Tentative Ruling Issued in California Cap and Trade Auction Lawsuit

A tentative ruling was issued yesterday in the related cases California Chamber of Commerce v. California Air Resources Board (ARB)  and  Morning Star Packing Co. v. ARB, pending before the Sacramento County Superior Court.  The cases challenge the legality of ARB's cap and trade auctions under two theories:  (1) the cap and trade auctions exceed ARB's authority under AB 32, and (2) the auctions amount to an illegal tax adopted without the requisite two-thirds approval of the California Legislature.  The Court tentatively ruled in ARB's favor that the agency's implementation of a cap and trade auction system is within the scope of AB 32, which delegated ARB authority to design the distribution of emissions allowances.  The Court did not rule on whether the allowance auctions constitute an illegal tax.  The tentative ruling outlined questions on this topic for oral argument, which was heard yesterday.  A ruling on the tax challenge is expected in the next 90 days.

ARB held its most recent quarterly auction on August 4, 2013.  2013 vintage allowances sold for $12.22.  In the advance auction of 2016 vintage allowances, held concurrently, allowances sold for $11.10.

IRS Likely to Supplement "Beginning Construction" Guidance

As most of you are aware, Congress in the "American Taxpayer Relief Act of 2012" eliminated the "placed in service" deadline for purposes of the renewable energy tax credits.  In its place, Congress required for purposes of the production tax credit (section 45) and the elective investment tax credit (section 48), that taxpayers "begin construction" on their projects on or before December 31, 2013.  This requirement does not apply to solar projects. 

In Notice 2013-29, the IRS provided taxpayers with guidance regarding what it means to "begin construction" for these purposes.  Similar to the guidance issued for the section 1603 grant, the IRS provided two alternative tests by which taxpayers can establish that construction has begun: (1) physical work of a significant nature; or (2) a safe harbor for qualified costs paid or incurred on or before 12/31/13.

We have now been told by several sources that the IRS is considering issuing additional guidance regarding what it means to "begin construction."  The two issues likely to be addressed in such additional guidance are: (1) what is required to establish continuous construction (in the case of the physical activity test) or continuous efforts (in the case of the safe harbor); and (2) the effect of transfers of projects on whether taxpayers are considered to have begun construction.  These are practical questions that arise frequently when projects are being developed. 

Although it is not certain when (or even whether) the additional guidance will be issued, we would expect to see it sometime in September.  Stoel Rives will issue an alert if and when such guidance is issued.

In the meantime, please feel free to contact your favorite Stoel Rives attorney if you have any questions.


IRS Issues Clarification Regarding "Binding Written Contract" in its "Start of Construction" Guidance for PTC or ITC Energy Credits

As we originally noted, the IRS guidance issued April 15 regarding the "start of construction" requirement for energy projects to qualify for PTC or ITC contained a "big surprise" regarding its definition of a binding contract. Unlike previous incentive programs, the guidance provided that contracts that limit damages to a specified amount, such as by use of a liquidated damages provision, would not be treated as “binding”. Only binding written contracts for work performed on behalf of the taxpayer are taken into account for purposes of satisfying the test for significant physical work.

Following questions about the definition, the IRS has now issued an updated version (PDF) of its Notice 2013-29.

Section 4, Physical Work, paragraph 4.03(1), originally read: “(1) Binding written contract. A contract is binding only if it is enforceable under local law against the taxpayer or a predecessor and does not limit damages to a specified amount (for example, by use of a liquidated damages provision).”

The revised Notice incorporates by reference the same 5% liquidated damages threshold that was used in the previous bonus depreciation regulations by adding the following text: “… For this purpose, a contractual provision that limits damages to an amount equal to at least five percent of the total contract price will not be treated as limiting damages to a specified amount. For additional guidance regarding the definition of a binding contract, see § 1.168(k)-1(b)(4)(ii)(A)-(D).”

If you have questions regarding the guidance's revised binding contract definition or any other issue regarding the PTC, the ITC or related matters, please contact one of the Stoel Rives attorneys listed below.

Chris Heuer at (503) 294-9206 or ckheuer@stoel.com
Greg Jenner at (202) 398-1795 or gfjenner@stoel.com
Adam Kobos at (503) 294-9246 or ackobos@stoel.com
Carl Lewis at (206) 386-7688 or cslewis@stoel.com
Kevin Pearson at (503) 294-9622 or ktpearson@stoel.com

Phase II - 48C credits

As you may have heard, the IRS and DOE have announced a second allocation of "Advanced Energy Project Tax Credits" - also known as 48C credits.  The 48C credit was enacted as part of the stimulus bill (ARRA) in 2009 and the first allocation was made in 2010.  Phase II is being held because a certain portion of the $2.3 billion in credits allocated in 2010 were not used in a timely fashion.  The amount available in Phase II is $150 million.

The 48C credits are available for projects that re-equips, expands, or establishes a manufacturing facility for the production of certain types of renewable and advanced energy property.  In other words, the credit is available for projects that manufacture or produce property not for the installation of the property itself.

Stoel Rives was proud to have represented the companies receiving the largest and the seventh largest allocations in Phase I (aggregating more than 10% of all credits allocated).  Please contact any one of the following should you have any questions about Phase II.

Chris Heuer - 503-294-9206

Adam Kobos - 503-294-9246

Greg Jenner - 612-373-8857

Carl Lewis - 206-386-7688

Kevin Pearson - 503-294-9622.


Stoel Rives Opens Office in Washington, D.C.

We are pleased to announce that we have opened a satellite office in Washington, D.C. Our new address, effective immediately:

Stoel Rives LLP
1020 19th Street NW, Suite 375
Washington, DC 20036
Phone: (202) 398-1795 / Fax: (202) 621-6394

The new office is headed by firm partner Greg Jenner, a former Deputy Assistant Secretary of the U.S. Treasury for Tax Policy and Tax Counsel to the U.S. Senate Committee on Finance.

