David Burton on Energy Tax Credits in the Inflation Reduction Act

In this illuminating episode, hosts Allen Hall and Joel Saxum interview David Burton, a partner at Norton Rose Fulbright law firm and an expert on U.S. tax policy for renewable energy. They dive deep into the intricacies of the Inflation Reduction Act and how it will impact wind projects, with David providing insightful explanations of production tax credits, investment tax credits, domestic content requirements, and more. With his extensive experience structuring tax-efficient energy deals and advising major corporations, David unpacks these complex new policies and delivers key knowledge that could save or make wind companies millions.



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Allen Hall: Welcome to the special edition of the Uptime Wind Energy Podcast. I'm your host, Allen Hall, here with Joel Saxum. And our guest today is David Burton. David is a partner at Norton Rose Fulbright, which is based in New York. David is an expert in US tax matters and has experience with structuring tax efficient transactions for renewable operations.



David was a managing director and senior tax counsel at GE Energy Financial Services, where he oversaw all the aspects for more than 21 billion in global energy projects. David, welcome to the program.



David Burton: Thank you, Allen. It's great to be here.



Allen Hall: Okay. So the timing of this could not be better. And Joel and I were just up in Canada trying to explain to the Canadians what the IRA bill meant and why everybody is so confused as to what is happening in America.



So we thought we'd bring in the expert to help us with understanding the, all the tax incentives that are built in. Built up into the IRA bill. I don't want to give you a couple of softballs to start with. How about that production tax credit? What is that in the IRA bill? And what does that mean?



David Burton: It's $27.50 per megawatt hour for the first 10 years of production. If you transfer the project, the transferee steps into your shoes and does not get to restart the 10 year period. It's a pretty powerful tax credit to get the 2750 megawatt hour. There are requirements you have to meet that we call the fine print that regard prevailing wage and apprentice requirements, which we can get into.



Allen Hall: That makes sense to me. That's a really good explanation. I have not heard explained that simply.



Joel Saxum: That one's easy. I like that one. I can follow that.



Allen Hall: All right. Investment tax credits. Let's raise the heat up a little bit. What is an investment tax credit?



David Burton: The base of percentage for the investment tax credit is 30%.



Again, you have to comply with prevailing wage and apprentice to even get to 30%. And it's a tax credit that accrues when the project is placed in service, basically operational. And it's 30 percent of a tax basis. Which, you know, more or less is 30 percent of the cost of the project. Rather than having to wait 10 years, you get all, you get the tax benefit all upfront.



So, oftentimes the PTC may be a bigger gross amount but it's over 10 years, so sometimes you'll, you're not opt for the ITC because it's a better present value answer, but it's just a question of math.



Joel Saxum: I want to touch one important thing here, and this is an important thing that I got from you, David,