Tax alert

Rates, adjustment factor and reference price for renewable energy PTC

May 24, 2022
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ESG Credits & incentives Energy

The IRS recently released a series of guidance publishing 2022 inflation adjustment factors, reference prices, and credit rates for the section 45 production tax credit. Additionally, the IRS published the applicable percentage under section 613A to be used in determining percentage depletion for marginal properties for the 2022 calendar year.

2022 Production tax credit for electricity from renewable resources

Recent Treasury guidance (Notice 2022-20 and Federal Register notice, FR Doc. 2022-07967, April 14, 2022, as corrected by FR Doc. 2022-09695, May 6, 2022) published the production tax credit rates, inflation ad¬justment factor and reference price for calendar year 2022 for the renewable elec¬tricity production credit under section 45. The 2022 inflation adjustment factor and reference price are used in determining the avail¬ability of the credit and apply to calendar year 2022 sales of kilowatt hours of elec¬tricity produced in the United States or a possession thereof from qualified energy resources. The credit period for refined coal production and Indian coal production expired for calendar year 2022.

For calendar year 2022:

  • The inflation adjustment factor for qualified energy resources is 1.7593.
  • The reference price for facilities producing electricity from wind (based upon information from the Department of Energy) is 4.09 cents per kilowatt hour.
  • The reference price for facilities producing electricity from closed-loop biomass, open-loop biomass, geothermal energy, municipal solid waste, qualified hydropower production, and marine and hydrokinetic energy have not been determined.
  • The credit rate for renewable electricity production is 2.6 cents per kilowatt hour on the sale of electricity produced from the qualified energy resources of wind, closed-loop biomass and geothermal energy.
  • The credit rate for renewable electricity production is 1.3 cents per kilowatt hour on the sale of electricity produced in open-loop biomass facilities, landfill gas facilities, trash facilities, qualified hydropower facilities, and marine and hydrokinetic energy facilities.

2022 Percentage depletion for marginal properties

Notice 2022-24 announces the applicable percentage under section 613A to be used in determining percentage depletion for oil and gas produced from marginal proper¬ties for calendar year 2022. The applicable percentage for marginal production for 2022 is 15%.

Treasury previously released three notices in the Internal Revenue Bulletin No.2022-18 related to oil and gas incentives. These notices, published annually, set forth various reference prices and inflation adjustment factors for the marginal well credit, the enhanced oil recovery credit and percentage depletion for oil and natural gas produced from marginal properties. (See RSM’s prior coverage.)

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