P.L. 116-94 extended the start-of-construction deadline by two
years, from December 31, 2018, to December 31, 2020.
This report provides a brief overview of the renewable electricity PTC. The first section of the
report describes the credit. The second section provides a legislative history. The third section
presents data on PTC claims and discusses the credit’s revenue consequences. The fourth section
briefly considers some of the economic and policy considerations related to the credit. The report
concludes by briefly noting policy options related to the PTC.
Description
The renewable electricity PTC is a per kWh credit for electricity generated using qualified energy
resources.1 To qualify for the credit, the electricity must be sold by the taxpayer to an unrelated
person. The credit can be claimed for a 10-year period once a qualifying facility is placed in
service. The maximum credit amount for 2019 is 2.5 cents per kWh.2 The maximum credit rate,
set at 1.5 cents per kWh in statute, is adjusted annually for inflation.3 Wind (before applying the
2017-2020 phaseout rates), closed-loop biomass, and geothermal energy technologies qualify for
the maximum credit amount (see Table 1). Other technologies, including open-loop biomass,
small irrigation power, municipal solid waste, qualified hydropower, and marine and hydrokinetic
energy facilities, qualify for a reduced credit amount, where the amount of the credit is reduced
by one-half (see Table 1).4
Under current law, facilities for which construction began before January 1, 2021, may qualify for
the PTC.5 However, for wind facilities that began construction during 2017, the credit is reduced
1 The renewable electricity production credit can be found in §45 of the Internal Revenue Code (IRC).
2 The maximum credit amount for 2013, 2014, 2015, and 2016 was 2.3 cents per kWh. The maximum credit amount for
2017 and 2018 was 2.4 cents per kWh.
3 The inflation adjustment is based on the gross domestic product (GDP) implicit price deflator, where the 1992 GDP
implicit price deflator is the base year.
4 From 2012 through 2014, the half-credit amount was 1.1 cents per kWh. The half-credit amount increased to 1.2 cents
per kWh for 2015, 2016, 2017, 2018, and 2019.
5 A taxpayer may establish the beginning of construction by starting physical work of a significant nature or by meeting
a continuity safe harbor provided in the IRS Notice 2016-31, available at https://www.irs.gov/pub/irs-drop/n-16-31.pdf.
Notice 2016-31 modifies IRS guidance related to continuous construction (see previous guidance in IRS Notice 201515, available at http://www.irs.gov/pub/irs-drop/n-15-25.pdf) to reflect the date changes enacted in P.L. 114-113. IRS
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The Renewable Electricity Production Tax Credit: In Brief
by 20%. The credit is reduced by 40% for wind facilities that began construction in 2018, reduced
by 60% for facilities that began construction in 2019, and reduced by 40% for wind facilities that
begin construction in 2020. Before 2013, the PTC expiration date was a placed-in-service
deadline, meaning that the electricity-producing property had to be ready and available for use
before the credit’s expiration date.
Table 1. PTC Credit Rate and Eligible Renewable Technologies
(2019)
Credit Rate
(per kWh)
Qualifying Technologies
Full Credit
2.5¢
Wind (construction beginning before 2017), Closed-Loop Biomass,
Geothermal
Half Credit
1.2¢
Open-Loop Biomass, Small Irrigation Power, Municipal Solid Waste,
Qualified Hydropower, Marine and Hydrokinetic
40% Credit
1.0¢
Wind (construction beginning in 2019)
Source: IRC Section 45.
The amount that may be claimed for the PTC is set to phase out once the market price of
electricity exceeds threshold levels. Since being enacted, market prices of electricity have never
exceeded the threshold level and the PTC has not been phased out, nor is the PTC likely to be
phased out under current law.6
In the past, the ability to claim the PTC was also, in some cases, limited by the corporate
alternative minimum tax (AMT). Before 2018, the PTC was available for taxpayers subject to the
AMT for the first four years of the credit. While the PTC could not be claimed against the
corporate AMT, unused credits could be carried forward to offset future regular tax liability.
While few firms were subject to the corporate AMT, this limitation may have been significant for
those affected.7 The corporate AMT was eliminated as part of the 2017 tax revision (P.L. 11597).8
PTC-eligible taxpayers have the option of claiming the 30% energy investment tax credit (ITC) in
lieu of the PTC. After 2016, for wind projects electing the ITC in lieu of the PTC, the ITC is
phased out following the PTC phaseout schedule. Property that was placed in service during
2009, 2010, or 2011, or which was placed under construction in one of these years, also had the
Notice 2017-04, available at https://www.irs.gov/pub/irs-drop/n-17-04.pdf, modifies IRS Notice 2016-31. The guidance
regarding when construction is deemed to have begun was further modified and clarified in IRS Notice 2018-59 and
IRS Notice 2019-43, available at https://www.irs.gov/pub/irs-drop/n-18-59.pdf and https://www.irs.gov/pub/irs-drop/n19-43.pdf.