Click here to read the press release.

Fiscal Cliff Bill Includes PTC Extension and Other Energy-Related Provisions

Congress yesterday passed the American Taxpayer Relief Act of 2012 (the Act), which averted the so-called “fiscal cliff.” The President is expected to sign the Act shortly.

The Act includes a number of energy-related tax provisions, including a one-year extension and modification of the production tax credit under Section 45 of the Internal Revenue Code (the PTC) for certain renewable energy facilities. The energy-related provisions in the Act include:

  • PTC Extensions and Modifications – The PTC is extended and modified for certain types of facilities. These extensions and modifications include:

    • In the case of wind, geothermal, landfill gas, trash, marine, and hydrokinetic facilities and certain closed-loop biomass, open-loop biomass, and qualified hydropower facilities, the PTC will apply if construction begins before January 1, 2014 (rather than if the facilities are placed in service before January 1, 2014). The Act does not specify what it means to begin construction for this purpose, although there are analogous authorities that have been adopted for other purposes that may be applied. Note, however, that a facility to which this extension applies may qualify for the PTC even if it is not placed in service before January 1, 2014.

    • The PTC for municipal solid waste facilities is modified to exclude from the definition of municipal solid waste certain paper that is commonly recycled and that has been segregated from other solid waste.

    • The election to claim the investment tax credit rather than the PTC for certain facilities is extended to apply to certain facilities with respect to which construction begins prior to January 1, 2014.

    • The PTC for Indian coal production facilities is extended for one year, to apply to sales of qualified production during the eight-year period (rather than the previous seven-year period) beginning on January 1, 2006.
Continue Reading...

Congress Passes Extension and Modification of Production Tax Credit

News reports have already alerted people to the fact that Congress has extended the Production Tax Credit ("PTC") for wind as part of its agreement to avoid the fiscal cliff. The bill - named the American Tax Relief Act of 2012 - extended the sunset date for wind through December 31, 2013. This extension gives wind parity with all other renewable resources covered by the PTC.

What hasn't been as widely reported, however, is that Congress also made a significant modification to the PTC as part of the same provision.

Previously, whether a facility qualified for the PTC depended on when the facility was placed in service for federal income tax purposes. That provision has now been changed so that a facility will qualify for the PTC if construction with respect to the facility begins on or before January 1, 2014. This change applies to all renewables (biomass, marine and hydrokinetic, landfill gas, trash, hydropower) to which the PTC applies (not just wind), with the exception of refined coal and Indian coal. In other words, there is no longer a placed in service deadline for purposes of the PTC if construction begins before January 1, 2014.

For those of you acquainted with the 1603 grant, this "begun construction" requirement will seem very familiar. However, caution is required. First, the 1603 grant was administered by Treasury Department whereas the PTC will be administered by the IRS. The Treasury Department was generally viewed as favorably disposed to 1603 applicants. Second, we do not yet know how the IRS will interpret the term "begun construction." There is no requirement that the IRS interpret it consistently with section 1603. We do know, however, that the IRS included a 10% safe harbor as part of the bonus depreciation regulations (Treas. Reg. 1.168(k)-1(b)(4)(iii)(B)(2)), so it is possible that they may provide a safe harbor for the PTC as well.

It is also important to note that, along with extension and modification of the PTC, the legislation extended for one year the ability of taxpayers to elect the ITC in lieu of the PTC.

The modification of the PTC will likely make 2013 an interesting year, particularly as developers attempt to meet the "begun construction" requirements (however that term is eventually defined). If the IRS gives developers a safe harbor of some sort, it will be essential that they avoid the last minute, year-end rush we experienced in 2011 as we worked to qualify projects (mostly solar) for the “begun construction” requirements of the 1603 grant. A key gating item may well be the extent to which utilities seek to procure wind and other renewable energy is Qs1-2, 2013.

We will keep you apprised of further developments and insights.

In the meantime, should you have any questions, please contact Kevin Pearson, Adam Kobos, Carl Lewis, Greg Jenner or any other Stoel Rives attorney.

Further update on Expiring Provisions

As I mentioned in my post yesterday, sometimes a chairman's mark will change just before the committee marks up legislation.  Chairman Baucus's did.  Here is a description of the now-included PTC/ITC proposal:

Description of Proposal

 The proposal extends and modifies the expiration dates for the renewable electricity production credit and the 30-percent investment credit in lieu of such production credit. The proposal extends the wind credits (production and investment) for one year, through December 31, 2013. In addition, the expiration date for all renewable power facilities (including wind facilities) is modified such that qualified facilities or property will be eligible for the renewable electricity production credit, or the investment credit in lieu of such credit, if the construction of such facilities or property begins before January 1, 2014.

The proposal also modifies the definition of municipal solid waste to exclude commonly
recycled paper that has been segregated from such waste for purposes of this credit.

 Effective Date

 The proposal is effective on the date of enactment.


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Follow up - Baucus and Hatch strike deal on expiring provisons

Earlier today, I reported that Senators Baucus and Hatch had agreed on a proposal to extend a package of expiring provisions.  Details of that package have now been released here:


Unfortunately, it appears that extension of the PTC was not included.  This does not preclude the Senate Finance Committee from adding it during its markup of the package tomorrow.  In addition, chairmen have been known to make modifications to their "mark" just before the Committee meets. 

Stay tuned for further developments.



