April 29, 2022
IRS releases 2022 inflation adjustments for renewable energy production tax credits
NOTE: The IRS corrected these inflation adjustments on May 6, 2022. See Tax Alert 2022-0741 for details.
The IRS has released (Notice 2022–07967) the 2022 inflation adjustment factor and reference prices for calculating the IRC Section 45 production tax credit (PTC) for qualified energy resources.
The PTC originally allowed taxpayers to claim a credit equal to $1.5 cents (adjusted annually for inflation) per kilowatt hour of renewable electricity produced at a qualified facility. The PTC applies if the qualified facility began construction before January 1, 2017, under one of the methods conveyed in IRS Notice 2013-29. The PTC rate available for wind facilities is phasing down and depends on the year in which a project begins construction.
The inflation adjustment factor for calendar-year 2022 is 1.8012. The 2022 reference price for facilities producing electricity from wind is 4.09 cents per kilowatt hour; because this price does not exceed the 8 cents in IRC Section 45(b)(1), the phaseout of the credit under IRC Section 45(b)(1) does not apply for calendar 2022. References prices for facilities producing electricity from closed-loop biomass, open-loop biomass, geothermal energy, municipal solid waste, qualified hydropower production, and marine and hydrokinetic renewable energy have not been determined for 2022.
The PTC for 2022 is:
The inflation-adjusted PTC rate for calendar-year 2022 electricity sales for wind projects and other technologies might provide some relief from rising costs associated with the generation and sale of the electricity.