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See also: "United States Wind Energy Policy § History of the Production Tax Credit

Section 45 of the Internal Revenue Code allows an income tax credit of 2.3 cents/kilowatt-hour (as adjusted for inflation for 2013[25]) for the production of electricity from utility-scale wind turbines, geothermal, solar, hydropower, biomass and marine and hydrokinetic renewable energy plants. This incentive, the renewable energy Production Tax Credit (PTC),[26] was created under the "Energy Policy Act of 1992 (at the value of 1.5 cents/kilowatt-hour, which has since been adjusted annually for inflation).[27] In late 2015 a large majority in "Congress voted[28] to extend the PTC for "wind and "solar power for 5 years and $25 billion. Analysts expect $35 billon of investment for each type.[29]

Low Income (Affordable) Housing Tax Credit (LIHTC)[edit]

Under this "program, created in the 1986 Tax Reform Act, the U.S Treasury Department allocates tax credits to each state based on that states population. These credits are then awarded to developers who, together with an equity partner, develop and maintain apartments as affordable units. Benefits are derived primarily from the tax credits over a 10-year period.

Qualified School Construction Bond (QSCB)[edit]

QSCBs are U.S. debt instruments used to help schools borrow at nominal rates for the rehabilitation, repair and equipping of their facilities, as well as the purchase of land upon which a public school will be built. A QSCB holder receives a Federal tax credit in lieu of an interest payment. The tax credits may be stripped from QSCB bonds and sold separately. QSCBs were created by Section 1521 of the American Recovery and Reinvestment Act of 2009. Internal Revenue Code Section 54F also addresses QSCBs.

Work Opportunity Tax Credit (WOTC)[edit]

The Work Opportunity Tax Credit (WOTC) is a federal tax credit providing incentives to employers for hiring groups facing high rates of unemployment, such as veterans, youths and others. WOTC helps these targeted groups obtain employment so they are able to gain the skills and experience necessary to obtain better future job opportunities. The WOTC is based on the number of hours an employee works and benefits the employer directly.

In December 2014, the credit was extended retroactively to the beginning of 2014 by the Tax Increase Prevention Act of 2014 (TIPA), P.L. 113-295.[30] That act authorized the credit only through December 31, 2014.[31]

American Opportunity Tax Credit (AOTC)[edit]

The American Opportunity Tax Credit (AOTC) [32] was part of the American Recovery and Reinvestment Act, which was signed into law in February 2009. The AOTC replaced the Hope Scholarship credit for Tax Years 2009 and 2010, increased the benefits for nearly all Hope credit recipients and many other students by providing a maximum benefit up to $2,500 per student, 100 percent of their first $2,000 in tuition and 25 percent of the next $2,000, expanding the income range over which taxpayers can claim a credit, and making the credit partially refundable. Critics have complained that complexity and restrictions on eligibility make the actual benefits per post-secondary student much lower than the theoretical maximum, and that even with tax credits, higher education remains tax-disadvantaged compared to other investments.[33]

State tax credits[edit]

Approximately 43 states provide a variety of special incentive programs that utilize state tax credits. These include Brownfield credits, Film Production credits, Renewable energy credits, Historic Preservation credits and others. The amount of credit, the term of credit and the cost of the credit differs from state to state. These credits can be either in the form of a certificate, which can be purchased as an asset, or in a more traditional pass through entity. The tax credits can generally be used against insurance company premium tax, bank tax and income tax.

Oregon Residential Energy Tax Credit (RETC)[edit]

The state of Oregon's RETC is a tax credit for solar systems. In 2016, Oregon Governor Kate Brown released a new budget proposal that does not extend the RETC program. In 2015, RETC gave $12.2 million in tax credits; in 2014, that amount was approximately $4.2 million.[34] Under the budget proposal, the credit will sunset at the end of 2017. Extension of the tax credit is a top priority for Oregon's solar industry.[35]

Value added tax[edit]

Resellers or producers of goods or providers of services (collectively, providers) must collect "value added tax (VAT) in some jurisdictions upon billing or being paid by customers. Where these providers use goods or services provided by others, they may have paid VAT to other providers. Most VAT systems allow the amount of such VAT paid or considered paid to be used to offset VAT payments due, generally referred to as an input credit. Some systems allow the excess of input credits over VAT obligations to be refunded after a period of time.

Foreign tax credit[edit]

Income tax systems that impose tax on residents on their worldwide income tend to grant a "foreign tax credit for foreign income taxes paid on the same income. The credit often is limited based on the amount of foreign income. The credit may be granted under domestic law and/or "tax treaty. The credit is generally granted to individuals and entities, and is generally nonrefundable. See "Foreign tax credit for more comprehensive information on this complex subject.

