U.S. Hydrogen & Fuel Cell
Fiscal Incentives
Tax Credits and the Grant-in-Lieu
of Tax Credit Program
External Affairs Department
Updated April 2011
The information contained in this document is derived from selected public sources. Ballard does not guarantee the
accuracy or completeness of the information and nothing shall be construed as a representation of such a guarantee.
Ballard accepts no responsibility for any liability arising from use of this document or its contents. Nothing in this
document constitutes or should be construed to constitute investment advice. Any opinions presented are subject to
change without notice.
Introduction
Fuel cell technology has been in the development phase for a number of years but is now successfully
making the transition to commercialization in select application areas. For example –
•
Fuel cell products are being used to drive enhanced productivity of material handling
operations, such as warehousing and distribution facilities making use of lift trucks – for more
information, refer to http://www.ballard.com/fuel-cell-applications/material-handling.aspx;
•
Fuel cell products are being used to extend reliability of backup power solutions for emergency
and supplemental power needs – for more information, refer to http://www.ballard.com/fuelcell-applications/backup-power.aspx.
These, and other emerging applications, are benefiting from business case enhancements made
possible through the use of fuel cell-based products, in addition to the environmentally friendly
implications of fuel cell technology.
In the United States, acceleration of fuel cell product adoption in the marketplace is being supported
by important fiscal incentives, including investment tax credits (ITC’s) and a special grant-in-lieu of tax
credit program. These hydrogen and fuel cell fiscal incentives are the topic of this White Paper.
In summary, the following fiscal incentives are available A. ITC through 2106 equal to 30% of the capital cost, up to $3,000/kW, associated with
business purchase of qualifying fuel cell products; and ITC equal to 30% of capital cost,
up to $1,000/kW when associated with residential purchase of fuel cell products for single
occupancy homes and up to $3,334/kW when for double occupancy homes;
B. Grant-in-lieu of tax credit through 2011 equal to 30% of the capital cost, up to
$3,000/kW, associated with the purchase of qualifying fuel cell products; and
C. ITC through 2014 equal to 30% of the capital cost, up to $200,000/station, toward the
purchase of hydrogen fueling equipment.
(A) INVESTMENT TAX CREDIT FOR FUEL CELL PRODUCTS
Overview1
The fuel cell investment tax credit (ITC) can be utilized for business or residential applications. In
either case -
•
The credit can be as much as 30% of the fuel cell product price or capital cost (subject
to a maximum, or cap, described below);2
•
The product must have a minimum 0.5 kW capacity along with an efficiency rating
greater than 30%;
•
The ITC is valid through December 31, 2016.
The maximum value of this ITC is capped –
1
Note that excess (unused) investment tax credit amounts may be carried forward to succeeding tax years.
The extent of capital costs beyond the cost of the fuel cell product that may qualify for the ITC, if any, is not determined at this
time.
2
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•
For a business product, the ITC cannot exceed $3,000/kW;
•
For a residential product in a single occupancy home the ITC cannot exceed
$1,000/kW; and
•
In the case of a double occupancy residential home the ITC cannot exceed
$3,334/kW.3
In all cases, the investment tax credit is determined as the lesser of a capital cost calculation and a
cap calculation (refer to example below).
IRS Bulletin 2008-34 (http://www.irs.gov/pub/irs-irbs/irb08-34.pdf) and the Fuel Cell and Hydrogen
Energy Association’s “Federal Fuel Cell Tax Incentives” document contain helpful information on this
topic. The latter document is included as Appendix I. Note that the IRS Bulletin is not updated to
include the new, higher limit related to the fuel cell product investment tax credit.
Eligibility
A comprehensive list of applications that are eligible for this ITC is not available, however,
congressional lawmakers’ intent (per written communication to the Internal Revenue Service) is that
the credit should apply to a broad set of applications including stationary power, motive power and
auxiliary power uses.
