On May 12, Senators John Kerry (D-MA) and Joe Lieberman (I-CT) introduced the "American Power Act (the "APA"), a broad-ranging bill that seeks to build a more independent, sustainable and environmentally responsible United States energy infrastructure and to create jobs in the U.S. The APA includes a number of tax related provisions, including providing for acceleration of certain deductions and the creation or expansion of tax credits for certain clean technology and energy-related manufacturing investments and expenditures.

The APA includes the following tax provisions for energy-related manufacturing:

• increase the amount of clean energy manufacturing tax credit (IRC section 48C) available by $5 billion to $7.3 billion, as well as extending the application period by 1 year and extending the allowable placed-in-service date from 3 years to 5 years from the date of certification; and
• allow immediate expensing of 100% of the cost of a natural gas vehicle manufacturing facility placed in service before 2015, or 50% of the cost for a facility placed in services between 2015 and 2020.

There are also a number of provisions relating to new nuclear power plants, including provisions that:

• reduce the accelerated depreciation period for new nuclear power plants to 5 years;
• provide a 10% investment tax credit for certain expenses of constructing nuclear power facilities (proposed new IRC section 48E);
• expand the availability of cash grants in lieu of the 10% investment tax credit in connection with qualified nuclear power facilities, and allow both public power providers and cooperative electric companies to qualify for such grants;
• allow an advanced energy project credit (IRC section 48C) for projects which re-equip, expand or establish a manufacturing facility for the production of property designed to be used to produce energy from qualifying advanced nuclear power facilities;
• allow partnerships with public power to obtain allocations of production tax credits for advanced nuclear power facilities (IRC section 45J);
• expand the availability of the credit for energy production from advanced nuclear facilities from 6,000 to 8,000 megawatts (IRC section 45J); and
• expand the availability of private activity bonds for public-private partnerships for advanced nuclear power facilities.

Although it is unclear whether the APA will move forward this year, Fulbright will continue to monitor legislative developments in the area as they may affect our clients. 

This article was prepared by David A. Gillespie (dgillespie@fulbright.com or 212 318 3073) and Jennifer A. Morgan (jamorgan@fulbright.com or 212 318 3242) from Fulbright's Tax Practice Group and Energy Practice Group. For more information please contact one of the authors or a member of Fulbright's Tax Practice Group or Energy Practice Group.

Click here to view Fulbright's recent alerts on the APA.

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