Renewable + Law : Renewable Energy Lawyer & Attorneys : Stoel Rives Law Firm : Climate Change, Emissions, Carbon Markets, Wind, Solar, Biofuels : Western United States

On December 2, House Ways & Means Chairman Rangel and Ranking Member Camp introduced a tax technical corrections bill (H.R. 4169).  We will likely see an identical version introduced in the Senate very soon.

Included among the technicals are changes to the Grant in Lieu of ITC under section 1603 of ARRA.  The most important change is one that allows the grant to be made to certain tax-exempt organizations.

Under current law, the grant may not be made to a governmental entity, tax-exempt entity, certain other entities (including Indian tribes and electric coops), or a pass-thru entity that includes any of the former as an equity owner.  This provision has made it impossible for these organizations (or funds that include such organizations) to invest in renewables and receive the grant unless they establish a blocker (taxable) corporation to hold their interest in the project.  Many entities are uncertain whether they have the authority to establish taxable corporations.

The technical, if enacted, would provide that a grant may be made to tax-exempt organizations, retirement funds, and to state colleges and universities (but not other governmental entities) if the income from the project is treated as income from an unrelated trade or business (“UBTI”).  In most situations, this would be the case where power from the qualified facility was being sold.  It is not clear whether this provision would apply if the power was being used for the entity’s own purposes (not sold).  Where applicable, the technical will eliminate the need for a blocker corporation in cases where the tax exempt or retirement fund is an investor or where a college or university is selling the power.  Note -- the technical does not eliminate the need for a blocker corporation in order for the entity to qualify for accelerated depreciation.

Nevertheless, this could be a major change, particularly for colleges and universities that are selling renewable power but which otherwise could not receive the grant. 

A cautionary note: the technical has not yet been enacted and it is not clear when it will be.  However, to even be introduced, a technical has to have been agreed upon by both tax writing committees, which means its enactment is virtually assured eventually.

Please contact your favorite Stoel Rives attorney with any questions.