Possible Agreement on Extension of Tax Provisions, including PTC

Senators Max Baucus and Orrin Hatch, chairman and ranking member respectively, of the US Senate Finance Committee, have just announced that they have reached agreement on legislation to extend certain expiring tax provisions.  The bill will be marked up by the Finance Committee on August 2.

The details of the proposal have not been announced.  However, it is possible that the package could contain an extension of the Production Tax Credit ("PTC").

Even if the PTC is included in the Baucus-Hatch proposal, the legislation still must be passed by the Senate and House of Representatives.  The House (including the Ways & Means Committee) has not yet acted on expiring provisions.

We will update this blog as details are released.

DOE Concludes 1603 a Big Job Creator

A surprise to no one involved in renewable energy, the DOE (via NREL) has just issued a report concluding 1603 created tens of thousands of new jobs.

See the report at http://www.nrel.gov/docs/fy12osti/52739.pdf


Stoel Rives Offering 50% Registration Discount at Project Finance: The Tutorial

Stoel Rives partner Ed Einowski will serve as a faculty member and speaker at Infocast’s Project Finance: The Tutorial, taking place next month in New York City. 

This program, now in its 25th year, is truly a critical financial tool, as it provides insights into obtaining financing in today's market environment.  This is why Stoel Rives is pleased to offer a 50% registration discount to our friends and colleagues. Simply enter code 122015 during your registration to receive the discount.


The 2012 edition will provide up-to-the-minute information on how to best access today's capital and credit markets. Topics addressed will include:

  • structuring deals in a post-tax grant environment
  • maximizing performance through new technology
  • decreasing performance risk
  • putting together bankable projects in a tightening lending environment

Ed will present Commercial Issues and Risk Allocation in Project Documentation, on Thursday, March 22, from 1:00 to 1:45 p.m.  This presentation will review critical terms, provisions and negotiations involved in forming project agreements, such as:

  • construction and warranty issues
  • technology advancements
  • operation problems
  • transmission interconnection issues

Click here to learn more, or to register online.

President Proposes Permanent PTC Extension

On Wednesday, February 22, the White House and the Department of Treasury issued a report entitled “The President’s Framework for Business Tax Reform.”  Among other proposals for reforming the way U.S. businesses are taxed, the report calls for a permanent extension of the Production Tax Credit (“PTC”) for renewable energy projects.  In addition, the President’s plan would make the PTC refundable, ostensibly to avoid the inefficiencies incurred in tax equity structures.  The President’s plan does not mention the investment tax credit, which is the only subsidy available for solar energy as well as certain other renewables.


Interestingly, the President’s FY 2013 budget proposals, released just ten days earlier, included different proposals for renewable energy.  Under the President’s budget, the PTC would not be made permanent.  Instead, it would be extended for wind facilities (only) that are placed in service in 2013.  It would also extend the election to claim the ITC for wind in lieu of the PTC).  In addition, the section 1603 grant would be extended to facilities for which construction began in 2012 (if placed in service in 2012).  For property placed in service after 2012, the President’s budget would replace the section 1603 grant with a refundable tax credit applicable to property for which construction began in 2009-2013.  The refundable credit would apply to wind facilities placed in service in 2013 (that meet the requirements of the PTC) and for other energy property in 2013-2016.  The qualification requirements for the refundable tax credit would be the same (except for the effective date provisions) as currently apply to the section 1603 grant. 


It is unclear why the proposals have been changed or whether either has a serious prospect of being enacted.  The original budget proposal was estimated to cost $3.87 billion over ten years.  There was no revenue estimate issued for the latest proposal.


Section 1603 Cash Grants for Renewable Energy Projects TeleBriefing

With the end of 2011 drawing near, many renewable energy developers are seeking to qualify their projects for the Section 1603 cash grant.  Developers continue to try to understand the complexities surrounding the grant requirements, especially the determination of when projects are considered to have met the “beginning construction” requirement.

On August 24, I'll moderate a Law Seminars International (LSI) Telebriefing on Section 1603, featuring Stoel Rives partner Greg Jenner and  Victoria McDowell, the Compliance Program Manager, Section 1603 Program, U.S. Department of the Treasury. 

The TeleBriefing will take place from 10 AM – 11 AM Pacific Time/ 1 PM -- 2 PM Eastern Time.  During the briefing, attendees will learn how to meet the “beginning construction” test and receive clarification from the Treasury Department on project requirements.  We'll also discuss the fate of projects that fail to qualify for the cash grant.


Registration is available online through Law Seminars International.


LexisNexis Selects Renewable + Law Blog to its Top 50 Environmental Law Blogs List

Having first reported to our readers in February that LexisNexis had nominated the Stoel Rives Renewable + Law Blog for its Top 50 Environmental Law & Climate Change Blogs for 2011 award, we are pleased to announce we made the list of winners! In publishing its Top 50 list, LexisNexis declared that our Renewable + Law bloggers’ “avowed passion for solar energy, wind energy, biofuels, ocean and hydrokinetic energy, biomass, waste-to-energy, geothermal and other clean technologies is evident in the care they take with this blog-the posts are frequent, the topics are interesting and cutting edge, and the writing is top notch.”


Thanks again to all our readers who make regular use of Renewable + Law Blog and those who wrote in to support us for this award. We're honored and inspired, and we plan to keep those Blogs and letters coming.


Energy-Related Tax Proposals in President's 2012 Budget

The Obama Administration last week released its proposed budget for 2012, which includes a number of tax proposals that could have a direct impact on the financing of renewable energy projects. Some of the more significant proposals include extension of the grant in lieu of tax credits, an additional allotment of qualified advanced energy manufacturing project credits, replacement of the deduction for energy-efficient commercial buildings with a tax credit, and an extension of the new markets tax credit.

For a more thorough discussion of these and other proposals, click here .

Please contact one of the attorneys listed below if you have questions.

