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Business Tax

IRS Updates Energy Credit Form, Instructions to Reflect Extender Legislation

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

The IRS has updated Form 8835, Renewable Electricity, Refined Coal, and Indian Coal Production Credit, and its instructions to reflect the changes made by the Taxpayer Certainty and Disaster Tax Relief Act of 2019.

Background

Code Sec. 45 provides a credit for taxpayers who produce renewable electricity (renewable electricity production credit) from qualified energy resources at qualified facilities.

Code Sec. 48 provides a 30% credit for businesses that place in service certain energy property including, fuel cell property, solar property, small wind energy property and geothermal heat pump property (energy property investment credit).

The Taxpayer Certainty and Disaster Tax Relief Act of 2019 (Disaster Act), which was included in the Further Consolidated Appropriations Act, 2020 (PL 116-94) enacted in December 2019, made the following changes to the renewable electricity production credit and the energy property investment credit:

  • The credit period for Indian coal produced at a qualified Indian coal production facility was extended from a 12-year to a 15-year period for Indian coal produced at a qualified Indian coal facility placed in service before 2009. (Code Sec. 45(e)(10))
  • Provided a new phase out of the credit for wind facilities. The Disaster Act reduced the credit for wind facilities that begin construction during 2020. (Code Sec. 45(b)(5)(D))

What’s new

The IRS has updated Form 8835 and its instructions as follows:

Changes to Form 8835:

  • For 2018 Line 2(b), was used to claim the energy credit for small irrigation, it is now reserved.
  • Lines 10 and 11 were added to claim credit for Indian coal produced at a qualified Indian coal production facility.
  • Line 17c was changed to reflect the reduction in the credit for wind facilities to 40% for facilities the construction of which began in 2020.

Changes to the Form 8835 instructions:

  • Instructions for line 10 were added.
  • A definition of Indian coal was added. Indian coal is coal produced from coal reserves which, on June 14, 2005, were owned by an Indian tribe or held in trust by the U.S. for the benefit of an Indian tribe or its members.
  • Line 17c—taxpayers report the amount included on Line 16 applicable to wind facilities the construction of which began during 2018 or 2020.
  • Line 17e—taxpayers report the amount included on line 16 applicable to wind facilities the construction of which began during 2019.

In a Technical QuickAlert issued on January 15, 2020, the IRS has asked taxpayers and practitioners not to submit Form 8835 until further notice. The IRS has not yet updated its Modernized e-File (MeF) system to accept Form 8835.

To continue your research on the electricity production credit, see FTC 2d/FIN ¶ L-17750 et seq.; United States Tax Reporter ¶ 454 et seq.

 

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