6 The threshold amount above which the PTC begins to phase out is 8 cents per kWh in statute, adjusted for inflation.
Thus, the adjusted threshold amount for phaseout in 2019 is 13.12 cents per kWh. The reference price for the purposes
of the PTC phaseout is the annual average contract price per kWh of electricity generated from the same qualified
energy resource and sold in the prior year. The reference price for wind in 2019 is 5.18 cents. Because the reference
price (5.18 cents) did not exceed the threshold amount (13.12 cents), there was no PTC phaseout. See
https://www.govinfo.gov/content/pkg/FR-2019-06-06/pdf/2019-11810.pdf
7 For more, see Curtis Carlson and Gilbert E. Metcalf, “Energy Tax Incentives and the Alternative Minimum Tax,”
National Tax Journal, vol. 61, no. 3 (September 2008), pp. 477-491.
8 CRS Report R45092, The 2017 Tax Revision (P.L. 115-97): Comparison to 2017 Tax Law, coordinated by Molly F.
Sherlock and Donald J. Marples.
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The Renewable Electricity Production Tax Credit: In Brief
option of claiming an American Recovery and Reinvestment Act (ARRA) Section 1603 grant in
lieu of tax benefits.9
There are also production tax credits for Indian coal and refined coal.10 Indian coal production
facilities must have been placed in service before January 1, 2009, for coal produced before
January 1, 2016, to receive credits. There is no placed-in-service limitation for coal produced and
sold after December 31, 2015. Under current law, credits are not available for coal produced after
2020. The base rate for Indian coal is $2.00 per ton, but with the inflation adjustment the credit
was $2.525 in 2019.11 For refined coal, the base credit amount is $4.375 per ton, and the 2019
credit with the inflation adjustment is $7.173 per ton. Refined coal facilities must have been
placed in service before January 1, 2012, to qualify for credits. Refined coal facilities that were
placed in service before this deadline may still be receiving credits, as the credit was allowed for
production over a 10-year period.
Legislative History
The PTC was first enacted in 1992 as part of the Energy Policy Act of 1992 (EPACT92; P.L. 102486). Since 1999, the PTC has been extended 12 times (see Table 2). In many instances, the PTC
lapsed before being reinstated.
When first enacted as part of the EPACT92, the PTC was available for electricity generated using
wind or closed-loop biomass systems. The credit was initially set to expire on June 30, 1999. In
addition to extending the PTC through December 31, 2001, the Ticket to Work and Work
Incentives Improvement Act of 1999 (P.L. 106-170) added poultry waste as a qualifying
technology. The PTC was again extended, through December 31, 2003, as part of the Job
Creation and Worker Assistance Act (P.L. 107-147). The Working Families Tax Relief Act of
2004 (P.L. 108-311) included provisions extending the PTC through December 31, 2005.
Legislation enacted later in the 108th Congress substantially modified the PTC. The American
Jobs Creation Act of 2004 (AJCA; P.L. 108-357) added new qualifying resources, including openloop biomass (including agricultural livestock waste), geothermal energy, solar energy, small
irrigation power, and municipal solid waste (landfill gas and trash combustion facilities). Instead
of being able to claim the PTC for the first 10 years of production, these new qualifying resources
were limited to a five-year PTC period. Further, open-loop biomass, small irrigation power, and
municipal solid waste facilities had their credit amount reduced by one-half. The AJCA also
introduced a PTC for refined coal, with a rate of $4.375 per ton (indexed for inflation after 1992),
available for qualifying facilities placed in service before January 1, 2009.12
9 See CRS Report R41635, ARRA Section 1603 Grants in Lieu of Tax Credits for Renewable Energy: Overview,
Analysis, and Policy Options, by Phillip Brown and Molly F. Sherlock.
10 Indian coal is coal produced from reserves which, on June 4, 2005, were owned by an Indian tribe or held in trust by
the United States for the benefit of an Indian tribe or its members.
11 See Internal Revenue Service, “Credit for Indian Coal Production and Inflation Adjustment Factor for Calendar
Years 2018 and 2019,” 85 Federal Register 3486, January 21, 2020, at https://www.federalregister.gov/documents/
2020/01/21/2020-00884/credit-for-indian-coal-production-and-inflation-adjustment-factor-for-calendar-years-2018and-2019.
12 The AJCA also limited the reduction in credit for grants, tax-exempt bonds, or other subsidized financing to 50% for
facilities other than closed-loop biomass. For certain closed-loop biomass facilities, the ACJA made it so there was no
reduction in credit for taxpayers receiving other forms of subsidized financing. The AJCA also made changes to the
corporate AMT, allowing taxpayers to claim the PTC against the AMT and stipulating that a taxpayer’s tentative
minimum tax be treated as zero for the purposes of determining the tax liability limitation with respect to the PTC for
the first four years of production.
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The Renewable Electricity Production Tax Credit: In Brief
The PTC was extended twice during the 109th Congress. The Energy Policy Act of 2005
(EPACT05; P.L. 109-58) extended the PTC for all facilities except solar energy and refined coal
for two years, through 2007. EPACT05 also added two new qualifying resources: hydropower
and Indian coal. Hydropower was added as a half-credit qualifying resource. Indian coal could
qualify for a credit over a seven-year period, with the credit amount set at $1.50 per ton for the
first four years, and $2.00 per ton for the last three years, adjusted for inflation. EPACT05 also
extended the credit period from 5 years to 10 years for all qualifying facilities (other than Indian
coal) placed in service after August 8, 2005. The Tax Relief and Health Care Act of 2006 (P.L.