Chris Heuer at (503) 294-9206 or ckheuer@stoel.com
Greg Jenner at (612) 373-8857 or gfjenner@stoel.com
Adam Kobos at (503) 294-9246 or ackobos@stoel.com
Carl Lewis at (206) 386-7688 or cslewis@stoel.com
Kevin Pearson at (503) 294-9622 or ktpearson@stoel.com

IRS Circular 230 notice: Any tax advice contained herein was not intended or written to be used, and cannot be used, by you or any other person (i) in promoting, marketing or recommending any transaction, plan or arrangement or (ii) for the purpose of avoiding penalties that may be imposed under federal tax law.

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Energy Tax Law Alert: Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

Congress yesterday passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act), which extends several expiring renewable energy and fuel tax incentives and includes some new incentives that could provide significant benefits to renewable energy projects. The President signed the Act earlier today. Among the more significant provisions in the Act are:

Section 1603 Grant
Bonus Depreciation
Fuels Credits

Click here to read the full alert.

Chris Heuer at (503) 294-9206 or ckheuer@stoel.com
Greg Jenner at (612) 373-8857 or gfjenner@stoel.com
Adam Kobos at (503) 294-9246 or ackobos@stoel.com
Carl Lewis at (206) 386-7688 or cslewis@stoel.com
Kevin Pearson at (503) 294-9622 or ktpearson@stoel.com


House Passes Senate tax bill

As many of you have heard, this morning the House of Representatives passed the Senate compromise tax bill by a vote of 277-148.  The bill now goes to the President for his signature.

For the renewables industry, this is extremely good news.  The bill extends the deadline for beginning construction for the section 1603 grant for one year, through December 31, 2011.  The bill made no substantive changes to section 1603; it does not convert the grant into a refundable tax credit.

For renewable fuels, the bill extends the incentives for biodiesel, and alternative fuels and mixtures, retroactively for two years (through 2011), and extends the incentive for alcohol fuels (ethanol) for one year (through 2011).

In addition to these extensions (and many others), the bill also enacts "expensing" for certain assets (in general assets with a recovery period of 20 years or less).  This means that instead of MACRS or bonus depreciation, the entire cost of an asset placed in service after September 8, 2010 and before January 1, 2012 may be deducted in the year it is placed in service.  This is an extremely powerful incentive for those with the tax appetite to use the deduction.

One cautionary note: It is unclear how the new expensing provision will interact with section 1603.  The Treasury Guidance for section 1603 states that costs that are deducted in the year in which they are paid or incurred are not includible in the basis on which the grant will be calculated.  Treasury uses an example of costs deducted under section 179, which allows expensing for certain small businesses.  Section 179 is not substantively different from the new expensing provision, which may mean that the section 1603 grant cannot be claimed by any taxpayer claiming expensing.  Treasury is aware of this (I discussed it with them) and has indicated they will take it under advisement.

Stoel Rives will be putting out a more detailed alert on the tax bill.


Tax bill update

As some of you may have heard, the Senate today passed its version of the tax compromise by a vote of 81-19.  The bill includes an extension of the deadline in section 1603 for beginning construction through 2011.  The size of the majority is a strong signal to the House that the Senate may not be open for negotiation.

Although not a certainty, the expectation here (yes, I am in the Devil’s Den) is that the House may take up the bill as early as tonight but most likely tomorrow.  Procedurally, the way the House is likely to operate is to take up the Senate-passed bill, with the Democratic amendment being the only one in order.  If the Democratic amendment passes, chaos will reign because the bill will have to go to conference.  If the Democratic amendment fails, the House then will vote on final passage (agreeing to the Senate bill).  This likely will happen immediately thereafter.

At this point, no one knows for certain what the House Democratic amendment will contain.  Rumors are that it will focus on beefing up the estate tax, particularly increasing rates and decreasing exemptions.  We will have to see.  Of course, the House could take an entirely different procedural route.  It’s what makes DC so much “fun!”


Update on Tax Bill Negotiations

For those of you interested in the machinations in Congress over the tax cut extensions, especially concerning renewable energy, here is the latest:

Yesterday, the Senate released what it termed a "final compromise" bill.  That bill should be voted on in the Senate very soon.  It reflects negotiations within the Senate and between the Senate and the White House.  It does not reflect a final deal with the House.

The very good news is that the Senate compromise includes a one-year extension of the "beginning construction" requirement for the 1603 grant to December 31, 2011.  This is a straight extension; it is not the complete revision of the program to a refundable tax credit that we blogged about previously.

The fate of 1603 still remains uncertain, however.  The House is the principal advocate of the complete revision and may insist on its version. 

The Senate compromise also includes 100% expensing, as agreed to between the White House and Republican leaders.  This means for property placed in service after September 8, 2010 and before January 1, 2012, the entire cost of the property may be deducted in the year it is placed in service.  In addition, bonus depreciation (50% immediate deduction plus normal depreciation for the balance) would apply to property placed in service in 2012.

For renewable fuels, more good news.  The Senate compromise extends through 2011 the existing per-gallon credits and outlay payments for ethanol, as well as the $.50 per gallon alternative fuels credit (other than for black liquor).  In addition, the $1.00 per gallon production tax credit for biodiesel and renewable diesel is also extended through 2011.

Activities are accelerating in Washington as Congress stumbles toward adjournment.  Stay tuned for further developments and intrigue.


Reid-Baucus Tax Bill

Today, Majority Leader Harry Reid and Senate Finance Committee Chair Max Baucus released their proposal for a middle class tax cut.  Although far from the final product, the bill gives us some insight into thinking on the Senate side.

