Energy Evolution, Episode 9 – Year-End Considerations
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In this episode of the Weaver: Beyond the Numbers, Energy Evolution, hosts Leanne Sobel, Dawn Rhea and Jon Pezzi unravel the complexities of 45Z credits and clean fuel production credits, along with biogas Investment Tax Credit (ITC), deadlines and compliance steps as the end of the year approaches. They focused their discussion on preparedness goals and how taxpayers can meet the deadlines for tax benefits and compliance.
Key Points:
- Taxpayers need to prepare for the upcoming clean fuel production credits effective January 1, 2025.
- Biogas producers should understand the safe harbors for the ITC, particularly for before its 2024 sunset.
- Businesses should understand the 80-20 rule and its implications when calculating facility costs and managing the build phase.
Businesses can prepare for the upcoming 45Z clean fuel production credit even as final rules remain unavailable. The conversation also touched upon the extensive testing and documentation that has to be carried out before December 31, 2024, including implementing two crucial safe harbors for the biogas space. Keeping track of essential elements such as the physical work of an ongoing nature, continuous construction and the 5% safe harbor, is crucial as the deadline approaches.
“You can’t just put 5% of the cost in and then just sit on the project for another year because you’re not ready to complete it just so you get the safe harbor. You have to continue building from that point forward,” said Jon.
The discussion also spotlighted the 80-20 rule and the pivotal role of prevailing wage and apprenticeship in calculating the costs of facilities and the construction phase. The hosts underlined the necessity for diligent tracking and documentation to sidestep substantial liabilities. The implications of the ITCs, production tax credits and upcoming 45Z credits were emphasized, particularly for operators in the petroleum sector.
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