General Instructions

Purpose of Form

Use Form 8835 to claim the renewable electricity, refined coal, and Indian coal production credit. The credit is allowed only for the sale of electricity, refined coal, or Indian coal produced in the United States or U.S. possessions from qualified energy resources at a qualified facility (see Definitions, later).

Generally, if you are a taxpayer that is not a partnership or S corporation, and your only source of this credit is from a partnership, S corporation, estate, trust, or cooperative, you are not required to complete Part I of this form. Instead, you can report this credit directly on Form 3800, Part III, line 1f. The following exceptions apply.

  • You are an estate or trust and the source credit can be allocated to beneficiaries. For more details, see the Instructions for Form 1041, Schedule K-1, box 13.

  • You are a cooperative and the source credit can or must be allocated to patrons. For more details, see the Instructions for Form 1120-C, Schedule J, line 5c.

Election To Treat a Qualified Facility as Energy Property

Section 48(a)(5) provides an irrevocable election to treat qualified property (described in section 48(a)(5)(D)) that is part of a qualified investment credit facility (described in section 48(a)(5)(C)) as energy property eligible for the investment credit (reported on Form 3468, Investment Credit) in lieu of a production credit reportable on this form. This election applies to a facility that:

  • Is a qualified facility under section 45(d)(1), (2), (3), (4), (6), (7), (9), or (11) that is placed in service after 2008 and the construction of which begins before January 1, 2014 (see Construction of a Qualified facility, later);

  • No credit has been allowed under section 45 for that facility; and

  • An irrevocable election was made to treat the facility as energy property.

See Notice 2009-52 and Form 3468, for information on making the election. Notice 2009-52 is available at  
www.irs.gov/irb/2009-25_IRB/ar09.html.

Coordination with Department of Treasury Grants

If a grant is paid under the American Recovery and Reinvestment Act of 2009 (the Act), section 1603, for placing into service specified energy property (described in Act section 1603(d)), no production credit under section 45, or investment credit under section 48, is allowed for the property for the tax year in which the grant is made or any subsequent tax year. See section 48(d) for more information.

You may have to refigure the investment credit and recapture all or a portion of it if a grant under section 1603 of the Act was made for section 48 property for which a credit was allowed for progress expenditures before the grant was made. Recapture is applicable to those amounts previously included in the qualified basis for an energy credit, including progress expenditures, that are also the basis for the 1603 grant.

How To Figure the Credit

Generally, the credit for electricity, refined coal, and Indian coal produced from qualified energy resources at a qualified facility during the credit period (see Definitions, later) is:

  • 1.5 cents per kilowatt-hour (kWh) for the sale of electricity produced by the taxpayer;

  • 1/2 of 1.5 cents for open-loop biomass, small irrigation, landfill gas, trash, hydropower, and marine and hydrokinetic renewable facilities;

  • $4.375 per ton for the sale of refined coal produced; or

  • $2 per ton for the sale of Indian coal produced.

The credit for electricity produced is proportionately phased out over a 3-cent range when the reference price exceeds the 8-cent threshold price. The refined coal credit is proportionately phased out over an $8.75 range when the reference price of fuel used as feedstock exceeds 1.7 times the 2002 reference price. The 1.5-cent credit rate, the 8-cent threshold price, the $4.375 refined coal rate, the reference price of fuel used as a feedstock, and the $2 Indian coal rate are adjusted for inflation. The reference price and the inflation adjustment factor (IAF) for each calendar year are published during the year in the Federal Register. If the reference price is less than the threshold price (adjusted by the IAF), there is no reduction. For electricity produced, if the reference price is more than 3 cents over the adjusted threshold price, there is no credit; if the reference price is more than the threshold price, but not more than 3 cents over the adjusted threshold price, there is a phaseout adjustment on line 2 or line 16. For refined coal produced, if the reference price is more than $8.75 over the adjusted threshold price, there is no credit; if the reference price is more than the threshold price, but not more than $8.75 over the adjusted threshold price, there is a phaseout adjustment on line 19.

Note.

