"This is the ability to deduct 50% of the cost of a project immediately in the year it is placed in service. The other 50% is depreciated normally," says Keith Martin, a tax and project finance specialist with the law firm Chadbourne & Parke LLP. Martin estimates the bonus is worth about $0.026 per dollar of capital cost in a typical wind farm. "It would only apply to wind farms put in service in 2008 and then only to ones in which the taxpayer wasn't committed to the investment before January 1 this year," Martin told delegates to the recent Infocast Wind Power Finance and Investment Summit in San Diego. "Remember, this is an inducement to get people to make investments this year they wouldn't otherwise have made." To get their share of the bonus, tax equity investors also have to buy into the project before it is put in service, something that normally doesn't occur until after it is operating.
Before the bonus is applied, the ability to write off most of the cost of a wind power project over five years already provides a tax subsidy of about $0.30 per dollar of capital cost. On top of that, the PTC is worth about $0.335 for every dollar of capital investment, says Martin. In effect, the US government is paying 66% of each dollar invested in a wind power plant during 2008.