United States

IRS releases 2017 inflation adjustment factors for section 45 credit

Inflation adjustment factors and reference prices updated


The tax credits for renewable electricity production and refined coal production each contain credit calculations that are subject to inflation adjustments and phase-out calculations that are subject to certain reference prices. As required by section 45(b)(2), the IRS issued Notice 2017-33 to update the applicable inflation adjustment factor and reference prices for 2017.

The 2017 inflation adjustment factor for qualified energy resources and refined coal is 1.5792. For 2017, the 10-year credit period for Indian coal has expired. Using these factors, the inflation-adjusted rate for the section 45(a) renewable electricity production credit is 2.4 cents per kilowatt hour of electricity produced (1.5 x 1.5792) for wind, closed-loop biomass and geothermal; and 1.2 cents per kilowatt hour of electricity produced (.75 x 1.5792) for open-loop biomass, landfill gas, trash combustion, hydropower and marine and hydrokinetic.

The reference prices are used to determine the phase-out calculation for the various production tax credits. The 2017 reference price for wind facilities is 4.55 cents per kilowatt hour and the 2017 reference price for refined coal is $51.09. Although these reference prices were updated for 2017, none of the updated reference prices exceed the factors that would cause any of the section 45 credits to be phased out.


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