For calendar year 2013, the effective credit rate for electricity, refined coal, and Indian coal produced and sold is, respectively, 2.3 cents per kWh, $6.590 per ton, and $2.308 per ton; there is no phaseout adjustment.

Example.

If the reference price of electricity is 10.0¢ and the adjusted threshold price is 9.0¢, reduce the credit by 1/3 ((10.0¢ – 9.0¢) ÷ 3¢ = .3333). Enter the line 1 credit in the first entry space on line 2, .3333 in the second entry space, and multiply to figure the reduction.

Definitions

Construction of a Qualified Facility

Two methods can be used to establish that construction of a qualified facility has begun. One method establishes the beginning of construction by starting physical work of a significant nature as described in section 4 of Notice 2013-29. Another method, establishes the beginning of construction by meeting the safe harbor provided in section 5 of Notice 2013-29. Although both methods can be used, only one method is needed to establish that construction of a qualified facility has begun.

For more information, see Notice 2013-29, 2013-20 I.R.B. 1085, as clarified by Notice 2013-60, 2013-42 I.R.B. 431. Notice 2013-29 is available at  
www.irs.gov/irb/2013-20_IRB/ar09.html, and Notice 2013-60 is available at  
www.irs.gov/irb/2013-44_IRB/ar09.html.

Resources means wind, closed-loop biomass, poultry waste, open-loop biomass, geothermal energy, solar energy, small irrigation power, municipal solid waste, hydropower production, marine and hydrokinetic renewables, refined coal, and Indian coal.

Closed-loop biomass is any organic material from a plant that is planted exclusively for use at a qualified facility to produce electricity.

Poultry waste is poultry manure and litter, including wood shavings, straw, rice hulls, and other bedding material for the disposition of manure.

Open-loop biomass is solid, nonhazardous, cellulosic waste material; lignin material; or agricultural livestock waste nutrients as defined in section 45(c)(3). See Notice 2008-60, 2008-30 I.R.B. 178, for rules related to open-loop biomass, including an expanded definition of a qualified facility and rules related to sales.

Geothermal energy is energy derived from a geothermal deposit as defined by section 613(e)(2).

Small irrigation power is power generated without any dam or impoundment of water. See section 45(c)(5).

Municipal solid waste is solid waste as defined under paragraph 27 of 42 U.S.C. 6903. For electricity produced and sold after January 2, 2013, in tax years ending after January 2, 2013, municipal solid waste does not include paper which is commonly recycled and which has been segregated from other solid waste (as so defined).

Refined coal is a liquid, gaseous, or solid fuel produced from coal or high carbon fly ash meeting the requirements of section 45(c)(7). See Notice 2010-54 for additional information on refined coal facilities. Notice 2010-54 is available at  
www.irs.gov/irb/2010-40_IRB/ar07.html.

Hydropower production means the incremental hydropower production for the tax year from any hydroelectric dam placed in service on or before August 8, 2005, and the hydropower production from any nonhydroelectric dam described in section 45(c)(8)(C).

Marine and hydrokinetic renewable energy means energy derived from waves, tides, and currents in oceans, estuaries, and tidal areas; free flowing water in rivers, lakes, and streams; free flowing water in an irrigation system, canal, or other man-made channel, including projects that utilize nonmechanical structures to accelerate the flow of water for electric power production purposes; or differentials in ocean temperature (ocean thermal energy conversion). See section 45(c)(10)(B) for exceptions.

Indian coal means coal which is produced from coal reserves which on June 14, 2005, were owned by an Indian tribe or held in trust by the United States for the benefit of an Indian tribe or its members.

Qualified facility is any of the following facilities owned by the taxpayer and used to produce electricity or, in the case of coal production facilities, refined and Indian coal. The facilities are shown by form section.

Part I

  • Poultry waste facility placed in service after December 31, 1999, and before January 1, 2005.

  • Wind facility placed in service after December 31, 1993, and before October 23, 2004.

  • Closed-loop biomass facility placed in service after December 31, 1992, and before October 23, 2004.

Part II

  • Wind facility placed in service after October 22, 2004, and the construction of which begins before January 1, 2014. This does not include any facility for which any qualified small wind energy property expenditure (as defined in section 25D(d)(4)) is used in determining the residential energy efficient property credit.