109-432) extended the PTC for one year, through 2008, for all qualifying facilities other than
solar, refined coal, and Indian coal.
The PTC was again extended and modified as part of the Emergency Economic Stabilization Act
of 2008 (EESA; P.L. 110-343). The PTC for wind and refined coal was extended for one year,
through 2009, while the PTC for closed-loop biomass, open-loop biomass, geothermal energy,
small irrigation power, municipal solid waste, and qualified hydropower was extended for two
years, through 2010. Marine and hydrokinetic renewable energy were also added by EESA as
qualifying resources. A new credit for steel industry fuel was also introduced. This credit was set
at $2.00 per barrel-of-oil equivalent (adjusted for inflation with 1992 as the base year). For
facilities that were producing steel industry fuel on or before October 1, 2008, the credit was
available for fuel produced and sold between October 1, 2008, and January 1, 2010. For facilities
placed in service after October 1, 2008, the credit was available for one year after the placed-inservice date or through December 31, 2009, whichever was later.
Table 2. Renewable Electricity PTC Expirations and Extensions
Legislation
Date
Enacted
Lapse Before
Extension?
PTC Eligibility Window
Energy Policy Act of 1992 (P.L. 102486)
10/24/1992
1/1/1993-6/30/1999
(closed-loop biomass)
1/1/1994-6/30/1999 (wind)
—
Ticket to Work and Work Incentives
Improvement Act of 1999 (P.L. 106170)
12/17/1999
7/1/1999-12/31/2001
Yes
7/1/1999-12/17/1999
Job Creation and Worker Assistance
Act (P.L. 107-147)
3/9/2002
1/1/2002-12/31/2003
Yes
1/1/2002-3/9/2002
Working Families and Tax Relief Act
(P.L. 108-311)
10/4/2004
1/1/2004-12/31/2005
Yes
1/1/2004-10/4/2004
The Energy Policy Act of 2005 (P.L.
109-58)
8/8/2005
1/1/2006-12/31/2007
No
The Tax Relief and Health Care Act of
2006 (P.L. 109-432)
12/20/2006
1/1/2008-12/31/2008
No
The Emergency Economic Stabilization
Act of 2008 (P.L. 110-343)
10/3/2008
1/1/2009-12/31/2010
10/3/2008-12/31/2011
(marine and hydrokinetic)
1/1/2009-12/31/2009 (wind)
No
The American Recovery and
Reinvestment Act of 2009 (P.L. 111-5)
2/17/2009
1/1/2011-12/31/2013
1/1/2010-12/31/2012 (wind)
No
The American Taxpayer Relief Act of
2012 (P.L. 112-240)
1/2/2013
1/1/2013-12/31/2013 (wind)
Noa
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The Renewable Electricity Production Tax Credit: In Brief
Legislation
Date
Enacted
PTC Eligibility Window
Lapse Before
Extension?
Tax Increase Prevention Act of 2014
(P.L. 113-295)
12/19/2014
1/1/2014-12/31/2014
Yes
1/1/2014-12/19/2014
Consolidated Appropriations Act, 2016
(P.L. 114-113)
12/18/2015
1/1/2015-12/31/2016
1/1/2015-12/31/2019 (wind)b
Yes
1/1/2015-12/18/2015
Bipartisan Budget Act of 2018 (P.L.
115-123)
2/9/2018
1/1/2017-12/31/2017
Yes
1/1/2017-2/9/2018c
Further Consolidated Appropriations
Act of 2020 (P.L. 116-94)
12/20/2019
1/1/2018-12/31/2020d
Yes
1/1/2018/-12/20/2019
Source: Information compiled by CRS using the Legislative Information System (LIS).
Notes: For all lapse periods, the PTC was retroactively extended. See text for full details on qualifying
technologies during different time periods.
a. The PTC expired in January 1, 2013, before being extended on January 2, 2013.
b. For wind facilities beginning construction in 2017, the credit is reduced by 20%. The credit is reduced by
40% for facilities beginning construction in 2018, and reduced by 60% for facilities beginning construction in
2019.
c. The extension was fully retroactive, in that the extension only covered a time period prior to the
extension’s date of enactment.
d. For wind facilities beginning construction in 2020, the credit is reduced by 40%.
The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) provided a longerterm extension of the PTC, extending the PTC for wind through 2012 and the PTC for other
renewable energy technologies through 2013. Provisions enacted in ARRA also allowed PTCeligible taxpayers to elect to receive a 30% investment tax credit (ITC) in lieu of the PTC. ARRA
also introduced the Section 1603 grant program, which allowed PTC- and ITC-eligible taxpayers
to receive a one-time payment from the Treasury in lieu of tax credits.13 Under ARRA, the
Section 1603 grant program was available for property placed in service or for which construction
started in 2009 or 2010. The Tax Relief, Unemployment Insurance Reauthorization, and Job
Creation Act of 2010 (P.L. 111-312) extended the Section 1603 grant program for one year,
through 2011.
