June 14, 2021

The Green Book and Green Energy

Biden Administration's Budget Proposal Expands, Extends and Creates Tax Credits for Renewable Energy
Holland & Knight Alert
Nicole M. Elliott | Alan Schwartz | Beth A. Viola | Isabel C. Lane


  • With tax policy long an important tool for incentivizing renewable energy, it comes as no surprise that in the U.S. Department of the Treasury's General Explanations of the Administration's Fiscal Year 2022 Revenue Proposals (the so-called Green Book), the Biden Administration proposes the expansion, extension and creation of a number of green energy tax credits.
  • Congressional Democrats also have proposed legislation to expand credits related to renewable energy with similar priorities and objectives to the Green Book proposals.
  • This Holland & Knight alert outlines a number of Green Book provisions that would offer incentives on a fully refundable, "direct pay" basis. Considered a priority of the industry, this direct payment option significantly increases the benefit of the credits, a move expected to help drive increased business investment.

Since the beginning of his presidential campaign, President Joe Biden has made clear his vision to drive the United States toward world leadership in green energy. With tax policy long an important tool in the toolbox for incentivizing renewable energy and energy efficiency, it comes as no surprise that in the U.S. Department of the Treasury's General Explanations of the Administration's Fiscal Year 2022 Revenue Proposals (the so-called Green Book), the Biden Administration proposes the expansion, extension and creation of a number of green energy tax credits described in detail below. (See Holland & Knight's previous alert, "Biden Administration's FY 2022 Budget and Its Tax Increases for Corporations, Wealthy," June 3, 2021, for a more general overview of the Green Book.)

These proposals will all require legislative change. Since the start of the 117th Congress and before, congressional Democrats have similarly been developing proposed legislation to expand credits related to renewable energy and energy efficiency with similar priorities and objectives to the Green Book proposals. Most notable among these proposals are H.R. 848, the Growing Renewable Energy and Efficiency Now Act (GREEN Act), sponsored by House Ways and Means Committee senior member Rep. Mike Thompson (D-Calif.), and S. 1298, the Clean Energy for America Act, championed by Senate Finance Committee Chairman Ron Wyden (D-Ore.). While the bills tackle the tax code's incentives for green energy with philosophically different approaches, they both target many of the same tax credits discussed in the Green Book. These legislative proposals will be detailed in a subsequent Holland & Knight alert.

Of particular interest for businesses, many of the provisions outlined below propose offering incentives on a fully refundable, "direct pay" basis, allowing individuals and businesses to elect to recoup the full value of the credits as a cash payment from the federal government. Considered a priority of the industry, this direct payment option significantly increases the benefit of the credits, a move expected to help drive increased business investment.

Also of note, the proposals contained in the Green Book generally include statements that the Biden Administration plans to work with Congress on measures to "pair these credits with strong labor standards, benefitting employers that provide good-paying and good-quality jobs." Although there is broad support from congressional democrats to support green energy through the tax code, more progressive members have sought to further pair these incentives with specific conditions to advance broader policy objectives, such as labor standards. Aligning with progressive concepts from the Green New Deal to advance labor priorities alongside green energy objectives, there has been discussion around tying increased tax incentives to requirements that businesses pay construction and operations workers – in some cases, including contractors and subcontractors – local prevailing wages. Also part of the conversation are provisions to require construction of new facilities, equipment and resources to utilize a certain percentage of domestic content, another priority of U.S. labor in an effort to boost the domestic supply chain.

Critics have expressed concern that adoption of these restrictions will limit the usefulness of the credits and ultimately slow deployment of renewable energy and energy-efficient resources at a time when rapid scale-up is needed to combat climate change. Support for these labor provisions is more fraught than support for the credits themselves, and will continue to be looked at as the House Ways and Means Committee and the Senate Finance Committees evaluate their respective legislative proposals.

Although it is unclear whether the proposals in the Green Book will garner significant support, or whether those in the GREEN Act or Clean Energy for America Act will prevail, change is certainly needed to meet President Biden's ambitious goal to reach 100 percent clean energy and net-zero economy-wide carbon emissions no later than 2050.

Below are some specific green energy proposals as set forth in the Green Book.

Specific Green Book Proposals

Electric Vehicles and Charging Infrastructure

A significant thrust of the Biden Administration's green energy plan is a push to transition vehicles toward an increasingly electric fleet and to build out the charging infrastructure to support these electric vehicles (EVs). The administration has proposed a variety of measures, only some of which leverage the tax code. Specifically, the tax proposals included in the Green Book include:

  • extension of the current $1,000 Section 30C credit for EV charging stations installed at residential property for five years
  • expansion and extension of the current 30C credit for EV charging stations for commercial use by increasing the business credit cap to $200,000 per device, allowing businesses to claim the credit on a per-device basis, extending the credit for five years with a direct pay option
  • expansion of the Safe, Accountable, Flexible Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) private activity bonds to state and local governments to issue private activity bonds for infrastructure to support zero emissions vehicles
  • creation of a new tax credit for medium- and heavy-duty zero emissions vehicles based on the Section 30D tax credit, offering credits that range from $25,000 for a Class 3 vehicle to $120,000 for Class 7-8 vehicles and gradually phasing down through 2027 (proposal also includes a direct pay option)

Sustainable Aviation Fuel

Unlike many of the other proposals contained in the Green Book, which build off existing tax credits, there is currently no tax incentive for the production of sustainable aviation fuel. The proposal is to create a new tax credit in the amount of $1.50 per gallon for fuel that achieves at least a 50 percent reduction in emissions when compared with conventional jet fuel. The temporary credit becomes even more valuable if the sustainable fuel produced is cleaner when compared with conventional fuel.