From a renewable energy standpoint, the most important proposal is a one-year extension of the ITC grant.  Thus, the deadline for beginning construction would shift to December 31, 2011.  The proposal is not a pure extension of section 1603, however.  Instead, the proposal would convert section 1603 to a refundable tax credit.  This proposal originated on the House side in HR 4599, introduced by Rep. Earl Blumenauer (D-OR).  Here is a link to our previous blog on the Blumenauer proposal. 


The essential takeaway is that the program would shift to IRS from Treasury.  Taxpayers would "apply" for their money by filing a tax return for the year in which the facility was placed in service, claiming that they had made a payment against taxes equal to 30% (10% in certain cases) of the qualified cost of the facility.  They would then get a refund for that amount.  This new deadline means that taxpayers will have to wait a minimum of 3 1/2 months (and perhaps as long as 15 months) to receive their refund.

There is some good news buried within the proposal.  The outright ban on ownership by governmental entities and tax-exempts would be lifted.  Instead, governments could receive the "credit" as could tax exempts (so long as they treated income from the facility as UBTI).

We will provide additional updates as the process moves forward. 



Energy Tax Law Alert: ODOE Issues Final Administrative Rules

On November 24, 2010, the Oregon Department of Energy (“ODOE”) issued final permanent administrative rules (the “Permanent Rules”) relating to the Business Energy Tax Credit (“BETC”). For a description of the BETC generally, see our previous alerts on November 5, 2009, February 27, 2008, and July 2, 2007.

The Permanent Rules finalize and make some changes to temporary rules that ODOE issued on May 21, 2010 (the “May Temporary Rules”). ODOE issued the May Temporary Rules after the Oregon legislature passed HB 3680 (2010), which made significant changes to the BETC and granted ODOE substantial rulemaking authority. For a complete description of HB 3680, see our previous alert on March 24, 2010. Prior to finalizing the Permanent Rules, ODOE held one public hearing as well as interactive public meetings.

Overall, the Permanent Rules are very similar to the May Temporary Rules. ODOE did, however, incorporate many of the changes requested during the public meetings. Notably, the Permanent Rules clarify when a final application is considered complete (which addresses a potential “disappearing BETC” issue of concern to some taxpayers), relax the rules for amending a preliminary certificate, and add a safe harbor deadline to file an application for final certification prior to the June 30, 2012 sunset of the program.

To continue reading this alert click here.

Click here to subscribe to our client alerts.

Future of 1603

Updated at bottom

The following is a question I received, which I thought I would answer on the Blog:

Greg, as the expiration for the 1603 grant gets closer, two questions? 1) what are the chances of the grant being extended and 2) what are the modifications to the 1603 that you see coming January 1 2011.

Tony -

Thanks for your message.  My best take is that the election has made it more difficult for 1603 to be extended.  The Rs in Congress have not been very supportive of 1603.  That doesn’t doom it, but it won’t be easy.  Of course, if it’s not extended, there won’t be any modifications.  The good news (if you can call it that) is that the pressure for modifications was coming from House Ds.  Since they are on their way out of power, there is a lower chance of the modifications passing.

Take all of this with a grain of salt.  In truth, no one knows for sure what will happen, including folks I talk with on the Hill.  Stay tuned.


And Jane asks:

Is it possible that the 1603 grant would get retroactively extended next year, contingent on certain possible modifications to the current program structure?

Jane -

The answer is yes, it is possible.  It is also possible that we will see a straight extension (no modifications).    Or nothing.  At this point, no one really knows (and anyone who tells you they do is making it up).




House Passes Algae-based Renewable Fuel Promotion Act of 2010

On September 28, 2010, the House of Representatives passed the Algae-based Renewable Fuel Promotion Act of 2010 (H.R. 4168). The Act amends the Internal Revenue Code to (1) expand the definition of "cellulosic biofuel" to include algae-based biofuel for purposes of the cellulosic biofuel producer tax credit; and (2)  provide for accelerated depreciation of property used in the production of algae-based biofuel.  The legislation now will proceed to the Senate.   For the complete text, please click here.

Senators Propose Making Energy Storage Property Eligible for ITC & CREBs

Last week, Senators Jeff Bingaman (D-NM), Ron Wyden (D-OR), and Jeanne Shaheen (D-NH), introduced legislation that would add grid-connected energy storage property to the list of technologies eligible for the federal investment tax credit (the "ITC").  Under the Storage Technology for Renewable and Green Energy Act of 2010 (the "STORAGE 2010 Act"), eligible energy storage property would include hydroelectric pumped storage and compressed air energy storage, regenerative fuel cells, batteries, superconducting magnetic energy storage, flywheels, thermal energy storage systems and hydrogen storage.  Systems that can sustain a power rating of at least one megawatt for a minimum of one hour would be eligible for a 20% tax credit under the ITC program.  Should the bill become law, the tax credit would provide significant assistance to intermittent energy resource developers that are seeking new ways to shape and firm their projects' output.

The STORAGE 2010 Act would limit the available credits to $1.5 billion, and no single project may be allocated more than $30 million.

Importantly, the bill creates special extended deadlines for hydroelectric pumped storage facilities.  Whereas the majority of energy storage property considered under the bill would be required to be placed in service within two years of the date the ITC was allocated, pumped storage facilities would have three years to secure required licenses and permits, five years to begin construction, and eight years to be placed in service.

Compressed air energy storage systems would enjoy similar extended deadlines- i.e., would be reqired to begin construction within three years and be placed in service within five years.

The bill would also allow grid-connected energy storage property to qualify for Clean Renewable Energy Bonds under section 54C of the Internal Revenue Code.  The full text of the bill can be viewed here.