The PTC for wind, which was scheduled to expire at the end of 2012, was extended for one year,
through 2013, as part of the American Taxpayer Relief Act (ATRA; P.L. 112-240). In addition to
extending the PTC for wind, provisions in ATRA changed the credit expiration date from a
placed-in-service deadline to a construction start date for all qualifying electricity-producing
technologies. The PTC, as well as the ITC in lieu of PTC option, was retroactively extended
through 2014 as part of the Tax Increase Prevention Act of 2014 (P.L. 113-295).
The Protecting Americans from Tax Hikes (PATH) Act of 2015, enacted as Division Q of the
Consolidated Appropriations Act, 2016 (P.L. 114-113), extended the PTC expiration date for
nonwind facilities for two years, through the end of 2016. The ITC in lieu of PTC option was also
extended through 2016. For Indian coal facilities, the production credit was extended for two
years, through 2016. Additionally, for Indian coal facilities, the placed-in-service limitation was
removed, allowing the credit for production at facilities placed in service after December 31,
13 For more on the Section 1603 grant program, see CRS Report R41635, ARRA Section 1603 Grants in Lieu of Tax
Credits for Renewable Energy: Overview, Analysis, and Policy Options, by Phillip Brown and Molly F. Sherlock.
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The Renewable Electricity Production Tax Credit: In Brief
2008, to qualify.14 As part of Division P of the Consolidated Appropriations Act, 2016 (P.L. 114113), the PTC for wind was extended through 2019. The credit was extended at current rates
through 2016. For wind facilities beginning construction in 2017, the credit was reduced by 20%.
The credit was reduced by 40% for facilities beginning construction in 2018, and reduced by 60%
for facilities beginning construction in 2019.
The PTCs for nonwind technologies and the PTC for Indian coal expired at the end of 2016, but
were retroactively extended for tax year 2017 in the Bipartisan Budget Act of 2018 (BBA18; P.L.
115-123). The PTC for technologies other than wind expired at the end of tax year 2017, and
remained expired through 2018 and much of 2019.
The Further Consolidated Appropriations Act of 2020 (P.L. 116-94) retroactively extended the
PTC for 2018 and 2019 for nonwind technologies, and extended the credits forward through 2020
for all technologies. P.L. 116-94 extended the PTC for wind facilities starting construction in
2020 at a rate of 60% of the full credit. The wind PTC remained at its previous phaseout rate of
40% of the full credit for facilities starting construction in 2019.
PTC Revenue Cost Estimates and Claims
Estimates of the cost, or foregone revenue, associated with tax expenditure provisions can be
found in the Joint Committee on Taxation (JCT) annual tax expenditure tables. Because JCT’s
figures are estimates, they may differ from actual amounts of tax credit claims. Additionally, the
most recent JCT tax expenditure estimates do not reflect the PTC extension that was part of P.L.
116-94, enacted late in 2019.
Before the 2019 extension, estimated revenue losses (tax expenditure) associated with the PTC
are $19.3 billion between 2019 and 2023 (Table 3). Most of these revenue losses, $17.9 billion,
are due to the PTC for wind energy. An estimated $0.5 billion is for PTCs for electricity produced
using geothermal, $0.4 billion for PTCs for electricity generated using open-loop biomass, $0.3
billion for PTCs for electricity generated using municipal solid waste, and $0.1 billion for PTCs
for electricity generated using qualified hydropower.15 Over the same five-year period, the
estimated revenue losses (tax expenditure) associated with the production credits for refined coal
and Indian coal are $0.1 billion each. JCT’s tax expenditure estimates are based on current law.
The PTC extension in P.L. 116-94 will result in additional reductions in federal tax revenue. The
JCT estimates that this most recent extension of the PTC will reduce federal tax revenue by $2.1
billion between 2020 and 2029. Additionally, extending the PTC for Indian coal will reduce
federal tax revenue by $0.1 billion between 2020 and 2029. A policy that further extends the PTC
would increase these tax expenditure estimates.
14 Additionally, modifications in P.L. 114-113 to the PTC for Indian coal (1) modified third-party sales requirements
and (2) exempted the Indian coal credit from the AMT.
15 The amount awarded to specific technologies may not sum to the total PTC tax expenditure estimate due to rounding.
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Table 3. PTC Estimated Tax Expenditures
billions of dollars
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0.3
2.1
1.1
0.9
1.3
1.4
1.4
1.6
1.7
1.5
Wind Only
0.6
0.7
1.0
1.1
1.3
1.4
1.2
Indian Coal
-i-
-i-
-i-
-i-
-i-
-i-
-i-
Refined Coal
-i-
-i-
-i-
-i-
-i-
-i-
-i-
0.9
1.3
1.4
1.4
1.6
1.7
1.5
Renewable Resources
Total
0.3
2.1
1.1
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total
20192023
Renewable Resources
2.6
3.2
4.3
4.8
5.1
4.7
3.9
2.9
2.7
19.3
Wind Only
2.3
3.1
4.0
4.5
4.7
4.3
3.6
2.7
2.4
17.9
Indian Coal
-i-
-i-
-i-
-i-
-i-
-i-
-i-
-i-
-i-
0.1
Refined Coal
-i-
-i-
-i-
-i-
-i-
-i-
-i-
-i-
-i-
0.1
Total
2.6
3.2
4.3
4.8
5.1
4.7
3.9
2.9
2.7
19.5
Source: Joint Committee on Taxation, annual tax expenditure tables, available at https://www.jct.gov/publications.html?func=select&id=5.