Credits for alternative tax bases[edit]

Several tax systems impose a regular income tax and, where higher, an alternative tax. The U.S. imposes an "alternative minimum tax based on an alternative measure of taxable income. Mexico imposes an IETU based on an alternative measure of taxable income. Italy imposes an alternative tax based on assets. In each case, where the alternative tax is higher than the regular tax, a credit is allowed against future regular tax for the excess. The credit is usually limited in a manner that prevents circularity in the calculation.

See also[edit]


  1. ^ Piper, Mike (Sep 12, 2014). Taxes Made Simple: Income Taxes Explained in 100 Pages or Less. Simple Subjects, LLC. "ISBN "978-0-9814542-1-4. 
  2. ^ The "OECD uses the term "wastable" to mean refundable in some analyses, though this term is not used by English language tax systems.
  3. ^ "HM Revenue & Customs – Reasons why your tax credits might go down or stop". Retrieved 16 March 2011. 
  4. ^ "Child Poverty Action Group Welfare benefits and tax credits handbook, 2011/12
  5. ^ Rampen, Julia (22 May 2015). "Benefits cap leaves children hungry and cold - how to survive it". 
  6. ^ "The decline of tax credits: a tale of wishful thinking and saloon-bar logic". 
  7. ^ a b "BBC (London) 15 September 2015 Commons back Osborne plan for tax credit cuts
  8. ^ Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015 UK Draft Statutory Instruments, Retrieved 26 October 2015
  9. ^ Parliament has voted, must charities take up the slack? Turn2us, Politics Home, 16 September 2015, retrieved 26 October 2015
  10. ^ Moore, Sinead (11 September 2015). "IFS hits back at new higher 'living wage'". Economia. "Institute of Chartered Accountants in England and Wales. Retrieved 4 March 2016. 
  11. ^ "The Independent (London) 27 October 2015 "Tax credits: House of Lords votes to delay cuts by three years"
  12. ^ "Tax Breaks for Single Parents". SMG. Retrieved 2014-10-12. 
  13. ^ IRS form 8800, 2014 tax year
  14. ^ Presti and Naegele Tax Newsletter, FAQ: What tax breaks come with raising a child?, February 2012.
  15. ^ "Types of Working for Families Tax Credits (Understanding Working for Families Tax Credits)". 
  16. ^ Lifetime Learning Credit
  17. ^ "Energy Incentives for Individuals: Questions and Answers". Retrieved 15 May 2014. 
  18. ^ "Alternative Motor Vehicle tax Credit". IRS. Retrieved 29 September 2011. 
  19. ^ "Fuel Tax Credits and Refunds". IRS. Retrieved 29 September 2011. 
  20. ^ "Tax law changes related to disaster relief". IRS. Archived from the original on October 7, 2011. Retrieved 30 September 2011. 
  21. ^ "A Guide to the Federal Historic Preservation Tax Incentives". National Park Service. Archived from the original on August 4, 2011. Retrieved 30 September 2011. 
  22. ^ US Internal Revenue Code - Title 26 (PDF) U.S. Government Publishing Office, Retrieved 12 December 2015
  23. ^ Renewables Boom Expected Thanks to Tax Credit Scientific American, Retrieved 28 April 2016
  24. ^ BUSINESS ENERGY INVESTMENT TAX CREDIT (ITC) U.S. Department of Energy, Retrieved 28 April 2016
  25. ^ "Internal Revenue Bulletin: 2013–22". Retrieved 15 May 2014. 
  26. ^ Renewed Tax Credit Buoys Wind-Power Projects, March 21, 2013 "New York Times
  27. ^ "Federal Renewable Electricity Production Tax Credit (PTC)". DSIRE. Archived from the original on September 29, 2011. Retrieved 30 September 2011. 
  28. ^ "U.S. wind industry leaders praise multi-year extension of tax credits". Retrieved 15 November 2016. 
  29. ^ Randall, Tom (17 December 2015). "Forget Oil Exports—What Just Happened to Solar is a Really Big Deal" – via 
  30. ^ "President Signs Extenders Package, ABLE Act, IRS Budget Cut" (PDF). Walters Klewer: CCH. December 22, 2014. Retrieved 2015-06-15. 
  31. ^ Schreiber, Sally P. (February 19, 2015). "Employers have more time to claim work opportunity tax credit". Journal of Accountancy. Retrieved 2015-06-15. 
  32. ^ "the American Opportunity Tax Credit" (PDF). US Department of the Treasury. Archived from the original (PDF) on September 25, 2012. Retrieved 2012-06-26. 
  33. ^ Simkovic, Michael (2015). "The Knowledge Tax". University of Chicago Law Review. 82: 1981. "SSRN 2551567Freely accessible. 
  34. ^ Maloney, Peter (2016-12-06). "Oregon Gov. Brown leaves solar tax credits out of 2017-19 budget proposal". Utility Dive. Retrieved 2016-12-07. 
  35. ^ Danko, Pete (2016-12-01). "Governor Kate Brown's budget allows Oregon's rooftop solar tax credit to die". Portland Business Journal. Retrieved 2016-12-07. 

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