Although a formal list does not exist, guidance provided in IRS Bulletin 2008-34 is that stationary and
mobile power plants meeting the ITC’s general criteria are eligible for the investment tax credit
(http://www.irs.gov/pub/irs-irbs/irb08-34.pdf).
Note also that this ITC does not extend to motive power for automotive and bus applications.4
An Example
If a U.S. telecom company purchases a 5 kW fuel cell-based backup power unit at a price of $15,000,
then it can claim an ITC against income tax payable in the year that the unit is placed into service. The
value of the investment tax credit will be the lesser of two computations ITC Computation Based on Capital Cost:
30% of purchase price = (.30 x $15,000) = $4,500
ITC Cap Computation:
$3,000 per kW = ($3,000/kW x 5kW) = $15,000
Value of the investment tax credit to the U.S. telecom company in this example is 30% of the fuel cell
purchase price or $4,500.
Claiming The Credit For Fuel Cell Products
To claim the business fuel cell investment tax credit, IRS Form 3468, “Investment Credit” must be
completed (refer to Appendix II or go to http://www.irs.gov/pub/irs-pdf/f3468.pdf). The IRS may also
require a completed Form 3800, “General Business Credit” (this can be found at
http://www.irs.gov/pub/irs-pdf/f3800.pdf).
Note that, in the case of a product lease, the business fuel cell investment tax credit may be claimed
by the lessor of qualified fuel cell products if depreciation (or amortization in lieu of depreciation) is
3
The double occupancy ITC does not apply to married individuals filing a joint tax return.
A separate investment tax credit is available for fuel cell vehicles (and other alternative fuel vehicles). Due to expire at the end of
2014, this ITC scales from $4,000 for vehicles weighing at least 8,500 lbs. up to $40,000 for vehicles weighing at least 26,000 lbs.
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allowable to the lessor with respect to the product. The lessee of qualified fuel cell products generally
may not claim the business fuel cell investment tax credit.
To claim the residential fuel cell tax credit, IRS Form 5695 must be completed (refer to Appendix III or
go to http://www.irs.gov/pub/irs-pdf/f5695.pdf). Note that the form has not been updated to reflect
the new, higher limit for double occupancy homes.
(B) GRANT-IN-LIEU OF TAX CREDIT FOR FUEL CELL PRODUCTS
Overview
The grant-in-lieu of tax credit is for eligible fuel cell products placed into service during the period
2009-2011, or for products where installation begins during the period 2009-2011 with the product
being placed into service prior to termination of the tax credit.5
This option was introduced to eliminate the need for businesses to demonstrate taxable income in
order to claim the tax credit. Note, however, that for the period associated with the grant-in-lieu of tax
credit program, businesses with or without taxable income can apply for the grant.
Eligibility
To be eligible for a grant, fuel cell products must have minimum capacity of 0.5 kW and electricity-only
efficiency in excess of 30%. The grant will extend only to taxpayer entities – as a result, government
entities at all levels are ineligible for grants.
An Example
If a U.S. telecom company purchases a 5 kW fuel cell-based backup power unit at a price of $15,000,
the value of the grant will be the smaller of two computations Grant Computation Based on Capital Cost:
30% of purchase price = (.30 x $15,000) = $4,500
Grant Cap Computation:
$3,000 per kW = ($3,000/kW x 5kW) = $15,000
Value of the grant to the U.S. telecom company in this example is 30% of the fuel cell purchase price
or $4,500.
Applying For A Fuel Cell Products Grant
Fuel cell equipment must be installed in the 2009-11 timeframe. However, grant applications can be
submitted up to October 1, 2012. . The Treasury Department will issue grant awards within 60-days of
receipt of an application or within 60-days of the in-service date, whichever is later. Please see
Department of Treasury link (http://www.treasury.gov/initiatives/recovery/Pages/1603.aspx) for
forms and additional information regarding this program.