Notes: All figures are forward-looking estimates and do not reflect actual revenue losses. An “-i-” indicates a positive revenue loss of less than $50 million. Before 2008,
the JCT did not disaggregate the cost of the PTC for different energy resources. Five-year sums for renewables include all eligible resources. Only wind and open-loop
biomass are listed separately, as the revenue loss for all other technologies is estimated to be less than $50 million in any single year. Multiyear sums may differ from the
sum of individual tax years due to rounding. Tax expenditure estimates do not include the extension through 2020 enacted in P.L. 116-94. The JCT estimated that
extending the PTC through 2020 would reduce federal tax revenue by an additional $0.1 billion in 2020, $0.2 billion in 2021, $0.2 billion in 2022, and $0.2 billion in 2023.
JCT’s cost estimate for the Taxpayer Certainty and Disaster Tax Relief Act of 2019 can be found at https://www.jct.gov/publications.html?func=startdown&id=5200.
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The Renewable Electricity Production Tax Credit: In Brief
Information on PTC claims by corporations is available from the IRS through the 2015 filing
year. For 2015, 265 corporate taxpayers claimed the PTC (see Table 4). Most of the credits
claimed were for production of renewable electricity, with only a few claims being made for
refined coal, Indian coal, or steel industry fuel.16 In total, for 2015, taxpayers claimed PTCs of
$4.0 billion. Because the PTC is paid out for 10 years, most PTCs awarded in any given year are
the result of previous-year investments. Some taxpayers may not be able to use all of their tax
credits to offset taxable income in a given tax year. In this case, taxpayers may carry forward
unused credits to offset tax liability in a future tax year. In 2010, nearly $1.2 billion in PTCs were
carried forward from previous tax years.17
The IRS data on PTC claims highlight the effect policy actions taken in response to the 20072009 economic downturn had on renewable energy tax credit claims. While the number of
taxpayers claiming the PTC increased between 2008 and 2009, and again from 2012 through
2015, this number decreased between 2009 and 2012. With the Section 1603 grant option
available, fewer taxpayers claimed the PTC. While Section 1603 grants were available in lieu of
the PTC, $15.5 billion in grants were claimed for technologies that otherwise would have been
PTC-eligible.18 This amount is not directly comparable to the costs of the PTC because Section
1603 grants were a one-time payment, while projects may generate electricity eligible for the
PTC for 10 years of production.
Table 4. Internal Revenue Service Statistics on PTC Claims
billions of dollars
2008
2009
2010
2011
2012
2013
2014
2015
Number of Claimantsa
253
260
246
230
180
230
236
265
Total Amount Claimed
$1.2
$1.5
$1.7
$1.8
$2.3
$2.8
$3.5
$4.0
Credits Carried Forward
$0.2
$0.6
$1.2
n.a.
n.a.
n.a.
n.a.
n.a.
Source: CRS analysis of Internal Revenue Service (IRS) Statistics of Income (SOI) line counts data, various years.
Available at http://www.irs.gov/uac/SOI-Tax-Stats-Corporation-Income-Tax-Returns-Line-Item-Estimates.
a. This is the number of corporate taxpayers filing IRS Form 8835 to claim the Renewable Electricity, Refined
Coal, and Indian Coal Production Credit. Line counts for credit amounts carried forward are not available
after 2010.
The effect of the 2007-2008 financial crisis and economic downturn can also be seen in data on
tax credit carry forwards. The amount of PTCs being carried forward more than doubled between
2008 and 2009, then doubled again between 2009 and 2010. During the economic downturn,
taxpayers had less net income to offset with tax credits. Further, weakness in tax equity markets
16 The IRS data do not identify the number of taxpayers claiming the PTC for individual energy resources. The tax
expenditure figures presented above, in Table 3, provide estimates of the amount of PTCs being claimed for coal as
opposed to renewable resources.
17 Taxpayers with limited tax liability may not have the ability to claim tax credits in a given tax year. Under the
general business credit, unused tax credits can be carried back one year (used to offset positive tax liability in the
previous tax year), or carried forward for up to 20 years (used to offset positive tax liability in future tax years).
Carryforward data is not available for tax years after 2010.
18 This includes grants paid for wind, open- and closed-loop biomass, geothermal electricity, hydropower, landfill gas,
trash, and marine technologies. A full list of awards can be found at https://home.treasury.gov/policy-issues/financialmarkets-financial-institutions-and-fiscal-service/1603-program-payments-for.
