IRS releases 2016 inflation adjustment factors for section 45 credit
TAX ALERT |
The credits for renewable electricity production and refined coal production each contain credit calculations that are subject to inflation and phase-out calculations that are subject to varying reference prices. As required by section 45(b)(2), the IRS has issued Notice 2016-34 to update the applicable inflation adjustment factor and reference prices for 2016.
The inflation adjustment factor for qualified energy resources and refined coal is 1.5556 and the inflation adjustment factor for Indian coal is 1.1934. Using these factors, the inflation-adjusted rate for the section 45(a) renewable electricity production credit is 2.3 cents per kilowatt hour of electricity produced (1.5 (statutory rate) x 1.5556).
The reference prices are used to determine the phase-out calculation for the various credits allowed under this provision. Although these reference prices were updated for 2016, none of the updated prices cause any of the section 45 credits to phase-out.