Minnesota Angel Investment Tax Credit

Governor Tim Pawlenty signed into law the Small Business Investment Tax Credit, also known as the “Angel Tax Credit,” on April 1, 2010.   The Angel Tax Credit is expected to stimulate investment in Minnesota businesses utilizing or developing new technologies, including those related to renewable energy and energy efficiency and conservation. Qualified investors are eligible for a 25 percent individual tax credit (maximum of $125,000 per year per individual or $250,000 per year for those married and filing jointly) for an investment made in a qualified small business. A total of $11 million in credits is currently allocated for 2010. The Minnesota Department of Employment and Economic Development (DEED), which will administer the program, recently made available the application requirements and certification forms on its website. 

Qualified Investors

The following is a general list of criteria for investors to consider in whether they may qualify for certification under the Angel Tax Credit program:

  • Be a natural person.
  • Meet the requirements of an accredited investor under Regulation D.
  • If not an accredited investor, be a non-accredited investor investing in exempt filings per Minn. Stat. 80A.46 (13) or (14) or Minn. Stat. 80A.50 (b).
  • Not receive more than 50 percent of their annual gross income from the business.
  • Be certified by DEED before investment is made. Non-accredited investors making exempt transactions may file for certification within 30 days of making investment. There is a certification filing fee of $350.
  • Make a minimum qualifying investment of $10,000. Three or more investors may join to create a fund. Funds have a minimum investment of $30,000, which may be divided among investors as the fund wishes.

Qualified Businesses

A qualified business must be engaged in technological innovation in Minnesota through the use or research and development of proprietary technology in specified “qualified high technology fields” which include aerospace, agricultural processing, renewable energy, energy efficiency and conservation, environmental engineering, food technology, cellulosic ethanol, information technology, materials science technology, nanotechnology, telecommunications, biotechnology, medical devices, pharmaceuticals, diagnostics, biologicals, chemistry, or veterinary science. The following is a general list of criteria for businesses to consider in whether they may qualify for certification under the Angel Tax Credit program:

  • Be headquartered in Minnesota.
  • Have a minimum of 51 percent of employees and 51 percent of payroll in Minnesota.
  • Have fewer than 25 employees.
  • Pay employees annual wages of at least 175 percent of poverty level, currently $18.55 per hour. Does not apply to business’ executives, officers, board members, 20 percent-plus owners.
  • Not have been in operation for more than 10 years.
  • Not previously have received private equity investments of more than $2 million.
  • Not have been disqualified from investment under Minn. Stat. 80 A.50 (b)(3) Small corporation offering registration disqualifications.
  • Not have generated more than $4 million in investments that have received an Angel Tax Credit. The Angel Tax Credit is capped at $1 million per business.
  • Be certified by DEED before investment is made. The certification filing fee is $150.

For more information on the Minnesota Angel Investment Tax Credit, please visit the Angel Tax Credit section of the DEED website.

Treasury Department Issues Additional Guidance Regarding Cash Grant Begin Construction Requirement

The U.S. Treasury Department today released on its website additional guidance regarding the "begin construction" requirement for qualifying for the 30% ARRA cash grant. To qualify for the grant, a project either must be placed in service in 2009 or 2010 or, if construction begins on or before December 31, 2010, must be placed in service by a specified credit termination date (December 31, 2012 for large wind projects; December 31, 2013 for biomass, certain geothermal and other projects; and December 31, 2016 for solar and other projects).  For the Stoel Rives Energy Tax Alert on the topic, click here

May 11 Public Hearing Regarding Changes to Washington's Renewable Energy System Cost Recovery Program

Our Seattle tax attorneys (listed below) have told us about Washington Department of Revenue's  ("DOR") public hearing on May 11 regarding proposed amendments to its rule governing administration of the Renewable Energy System Cost Recovery program.

Kim Risenmay at (206) 386-7525 or gkrisenmay@stoel.com
Carl Lewis at (206) 386-7688 or cslewis@stoel.com
Erin Toland at (206) 386-7563 or emtoland@stoel.com

Pursuant to this program, participating light and power companies may make incentive payments to customers who purchase and use renewable energy systems, and the light and power companies then receive offsetting tax credits against their Washington Public Utility Tax liabilities.

The DOR has indicated that the rule will be updated to reflect recent changes to Washington law, (1) increasing the annual payments that light and power businesses can make to individual customers; (2) increasing the total amount of incentive payments that participating light and power businesses can make to their customers; (3) changing the formula used to determine payment amounts based on “economic development kilowatt-hours;” (4) extending the incentive program to include community solar projects; (5) creating three categories of eligible community solar projects; (6) setting limitations on total incentive payments for community solar projects; and (7) setting capacity generating restrictions on systems in community solar projects.

If you're interested in attending the hearing which begins at 10:00 a.m. on Tuesday, May 11, 2010, go to the  DOR's Fourth Floor Executive Conference Room at Capital Plaza Building,
1025 Union Avenue SE, Olympia, WA 98501

IRS Circular 230 notice: Any tax advice contained herein was not intended or written to be used, and cannot be used, by you or any other person (i) in promoting, marketing or recommending any transaction, plan or arrangement or (ii) for the purpose of avoiding penalties that may be imposed under federal tax law.

Optimizing Tax Benefits in Financing Renewable Energy Projects

Federal tax benefits, such as the Section 1603 Grant, investment tax credits and production tax credits, continue to be an important driver in financing renewable energy projects.  Several of my colleagues will be discussing these tax benefits and other incentives related to project financing in a webinar hosted by Infocast on Wednesday, March 31, 2010 at 1:00 p.m. Eastern.  Here is full description of the topics that will be discussed, the speakers and a link to the Infocast website for registration:

The section 1603 grant program created by the American Recovery and Reinvestment Act of 2009 recently entered its second year. Section 1603 has transformed the renewable energy industry from one in the doldrums to an industry revitalized. But what does the future hold for section 1603 and will recent legislative efforts to limit the grant program create a new uncertainty in renewable energy financing?

