Last Thursday the Treasury's Office of the Fiscal Assistant Secretary released guidance and sample application forms for grants in lieu of tax credits for specified renewable energy properties authorized by Section 1603 of the American Recovery and Reinvestment Act (ARRA). Treasury expects to issue at least $3 billion in grants to fund over 5,000 new renewable energy facilities.
As we've discussed previously, under Section 1603 of the ARRA, owners of facilities that are eligible for the Investment Tax Credit may elect instead to receive a cash grant from the DOE equal to the amount of the ITC when the facility enters service. The grants are available for facilities placed in service in 2009 or 2010, or for facilities which begin construction in 2009 or 2010 and are completed within four to eight years, depending on the type of facility. Eligible properties include large and small wind facilities, closed-loop biomass, open-loop biomass, geothermal, landfill gas, hydropower, marine and hydrokinetic, microturbines, solar, fuel cells, and combined heat and power. For most properties, the grant will equal 30% of the cost basis (10% for microturbines, combined heat and power and certain geothermal facilities).
The guidance issued last Thursday describes the application and review process for the grants, including the application form that must be completed. The Treasury Department will begin accepting applications online on August 1st, and the ARRA requires that the Treasury Department make payments to qualified applicants within sixty days of receiving the application.
The guidance is the first of the two ARRA incentives that developers have been waiting for, even to the point of delaying "shovel-ready projects." The second, the Department of Energy's loan guarantee program is still being hashed out. Thursday's guidance was pretty much as favorable as one could expect, providing some needed clarity while allowing developers a great deal of flexibility in financing structure and project design. For example, though some types of entities (certain non-profits, government entities) are prohibited from receiving grants, the guidance explicitly endorses the use of blocker corporations to allow those entities to participate. Similarly, the grants are not recaptured upon any transfer of the property within 5 years, only entities that ineligble to receive grants in the first instance. This flexibility is consistent with the intent of the stimulus act: to get money out the door quickly to support renewable energy projects.
Does this mean that all projects receive the 30% rebate immediately upon completion and putting the facility into service? Doesn't IRC 50(d)(2) require that the § 48 investment tax credit be credited to customers over the book life of the property, consistent with the normalization requirements of IRC § 46(f)(2)?
Posted by: martin homec | August 06, 2009 at 11:25 PM
Martin,
Thanks for contributing comments to the blog! Unfortunately, it seems to us that to answer your question would require us to provide specific legal advice, which is not something our ethics rules permit us to do through our blog. You may find helpful general information through the IRS at www.treasury.gov. But retain a qualified professional if you are seeking advice concerning your specific situation.
Posted by: Tim Schneider | August 07, 2009 at 01:51 PM
who decides whether a project is eligible - Treasury or IRS or DOE/NREL
Posted by: mayor george fitch | November 04, 2009 at 09:56 AM