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The Renewable Electricity Production Tax Credit: In Brief
made it harder for renewable energy project developers to establish partnerships to monetize tax
credits.19
Economic and Policy Considerations
The PTC was enacted in 1992 to promote the “development and utilization of certain renewable
energy sources.”20 The 1999 sunset was included to provide an “opportunity to assess the
effectiveness of the credit.”21 When the PTC was extended as part of a “tax extenders” package in
1999, Congress noted that the PTC had been important to the development of environmentally
friendly renewable power, and extended the credit to promote further development of wind (and
other) resources.22 Recent extensions of the PTC reflect a belief that the tax incentives contribute
to the development of renewable energy infrastructure, which advances environmental and energy
policy goals.23
Research suggests that the PTC has driven investment and contributed to growth in the wind
industry.24 While further extension of the PTC may lead to further investment and growth in wind
infrastructure, this potential is limited in the case of short-term extensions. Further, retroactive
extensions provide what are often characterized as windfall benefits, rewarding taxpayers that
would have made investments absent tax incentives.
While the PTC has contributed to increased use of renewable electricity resources, research on its
contribution to reducing greenhouse gas emissions is mixed. In a 2013 report, the National
Academy of Sciences estimated that removing tax credits for renewable electricity would result in
a small (0.3%) increase in power-sector emissions.25 In an evaluation of the renewable energy tax
credit extensions enacted in P.L. 114-113, the National Renewable Energy Laboratory concluded
19 For a discussion of tax equity markets for renewable energy tax credits during the economic downturn, see CRS
Report R41635, ARRA Section 1603 Grants in Lieu of Tax Credits for Renewable Energy: Overview, Analysis, and
Policy Options, by Phillip Brown and Molly F. Sherlock. For a general discussion of tax equity, see CRS Report
R45693, Tax Equity Financing: An Introduction and Policy Considerations, by Mark P. Keightley, Donald J. Marples,
and Molly F. Sherlock.
20 U.S. Congress, House Committee on Ways and Means, Comprehensive National Energy Policy Act, committee print,
102nd Cong., 2nd sess., May 5, 1992, H.Rept. 102-474, pp. 41-42.
21 Ibid.
22 U.S. Congress, Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 106th Congress,
committee print, April 19, 2001, JCS-2-01, p. 25.
23 U.S. Congress, Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 112th Congress,
committee print, February 2013, JCS-2-13, pp. 212-213.
24 Several empirical studies estimate the effects of the PTC on wind investment and development. See Travis Roach,
“The effect of the production tax credit on wind energy in deregulated electricity markets,” Economics Letters, vol. 127
(2015), pp. 86-88; Gireesh Shrimali, Melissa Lynes, and Joe Indvik, “Wind energy deployment in the U.S.: An
empirical analysis of the role of federal and state policies,” Renewable and Sustainable Energy Reviews, vol. 43 (March
2015), pp. 796-806; Claudia Hitaj, “Wind Power Development in the United States,” Journal of Environmental
Economics and Management, vol. 65 (2013), pp. 394-410; Xi Lu, Jeremy Tchou, Michael B. McElroy, and Chris P.
Nielsen, “The Impact of Production Tax Credits on the Profitable Production of Electricity from Wind in the U.S.,”
Energy Policy, vol. 39 (2011), pp. 4207-4214; Gilbert E. Metcalf, “Investment in Energy Infrastructure and the Tax
Code,” in Tax Policy and the Economy, ed. Jeffery R. Brown, vol. 24 (National Bureau of Economic Research, 2010),
pp. 1-33.
25 William D. Nordhaus, editor, Stephen A. Merrill, editor, and Paul T. Beaton, editor, Effects of U.S. Tax Policy on
Greenhouse Gas Emissions, National Academy of Sciences, Washington, DC, 2013, p. 68.
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The Renewable Electricity Production Tax Credit: In Brief
that the recent extensions of tax credits for wind and solar contribute to reduced emissions,
particularly if natural gas prices are low.26
A common rationale for government intervention in energy markets is the presence of
“externalities,” which result in “market failures.”27 Pollution resulting from the production and
consumption of energy creates a negative externality, as the costs of pollution are borne by
society as a whole, not just energy producers and consumers. Because producers and consumers
of polluting energy resources do not bear the full cost of their production (or consumption)
choices, too much energy is produced (or consumed), resulting in a market outcome that is
economically inefficient.28 Tax subsidies for clean energy resources are one policy option for
addressing the inefficiencies and market failures in the energy sector.29 Here, the subsidies
approach is not the most efficient way to achieve the policy objective.30 Subsidies reduce the
average cost of energy, encouraging energy consumption, countering energy conservation
initiatives, and offsetting emissions reductions.31 Additionally, tax subsidies do not necessarily
provide a comparable incentive for all emissions reduction alternatives, and may favor more
costly reductions over less costly ones. Finally, tax subsidies also reduce tax revenues. To the
extent that these subsidies are financed by distortionary taxes on other economic activities, they
reduce economic efficiency.32
A more direct and economically efficient approach to addressing pollution and environmental
concerns in the energy sector would be a direct tax on pollution or emissions, such as a carbon
tax.33 This option would generate revenues that could be used to offset other distortionary taxes,
achieve distributional goals, or reduce the deficit. A carbon tax approach would also be
“technology neutral,” not requiring Congress to select which technologies to subsidize.34
26 Trieu Mai et al., Impacts of Federal Tax Credit Extensions on Renewable Deployment and Power Sector Emissions,
National Renewable Energy Laboratory, NREL/TP-6A20-65571, February 2016, http://www.nrel.gov/docs/fy16osti/
65571.pdf.