Unfortunately, section 1603 is set to expire at the end of 2010, except for projects that have commenced construction. Recently, the prospects for extending section 1603 were dimmed when Senator Charles E. Schumer (N.Y.), and three other Democratic senators, sponsored a bill that would place limitations on receipt of the grant. Developers, lenders, investors and their counsel all need to know whether and how they can fit under section 1603 and, if they can, how to optimize their deal structures, including the interface between the section 1603 grant and the Department of Energy Loan Guarantee Programs and any related NEPA compliance issues. Those who, for whatever reason, cannot qualify for section 1603 need to understand what comes next: PTCs, ITCs, or maybe some variation on 1603, and how those transactions should be designed.

Please join Infocast and Stoel Rives for a 90-minute webinar and panel discussion on project financing of renewable energy projects to maximize the benefit of tax and other incentives that may be available. Stoel Rives is a Chambers-rated leader in renewable energy law.


Edward Einowski, Partner, STOEL RIVES LLP


Erica Egan, Senior Vice President, Corporate Finance, HELABA

Gregory Jenner, Partner, STOEL RIVES LLP

Kevin Pearson, Partner, STOEL RIVES LLP

Gary Barnum, Partner, STOEL RIVES LLP

Registration:    http://www.infocastinc.com/index.php/conference/287


Congress is considering a complete rewrite of the 1603 grant program.  Some of the changes being considered are very helpful while others would be extremely troubling.  Please continue reading to get the full story ...



Continue Reading...

Stoel Rives Clients Receive Huge Tax Credit Awards

Stoel Rives would like to congratulate REC Silicon and SolarWorld on their awards of tax credits by the IRS and DOE. These two companies, combined, received over 10 percent of all the tax credits awarded nationwide under section 48C of the tax code.

On Friday, January 8, the Department of Energy awarded to 183 companies $2.3 billion in tax credits for projects designed to expand, re-equip or establish manufacturing facilities for the production of equipment used to produce renewable and other green energy. The $2.3 billion was the full amount authorized by Congress in the stimulus bill as part of new section 48C of the tax code.

Applications for the credit far exceeded the dollar amount of credits available. Stoel Rives is proud to have been directly involved with these companies in preparing the complex applications for the credit. REC Silicon received the largest award of any company -- $154.8 million. SolarWorld received the seventh largest award -- $82.2 million. These credits will provide these companies with a dollar-for-dollar offset against their federal income tax liability.

There is considerable discussion in Congress regarding adding additional funds to the section 48C program, which will permit another round of awards. Please contact your favorite Stoel Rives attorney if you have any questions about these awards or extension of the section 48C credit.

ARRA SGIG Grants Taxable?


Concern is mounting over whether the smart grid awards and project grants to be distributed by the Department of Energy (“DOE”) will be taxable in the hands of the recipients.  Certain grants administered by  federal, state, or local programs for renewable energy projects located in the US may be reportable by the recipient.  The 100 smart grid award recipients, who are waiting for their share of the promised $3.4 billion from the DOE, are anxious to resolve this issue as many of them prepared their budgets (and the DOE may have made the awards) on the assumption that the awards were going to be tax-exempt. 

 The DOE is working closely with the awardees and the Treasury Department to reach resolution and hopes to provide guidance shortly.  We’ll be following this story closely – stay tuned for developments.

Technical Correction to Section 1603 Grant May Loosen Rules for Investment by Tax Exempts


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. 


Will Wyoming Tax Electricity Generated From Wind Energy Projects?

On November 18, 2009, the Wyoming interim Joint Revenue Committee (the "Committee") considered two bills, each of which proposed to tax wind generated electricity.  Neither bill passed the committee on tie votes of 6-6 (4-4 House members and 2-2 senate members).  One of the bills sponsored by Sen John Schiffer, R-Kaycee, chairman of the Committee (legisweb.state.wy.us/interimCommittee/2009/10LSO-0126w4.pdf) proposed a tax of $.0010 upon each kilowatt hour for electricity produced and sold in the State of Wyoming.  An exemption was provided for electricity produced for the personal consumption of the producer.  A power producer using coal or other fuels would break even on the generation tax through a credit equal to the severance tax portion of their electricity production costs.  The proposed tax works out to be an approximately 5 percent tax on generation.  The second bill considered by the Committee was sponsored by Rep. David Miller, R-Riverton, (legisweb.state.wy.us/interimCommittee/2009/10LSO-0062w2.pdf).  Rep. Miller's bill was similar to Sen. Schiffer's bill, but would only provide the credit to traditional power producers if they agree to use 90 percent of the credit on electricity generation or transmission projects and put the other 10 percent into the state's low income energy assistance program.  Proponents of the proposed tax cited a number of factors in favor of the bill including the fact that wind projects should contribute to state and local governments equally with other energy industries.  For example, Wyoming imposes a severance tax on natural resources, which includes (approximately) a 6 percent tax for oil and gas and a 7 percent tax for coal.  Opponents of the tax bills, including the group of wind energy developers represented by the Wyoming Power Producers Coalition, argued, among other things, that (i) wind energy projects already pay property taxes and provide other financial benefits to the local communities and (ii) the taxation issue should be studied carefully so as not to discourage wind energy development in Wyoming.

Continue Reading...

Upcoming Webinar: The Treasury Grant Program - Follow-up and Q&A

Join us for Structured Tax Incentives Part Deux! Our follow-up webinar will again include Vicky McDowell, Chief Administrator of the Treasury ITC Grant program. Unlike the first session, we will not use a formal presentation; instead, we will cover in greater detail the issues raised in your comments and will attempt to answer as many of your questions as we can.

