Tax Reform Act of 1986

Under this legislation, the business energy tax credit was eliminated for wind energy systems, phased out for biomass, and extended at 10% (for two years) for solar and geothermal. The 10% credit for solar and geothermal was periodically extended until 1992. The standard 10% business investment tax credit was also phased out. On the other hand, the five-year accelerated depreciation for alternative energy property was further liberalised (from a 150% to 200% declining balance method), although co-generation equipment depreciation was lengthened to fifteen to twenty years depending on the type of equipment. Public utility property also became eligible for the accelerated depreciation. This Act also instituted the alternative minimum tax (AMT), which significantly reduced the pool of investors who could take advantage of the tax credits.