  • Closed-loop biomass facility placed in service after October 22, 2004, and the construction of which begins before January 1, 2014.

  • Closed-loop biomass facility modified to co-fire with coal or other biomass (or both), placed in service before January 1, 2014. The facility will be treated as modified before January 1, 2014, if the construction of the modification begins before January 1, 2014. See section 45(d)(2).

  • Closed-loop biomass facility that is a new unit placed in service after October 3, 2008, in connection with a facility described in section 45(d)(2)(A)(i), but only to the extent of the increased amount of electricity produced at the facility by reason of the new unit.

  • Open-loop biomass facility using cellulosic waste, the construction of which begins before January 1, 2014.

  • Open-loop biomass facility using agricultural livestock waste placed in service after October 22, 2004, and the construction of which begins before January 1, 2014, and the nameplate capacity rating is not less than 150 kilowatts.

  • Open-loop biomass facility that is a new unit placed in service after October 3, 2008, in connection with a facility described in section 45(d)(3)(A), but only to the extent of the increased amount of electricity produced at the facility by reason of the new unit.

  • Geothermal energy facility placed in service after October 22, 2004, and the construction of which begins before January 1, 2014. The facility does not include any property described in Code section 48(a)(3) the basis of which is taken into account by the taxpayer for purposes of determining the energy credit under Code section 48.

  • Solar energy facility placed in service after October 22, 2004, and before January 1, 2006. The facility does not include any property described in Code section 48(a)(3) the basis of which is taken into account by the taxpayer for purposes of determining the energy credit under Code section 48.

  • Small irrigation power facility placed in service after October 22, 2004, and before October 3, 2008.

  • Landfill gas or trash facility using municipal solid waste placed in service after October 22, 2004, and the construction of which begins before January 1, 2014.

  • A refined coal production facility originally placed in service after October 22, 2004, and before January 1, 2012. See Notice 2010-54 for more information on refined coal facilities.

  • Hydropower facility producing incremental hydroelectric production attributable to efficiency improvements or additions to capacity described in section 45(c)(8)(B) placed in service after August 8, 2005, and will be treated as placed in service before January 1, 2014, if the construction of the improvement or addition begins before January 1, 2014, and any other facility producing qualified hydroelectric production described in section 45(c)(8) placed in service after August 8, 2005, and the construction of which begins before January 1, 2014.

  • Indian coal production facility placed in service before January 1, 2009.

  • Marine and hydrokinetic renewable energy facility placed in service after October 2, 2008, and the construction of which begins before January 1, 2014.

A qualified facility does not include a refined coal production facility or landfill gas facility using municipal solid waste to produce electricity, if the production from that facility is allowed as a credit under section 45K.

Credit Period

Eligible electricity production activity: Credit period for facilities placed in service before August 9, 2005 (years from placed-in-service date): Credit period for facilities placed in service after August 8, 2005 (years from placed-in-service date):
Wind 10 10
Closed-loop biomass 10 10
Open-loop biomass (including agricultural livestock waste nutrient facilities) 51 10
Geothermal 5 10
Solar (pre-2006 facilities only) 5 10
Small irrigation power 5 10
Municipal solid waste (including landfill gas facilities and trash combustion facilities) 5 10
Qualified hydropower N/A 10
Marine and hydrokinetic N/A 10
Indian coal N/A 8
Refined coal 10 10
1 The 5-year credit period for qualified open-loop biomass facilities (other than a facility described in section 45(d)(3)(A)(i) that uses agricultural livestock waste nutrients) placed in service before October 22, 2004, begins on January 1, 2005.

United States and U.S. possessions include the seabed and subsoil of those submarine areas that are adjacent to the territorial waters over which the United States has exclusive rights according to international law.

Who Can Take the Credit

Generally, the owner of the facility is allowed the credit. In the case of closed-loop biomass facilities modified to co-fire with coal, other biomass, or both, open-loop biomass facilities, and refined coal facilities, if the owner is not the producer of the electricity, the lessee or the operator of the facility is eligible for the credit.


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