Renewable Energy Production Tax Credits (Corporate) (Iowa)

Last modified on February 5, 2013.

Financial Incentive Program

Summary

In June 2005, Iowa enacted legislation creating two separate production tax credit programs for energy generated by eligible wind and renewable energy facilities. An eligible facility can qualify for only one of the two credits, codified as Iowa Code § 476C and § 476B. In January 2006, the Iowa Utilities Board (IUB) adopted rules governing the facility eligibility process (Docket No. RMU-05-08), and issued a final rule amendment in July 2008 (IUB Docket No. RMU-08-04). The rules were incorporated into the administrative code (IAC 199-15.18 through 199-15.21). The legislature has periodically amended sections 476B and 476C, most recently with HF 672 (May 2011) and HF 590 (July 2011). The corresponding rule changes (Docket No. RMU-2011-0003) are effective October 26, 2011.

Iowa Code § 476C Tax Credit – Wind and Other Renewable-Energy Facilities

Under Iowa Code § 476C, a production tax credit of 1.5¢ per kilowatt-hour is available for energy generated by eligible wind energy generators and other renewable energy facilities, including biomass and solar. In addition, Iowa offers $4.50 per million BTUs of biogas used to generate either electricity or heat for commercial purposes, or $1.44 per thousand cubic feet of hydrogen fuel generated and sold by an eligible renewable energy facility. These credits may be applied toward the state's personal income tax, business tax, financial institutions tax, or sales and use tax. All tax credits are transferable.

To qualify for the credit, a renewable energy facility must be at least 51% owned by specifically defined qualifying owners, and must be approved as eligible by the IUB. Furthermore, facilities must be placed into service on or after July 1, 2005, and before January 1, 2015.

The maximum total amount of wind generating capacity eligible for this credit was increased from 180 megawatts (MW) to 330 MW in April 2009, then increased to 363 MW in May 2011. The maximum total eligibility for other renewable technologies is 53 MW (increased from 20 MW in May 2011). Of this 53 MW, 10 MW is reserved for eligible facilities incorporated within or associated with an ethanol plant engaged in the sale of ethanol to states to meet a low carbon fuel standard. For both wind and non-wind facilities, an individual facility's capacity eligibility is limited to 2.5 MW per qualifying owner, and facility owners may not have an ownership interest in more than two eligible facilities. In addition, for non-wind applications filed on or after July 1, 2011, the total nameplate capacity size of the facility may not exceed 60 MW, and the facility's total capacity eligibility is limited to 10 MW.

Facilities must be operational within 30 months of IUB approval to maintain eligibility status. If the facility is not operational within the initial 30 month period, a 12-month extension can be requested. Afterward, further 12-month extensions can be requested if the facility is still expected to become operational. If the applicant does not apply for extensions, the facility will lose its eligibility status.

H.F. 672 added a provision that allows facilities to use generated renewable energy for on-site consumption. However, for applications filed on or after July 1, 2011, facilities that are less than .75 MW do not qualify for the tax credit if any the renewable energy produced is consumed on site.

As of October 2011, the total amount of eligibility requested exceeds the 363 MW (more than 390 MW in active applications). If there is a reduction in capacity for any of the eligible facilities, or if any of the facilities are not operational within the statutory time limits, released capacity will become available to those who did not receive a full allocation of requested capacity, or who filed an application after capacity limits were fully subscribed. If any capacity is released, applications will be processed in the order received.

After eligibility status is granted, the facility may apply for tax credit certificates over a 10-year period, beginning when the facility initiates energy production. Credits will not be issued for renewable energy produced or purchased for on-site consumption after December 31, 2024. The IUB will verify the number of kilowatt-hours or BTUs sold by each eligible facility. The Iowa Department of Revenue will review the tax credit application and IUB verification, and issue and track the tax credit certificates. Credit certificates in excess of a taxpayer’s liability for a taxable year may be carried forward for a maximum of seven years. Certificates may be transferred or sold one time to a third party. Transferred certificates may be used against a different type of tax than that noted on the original certificate.

Solar facilities taking a credit under this provision cannot claim a credit under the Solar Energy Systems Tax Credit.

Iowa Code § 476B Tax Credit – Wind-Energy Facilities Only

Under Iowa Code § 476B, a production tax credit of 1.0¢ per kilowatt-hour is available for electricity generated by eligible wind energy facilities, including electricity that is sold or used for on-site consumption. The tax credit may be applied toward the state's personal income tax, business income tax, financial institutions tax, sales and use tax, or energy replacement generation tax. All tax credits are transferable. The credits were formerly not available to facility owners that received the state's property tax exemption for renewable energy systems, the local option special assessment of wind energy devices, or the sales tax exemption for wind energy equipment. However, the April 2009 legislation removed this restriction effective for the 2008 tax year and thereafter. (See the DSIRE records for more information on these incentives).

To qualify for the credit, a wind energy facility must be approved as eligible by the IUB. There are no specific ownership criteria for individual projects; however, facility owners may not own more than two eligible facilities, and must have an executed power purchase agreement or interconnection agreement (except when the electricity is used for on-site consumption). Facilities must be placed into service on or after July 1, 2005, but before July 1, 2012. In May 2011, the maximum total program eligibility was reduced from 150 MW to 50 MW. For applications filed on or after March 1, 2008, the total nameplate capacity of the facility cannot be less than 2 MW or greater than 30 MW. Applications from schools, colleges, universities, and hospitals filed on or after July 1, 2009 must have a minimum nameplate capacity of 750 kW. Facilities must be operational within 18 months of IUB approval to maintain eligibility status. Facility owners may apply for a 12-month extension of the 18-month limit if they are unable to obtain generating equipment.

As of October 2011, the total amount of eligibility requested exceeds the 50 MW program limit (140 MW in active applications). If there is a reduction in capacity for any of the eligible facilities, or if any of the facilities lose their eligibility status, released capacity will become available to those who did not receive a full allocation of requested capacity, or who filed an application after capacity limits were fully subscribed. If any capacity is released, applications will be processed in the order received.

Once the IUB determines that a facility is eligible, facility owners may apply for wind energy tax credit certificates over a 10-year period, beginning with the initial production of electricity. The IUB will verify the number of kilowatt-hours sold or claimed for self-use by each eligible facility. The Iowa Department of Revenue will review the tax credit application and IUB verification, and issue and track the tax credit certificates. Credit certificates in excess of a taxpayer’s liability for a taxable year may be carried forward for a maximum of seven years. The certificates are freely transferable (i.e., they can be transferred more than once). Transferred certificates may be used against a different type of tax than that noted on the original certificate.

Incentive Contact

Authorities (Please contact the if there are any file problems.)

• Incentive and policy data are reviewed and approved by the N.C. Solar Center's DSIRE project staff.^[1]

References

1. ↑ ^{1.0 1.1}  "Database of State Incentives for Renewables and Efficiency (DSIRE)"