In recognition that conventional jet fuel is a contributor of CO2 emissions, the idea of a new tax incentive for sustainable aviation is gaining traction. Congress recently introduced legislation, the Sustainable Skies Act, that tracks the Biden Administration's proposal.

Expand Availability of Solar and Wind Tax Credits (ITCs and PTCs)

Under current law, a 60 percent production tax credit (PTC) (Code Section 45) for qualified renewable production (i.e. wind, closed-loop biomass, geothermal and other) is available for facilities that begin construction during 2021. No PTC is available for projects commencing in future tax years. The proposal would provide a full 100 percent PTC for wind and certain other qualified facilities that begin construction after 2021 and before 2027, with a five-year phased-down (20 percent per year) PTC continuing to be available for projects commencing through 2030.

Under current law, a 26 percent investment tax credit (ITC) (Code Section 48) is available for solar energy facilities that begin construction before the end of 2022. The ITC is reduced to 22 percent for projects that begin construction in 2023 and to 10 percent for facilities that commence construction in subsequent tax years. The proposal would extend the full 30 percent ITC for solar and geothermal electric energy property and other qualified facilities that begin construction after 2021 and before 2027, followed by a five-year phaseout each year between 2027 and 2030. The proposal would also expand the ITC to certain stand-alone energy storage technology starting in 2022.

The proposal provides for a direct pay option for both the PTC and ITC, which would permit a taxpayer to elect to receive a cash payment in lieu of the available PTC and ITC.

Expand and Enhance Carbon Oxide Sequestration Credit (Code Section 45Q)

The 45Q Credit is a per-metric-ton tax credit available to owners of carbon capture equipment who capture carbon oxide from an industrial facility or directly from the atmosphere and then sequester it, or who first use it as a tertiary injectant in enhanced oil recovery (EOR) and then sequester it as part of that process. Under current law, to be eligible for the credit, construction on both the facility and the carbon capture equipment must begin before Jan. 1, 2026.

The proposal would extend the deadline for construction of qualified facilities from Jan. 1, 2026 to Jan. 1, 2031. The credit amount would be increased by an additional $35 per metric ton (to $85) for "hard-to-abate industrial carbon oxide capture sectors such as cement production, steelmaking, hydrogen production and petroleum refining." Direct air capture projects would be eligible for an extra $70 per metric ton credit (i.e., a total credit of $120).

The proposal also includes a direct pay option that allows a taxpayer to elect to receive a cash payment in lieu of the carbon sequestration credit.

Qualifying Transmission Property

The proposal would create a new 30 percent investment tax credit for certain qualifying electric transmission property (e.g., overhead, submarine and underground transmission facilities, as well as any ancillary facilities and equipment necessary for transmission facility operation) with a minimum voltage of 275 kilovolts (kVs) and a minimum transmission capacity of 500 megawatts (MWs) that is placed in service after 2021 and before 2032. The new credit would also be eligible for the direct pay option, which would provide a taxpayer the option to elect a cash payment in lieu of the tax credits.

Electric Generation Tax Credit for Existing Nuclear Power Plants

The proposal would expand the electric generation tax credit (Code Section 45J) for existing nuclear power plants by providing up to $1 billion (annually) in credits for energy generated. The credits would be allocated to plants that would bid for the credit every two years. The credits would be targeted to economically at-risk facilities to prevent the early retirement of nuclear facilities and would continue through 2030.

The credit is also expected to provide for an electable direct cash payment in lieu of credits.

Qualifying Advanced Energy Manufacturing

The proposal would modify and expand the credits available for qualifying advanced energy projects (Section 48C) to include: industrial facilities; recycling in addition to production; and expanded eligible technologies, including energy storage and components, electric grid modernization equipment, carbon oxide sequestration and energy conservation technologies. The proposal authorizes an additional $10 billion in tax credits (with $5 billion allocated to coal communities), with the three-year application window opening after Dec. 31, 2021.

Taxpayers again would have the option of electing direct cash payments in lieu of credits.

Low-Carbon Hydrogen Tax Credit

The proposal would establish a credit for low-carbon hydrogen produced from a qualified low-carbon hydrogen production facility during its first six years of service for an end use application in the energy, industrial, chemicals, or transportation sector. Low-carbon refers to hydrogen produced using zero-carbon emissions electricity (renewables or nuclear) and water as feedstock, or hydrogen produced using natural gas as a feedstock with all carbon emitted in the production process captured and sequestered. The credit would be $3/kg of hydrogen between 2022 and 2024, and $2/kg between 2025 and 2027, subject to an annual inflation adjustment. This credit will also eligible for a cash payment option in lieu of the credit.

Repeal of Fossil Fuel Incentives

As a revenue raiser to offset the above energy incentives, the Green Book proposes ending a number of current incentives benefiting fossil fuels. Among the numerous provisions, the proposals would repeal:

  • the ability to expense exploration and mine development costs
  • the expensing of intangible drilling costs
  • the percentage depletion with respect to oil and gas wells and hard mineral fossil fuels
  • the enhanced oil recovery credit for eligible costs attributable to a qualified enhanced oil recovery project
  • the capital gains treatment of royalties on the disposition of coal or lignite
  • the exemption from the corporate income tax for publicly traded partnerships with qualifying income and gains from activities relating to fossil fuels


The energy-related provisions contained in the Green Book would impact many industries if enacted. Holland & Knight is closely engaged with the Biden Administration and Congress on these provisions, and will continue to monitor prospects for these credits closely as they move through the legislative process in the coming months. For more information on specific proposals or the potential impact on your organization, please contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

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