(C) INVESTMENT TAX CREDIT FOR HYDROGEN FUELING EQUIPMENT
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The termination date of the investment tax credit is January 1, 2017.
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Overview6
Current law allows for a 30% credit up to $200,000 per hydrogen fueling station through 2014..
Eligibility
The hydrogen fueling ITC follows rules established under the original Qualified Alternative Fuel Vehicle
(QAFV) refueling property credit, with the exception of the aforementioned $200,000 modification.8
Specifically, the taxpayer may claim a tax credit of 30% of fueling station capital cost, up to $200,000,
against the cost of any QAFV refueling equipment subject to the allowance for depreciation. The cost of
QAFV refueling equipment is determined under principles of IRS code 1.46-3 (a) and (c)
(http://www.taxalmanac.org/index.php/Treasury_Regulations,_Subchapter_A,_Sec._1.46-3), together
with the following rules –
•
The cost of a QAFV refueling property includes all costs that are required under federal tax
principles to be capitalized as a cost of the QAFV refueling property. These include the cost of
acquiring or constructing the QAFV refueling equipment or of converting conventional refueling
equipment into QAFV refueling equipment;
•
The cost of QAFV refueling property does not include costs that are properly allocated to land
or to a building and its structural components. Costs properly allocated to land include, but are
not limited to, costs related to the acquisition of land on which the QAFV refueling equipment is
located and expense for permits, legal fees, project management or engineering, to the extent
such expenses are related to the land;
•
The cost of QAFV refueling equipment does not include any amount that is taken into account
under IRS code 179 (http://www.irs.gov/publications/p946/ch02.html).
Defining Refueling Equipment
QAFV refueling equipment is defined as property meeting the following conditions -
•
The equipment is not used predominantly outside the United States (or, in the case of
equipment described in IRS code 168(g)(4)(G) is equipment used predominantly in a U.S.
possession) (http://www.taxalmanac.org/index.php/Sec._168);
•
The equipment is a character subject to the allowance for depreciation or is installed on
property that is used as a taxpayer's principal residence (within the meaning of IRS code 121)
(http://www.taxalmanac.org/index.php/Sec._121);
•
The original use of the equipment begins with the taxpayer;
•
The equipment is used for –
o
Storing alternative fuel at the point where the fuel is delivered into the fuel tank of
a motor vehicle that is propelled by such fuel; or
o
Dispensing alternative fuel at such point into the fuel tank of a motor vehicle that
is propelled by such fuel.
An Example
A U.S. distribution company purchases a hydrogen fueling system for use in supporting fuel cellpowered forklift trucks operating in a domestic distribution center. The complete cost of the system,
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8
Excess (unused) investment tax credit amounts may be carried forward to succeeding tax years.
Refer to section 30c of the IRS code.
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including installation, storage, compression, dispensing and all other qualifying equipment is
$1,000,000. The value of the investment tax credit will be the smaller of two figures ITC Computation Based on Capital Cost:
30% of purchase price = (.30 x $1M) = $300,000
ITC Cap:
$200,000
Value of the investment tax credit to the U.S. distribution company in this example is equal to the cap
of $200,000.
Claiming The Credit For Hydrogen Fueling Equipment
To claim the investment tax credit, you must complete IRS Form 8911 http://www.irs.gov/pub/irspdf/f8911.pdf
For additional information, refer to IRS Notice 2007-22 (http://www.irs.gov/irb/200722_IRB/ar10.html). Note that this IRS information predates the increased cap of $200,000 for 2009
and 2010. As such, the information and examples provided therein do not reference the increased cap
amount.
ABOUT BALLARD POWER SYSTEMS INC.
Ballard Power Systems (TSX: BLD)(NASDAQ: BLDP) is recognized as a
world leader in the design, development, manufacture and sale of
clean energy fuel cell products. To learn more about how Ballard is
delivering the Power to ChangeTM….. visit www.ballard.com.
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APPENDIX I
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APPENDIX II
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APPENDIX III
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