27 For a more detailed discussion of the economic rationale for intervention in energy markets, see U.S. Congress, Joint
Committee on Taxation, Present Law and Analysis of Energy-Related Tax Expenditures, committee print, 112th Cong.,
March 23, 2012, JCX-28-12.
28 Knowledge spillovers may exist in research, development, and deployment, providing a potential economic rationale
for subsidization. Because firms benefit from research, development, and deployment activities of others, profitmaximizing firms will invest less in these activities than what is socially optimal. However, since knowledge spillovers
can affect a broad range of industries, direct support for these activities generally may be more efficient. Further,
production-based subsidies will become increasingly inefficient at targeting such externalities as renewable energy
technology matures.
29 There are also nontax options, such as regulations and mandates, which are beyond the scope of this report.
30 Metcalf, Gilbert E. 2008. “Using Tax Expenditures to Achieve Energy Policy Goals.” American Economic Review,
98(2), pp. 90-94.
31 The 2013 National Academy of Sciences report notes how tax credits for renewable electricity increase overall
electricity demand.
32 Gilbert E. Metcalf, “Federal Tax Policy towards Energy,” Tax Policy and the Economy, vol. 21 (2007), pp. 145-184.
33 For general background on the carbon tax option, see CRS Report R45625, Attaching a Price to Greenhouse Gas
Emissions with a Carbon Tax or Emissions Fee: Considerations and Potential Impacts, by Jonathan L. Ramseur and
Jane A. Leggett; and Donald Marron, Eric Toder, and Lydia Austin, Taxing Carbon: What, Why, and How, Tax Policy
Center, Washington, DC, June 2015, http://www.taxpolicycenter.org/UploadedPDF/2000274-Taxing-Carbon-WhatWhy-and-How.pdf.
34 For a discussion of the challenges associated with achieving technology neutrality using the subsidies approach, see
testimony of Gilbert E. Metcalf before the Senate Committee on Finance, Technology Neutrality in Energy Tax: Issues
and Options, April 23, 2009, available at http://www.finance.senate.gov/imo/media/doc/042309gmtest.pdf; and
testimony of Gilbert E. Metcalf before the Senate Committee on Finance, Reforming America’s Outdated Energy Tax
Code, September 17, 2014, available at http://www.finance.senate.gov/imo/media/doc/Testimony%20-
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The Renewable Electricity Production Tax Credit: In Brief
Tax incentives are also not the most efficient mechanism for delivering federal financial support
directly to renewable energy developers and investors. Stand-alone projects often have limited tax
liability. Thus, project developers often seek outside investors to “monetize” tax benefits using
“tax-equity” financing arrangements.35 The use of tax equity investors, often major financial
institutions, reduces the amount of federal financial support for renewable energy that is delivered
directly to the renewable energy sector.36 Tax incentives that reward production, as opposed to
investment, are likely to lead to more renewable electricity per dollar of federal subsidy.37
Another consideration is the interaction of the PTC with other policies designed to support the
development of renewable electricity resources.38 More than half of U.S. states currently have
renewable portfolio standards (RPS) policies in place.39 Subsidies for renewable energy at the
federal level, including the PTC, reduce the cost of complying with state-level RPS mandates.
Policy Options and Proposals
Without legislative action, the PTC will not be available to projects that begin construction after
December 31, 2020. One option is to allow the PTC to expire as scheduled. Under this option,
projects that meet specified construction start dates would receive the PTC for the first 10 years
of qualified production.
Another option would be to provide a temporary extension of the PTC. With this option, the
construction start date deadline could be extended by a set number of years. The PTC for
nonwind technologies has continued to be extended without a phaseout. For wind technologies,
the PTC was scheduled to be fully phased out in 2020. However, P.L. 116-94 further extended the
wind PTC, and scaled back the phaseout. Wind projects beginning construction in 2019 qualify
for 40% of the full PTC amount, while wind projects beginning construction in 2020 qualify for
60% of the full PTC amount. Any further extension of the PTC may also consider whether the
PTC should be phased out for certain technologies.
In the 116th Congress, several PTC policy options have been discussed. The PTC was extended in
P.L. 116-94. Some proposals would have extended the PTC for a longer period of time. For
example, a discussion draft released by House Ways and Means Committee Democrats, the
Growing Renewable Energy and Efficiency Now (GREEN) Act, proposed extending the PTC
through 2024.40 In this proposal, the PTC for wind would be extended through 2024 at the 60%
%20Gilbert%20Metcalf.pdf.
35 For a general discussion of tax equity, see CRS Report R45693, Tax Equity Financing: An Introduction and Policy
Considerations, by Mark P. Keightley, Donald J. Marples, and Molly F. Sherlock.
36 One study found that wind developers valued $1.00 of nonrefundable tax credits the same as $0.85 in grant funding.
See Sarah Johnston, “Nonrefundable Tax Credits versus Grants: The Impact of Subsidy Form on the Effectiveness of
Subsidies for Renewable Energy,” Journal of the Association of Environmental and Resource Economists, vol. 6, no. 3
(May 2019), pp. 433-460.
