Poultry waste tex credit.

• Author: Bakale, Anthony
• Position: Tax Relief Extension Act of 1999

The Tax Relief Extension Act of 1999 expanded the tax credit under Sec. 45 for electricity produced from certain renewable resources to include poultry waste as a qualified energy source. "Poultry waste" is defined as poultry manure and litter, including wood shavings, straw, rice hulls and other bedding material for the disposition of manure. The credit is part of the Sec. 38 general business credit, subject to normal carryforward and carry-back periods with one exception. Under Sec. 39(d)(3), the credit may not be carried back to a tax year ending before 1993. The credit is 1.5 cents per kilowatt hour (KWH) of electricity produced by the taxpayer and sold to an unrelated person. Persons are considered related if they would be treated as a single employer (under common control) under Sec. 52(b). A sale to an unrelated third party by a corporation that files a consolidated return with the corporation that produces the qualifying electricity is treated as a sale to an unrelated person.

To qualify for the credit, the electricity generated from poultry waste must be produced domestically or in a U.S. possession by a taxpayer-owned facility placed in service between Dec. 31, 1999, and Jan. 1, 2002 (Sec. 45(c)(3)(C)). The credit is allowed only for electricity produced for a 10-year period beginning on the date the facility is placed in service. Generally, for a facility owned by more than one person, production is allocated among them in proportion to their respective ownership interests in the gross sales (Sec. 45(d)(3)). The credit is apportioned between estates or trusts and their beneficiaries on the basis of the estate or trust income allocable to each (Sec. 45(d)(5)). There is no special rule apportioning the credit among S shareholders. Generally, a tax credit is passed through to (and taken into account by) S shareholders in proportion to their ownership percentage. For a government-owned facility, the person eligible for the credit is the facility lessee or operator (Sec. 45(d)(6)).

Additionally, the credit is phased out over a three-cent-per-KWH range as the average price of electricity exceeds an eight-cent threshold amount. Under the phaseout rule, the credit is reduced by a percentage, determined by dividing the excess of the reference price for the calendar year of sale over eight cents per KWH by three cents. The reference price is defined as the Secretary's determination of the annual average contract price per KWH of...