37 Joseph E. Aldy, Todd D. Gerarden, and Richard L. Sweeney, Investment Versus Output Subsidies: Implications of
Alternatives for Wind Energy, National Bureau of Economic Research, Working Paper 24378, March 2018.
38 In addition to other policies, market factors, such as natural gas prices affect wind development. See CRS Report
R42576, U.S. Renewable Electricity: How Does the Production Tax Credit (PTC) Impact Wind Markets?, by Phillip
Brown.
39 For background, see CRS Report R45913, Electricity Portfolio Standards: Background, Design Elements, and Policy
Considerations, by Ashley J. Lawson.
40 For more, see https://mikethompson.house.gov/newsroom/press-releases/chairman-thompson-ways-and-meansdemocrats-unveil-growing-renewable-energy.
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The Renewable Electricity Production Tax Credit: In Brief
rate. This discussion draft also includes a provision to allow taxpayers to elect to forgo tax credits
and opt for a payment instead. The payment would be equal to 85% of the value of the tax credits.
Senator Wyden proposed, in S.Amdt. 1397 to S. 2657, to extend the PTC through 2023, allowing
the PTC for wind at 60% of the full PTC value.41
Others have proposed modifying the PTC as part of more comprehensive energy tax reforms. In
the House, Representative Reed has introduced the Energy Sector Innovation Credit Act of 2019
(H.R. 5523). This proposal would repeal the current renewable energy PTC, and instead enact a
PTC for electricity produced using emerging energy technologies (defined as those with a low
share of national electricity generation that meet emissions targets). In the Senate, Senator Wyden
has proposed the Clean Energy for America Act (S. 1288). This proposal would create a clean
energy production credit that would be available to zero emission technologies generally to be in
effect until emissions reduction targets are met.42
Past proposals have encouraged permanent renewable energy tax incentives. President Obama’s
FY2017 budget proposed a permanent extension of the PTC.43 Additionally, under President
Obama’s proposal, the PTC would have been made refundable, solar facilities would have been
added as qualifying property, and the credit would have been modified such that renewable
electricity consumed by the producer could qualify for tax credits. Solar property that qualified
for the residential energy efficient property credit would also have been eligible for the PTC.
Additionally, the investment tax credit (ITC) for renewable energy would have been made
permanent. In analysis of President Obama’s FY2017 budget, the JCT estimated that making the
PTC and ITC permanent, along with these other changes, would cost $19.8 billion between 2016
and 2026.44
Other past proposals included a PTC phaseout or elimination. In 2014, House Ways and Means
Committee Chairman Dave Camp proposed a form of PTC phaseout as part of his tax reform
proposal introduced in the 113th Congress, the Tax Reform Act of 2014 (H.R. 1). Under this
proposal, the PTC inflation adjustment factor would have been eliminated. This would have
reduced the value of the PTC for renewable electricity to 1.5 cents per kWh, for all PTC-eligible
properties still within the 10-year eligibility window. Thus, facilities that had received a 2.3 cent
per kWh PTC in 2014, and were still within their 10-year PTC window in 2015, would have seen
the value of the PTC fall to 1.5 cents per kWh for 2015 and beyond. Under Chairman Camp’s
proposal, the PTC would have been fully repealed after 2024. Because the value of the PTC
would be reduced for existing facilities, the JCT estimated that this proposal would have raised
$9.6 billion in additional federal revenues between 2014 and 2023, relative to current law at the
time. A similar proposal was introduced in the 114th Congress as the PTC Elimination Act (H.R.
1901).
41 For more, see U.S. Senate Committee on Finance, “Wyden Amendment to Energy Package Would Expand Vital
Clean Energy Tax Incentives,” press release, March 3, 2020, at https://www.finance.senate.gov/ranking-membersnews/wyden-amendment-to-energy-package-would-expand-vital-clean-energy-tax-incentives.
42 For more, see U.S. Senate Committee on Finance, “Wyden, Colleagues Introduce Legislation to Overhaul Energy
Tax Code, Combat Climate Change,” press release, May 17, 2019, https://www.finance.senate.gov/ranking-membersnews/wyden-colleagues-introduce-legislation-to-overhaul-energy-tax-code-combat-climate-change-.
43 For more information, see Department of the Treasury, General Explanations of the Administration’s Fiscal Year
2017 Revenue Proposals, Washington, DC, February 2016, available at https://www.treasury.gov/resource-center/taxpolicy/Documents/General-Explanations-FY2017.pdf.
44 Joint Committee on Taxation, Estimated Budget Effects of the Revenue Provisions Contained in the President’s
FY2017 Budget Proposal, March 24, 2016, JCX-15-16, available at https://www.jct.gov/publications.html?func=
startdown&id=4902.
Congressional Research Service
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The Renewable Electricity Production Tax Credit: In Brief
Author Contact Information
Molly F. Sherlock
Specialist in Public Finance
/redacted/@crs.loc.gov , 7-....
Acknowledgments
Joseph S. Hughes, Research Assistant, assisted with updating this report.
Congressional Research Service
R43453 · VERSION 19 · UPDATED
13
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