We invite and encourage you to submit questions to us in advance. Please email your questions by Monday, November 16, to Nicole Lyman at nmlyman@stoel.com or call (612) 373-8842.


Greg Jenner, a tax partner in our Minneapolis office, has worked extensively on energy-related tax issues. Previously, he served as Deputy Assistant Secretary and Acting Assistant Secretary of the Treasury for Tax Policy from 2002 through 2004.

Victoria McDowell is the Deputy Administrator for the Alcohol and Tobacco Tax and Trade Bureau (TTB). In 2009, she was detailed to Main Treasury to be Chief Administrator of the Treasury ITC Grant Program.

Kevin Pearson, a tax partner in our Portland office, focuses principally on federal income tax law, including both transactional matters and tax controversy matters.

Thursday, November 19, 2009
10 a.m. Pacific; 11 a.m. Mountain; 12 p.m. Central; 1 p.m. Eastern


Register online at http://www.stoel.com/webcasts.

Come Visit Us at E3, The Midwest's Premier Energy, Economic and Environmental Conference, on Nov. 17, 2009

As a proud Exhibit Hall sponsor of E3, the Midwest’s premier energy, economic and environmental conference, Stoel Rives LLP would like to encourage you to attend this annual event. Hosted by the University of Minnesota’s Initiative for Renewable Energy and the Environment, E3 will focus this year on the intersection of innovative technologies and policies, environmental benefits and emerging market opportunities across the renewable energy spectrum.

Stoel Rives attorneys Mark Hanson, Bill Holmes and Greg Jenner are part of the event faculty. Mark will moderate a panel presentation on the challenges and opportunities of converting carbon dioxide to fuels. Bill will moderate a panel discussing exactly how sophisticated smart power grids need to be in order to scale up renewables as a major U.S. energy contributor. Greg, meanwhile, will participate in a panel discussion on the most efficient and effective strategies for financing renewable energy projects.


For more information and to register, please visit the following link: http://bit.ly/XUUjJ. We hope to see you there, and encourage you to visit our booth (#24). In addition to our presenters, Debra Frimerman, Kevin Johnson, Kevin Prohaska, Katie Roek, Mary Sennes, Joe Thompson and Vicki Twogood will be available to discuss any questions you may have. Don’t forget to pick up complimentary copies of our Law of Series handbooks, including The Law of Solar, The Law of Wind, The Law of Biofuels, The Law of Building Green, Lava Law,and our most recent additions The Law of Algae and Show Me the Money: The Law of the Stimulus (2d ed).

Insights from Stoel Rives' Webinar on The Stimulus Bill: Structured Tax Incentives

During yesterday's webinar entitled “The Stimulus Bill: Structured Tax Incentives” Greg Jenner (Stoel Rives LLP attorney), Victoria McDowell (Chief Administrator of the Treasury ITC Grant Program), and Kevin Pearson (Stoel Rives LLP attorney) walked webinar participants through the background of the American Recovery and Reinvestment Act grant program and the application process.

Ms. McDowell provided insightful comments about to the application process, including the timing of submitting an application and the importance of including all supporting documentation. Ms. McDowell stated that Treasury is in the process of preparing additional guidance on the “beginning of construction” requirement. Currently, either physical work of a significant nature must have begun to meet the requirement or, under a safe harbor provided by Treasury, an applicant must have paid or incurred more than 5 percent of the total cost of the project (excluding the cost of land and any preliminary activities). Ms. McDowell’s comments suggested that forthcoming revisions from Treasury will further simplify the “beginning of construction” requirement. For more information on this and other key legal issues related to the Stimulus Bill, please join us for these future webinars:

  • November 18, 2009
    Grants & Applications – The Process and the Pitfalls
  • November 19, 2009 (just added)
    Follow up Webinar on Structured Tax Incentives – The 1603 Grant Program
  • December 2, 2009
    The DOE Loan Guarantee Program Long-Term and Ongoing

Each session will be 60 minutes and feature a question & answer period. The panels will also respond in real time to questions submitted by listeners.

REGISTER HERE: http://www.stoel.com/webcasts


Upcoming Webinar: The Stimulus Bill - Structured Tax Incentives

Stoel Rives is proud to sponsor an upcoming webinar series on key legal issues of The Stimulus Bill. Session dates and topics include:

November 4, 2009
Structured Tax Incentives

November 18, 2009
Grants & Applications – The Process and the Pitfalls

December 2, 2009
The DOE Loan Guarantee Program Long-Term and Ongoing

The first session, on November 4, will discuss Structured Tax Incentives. The Treasury grant under Section 1603 has been a game changer for the renewable energy market. Most people are familiar with the basics of the Treasury grant; however, many questions have arisen about how the grant will work in practice:

  • How will Treasury interpret various standards, including starting construction and placing in service?
  • How will Treasury police recapture events?
  • What changes might be expected regarding disqualified persons?

Join us for a discussion of these and other pressing questions.

Each session will be 60 minutes and feature question & answer period. The panels will also respond in real time to questions submitted by listeners.

A live Twitter feed will be available at #stimulusbill

REGISTER HERERegistration is free

November 17: Energy, Economics and Environment (E3) Conference

The University of Minnesota’s annual conference on Energy, Economics and the Environment – E3 – will be held in St. Paul on November 17. Hosted annually by the University of Minnesota’s Initiative for Renewable Energy and the Environment (IREE), this year’s conference will explore current technologies, environmental benefits and market opportunities in renewable energy.

Stoel Rives will be a sponsor of the E3 conference and will, as usual, host a booth at the event. Minneapolis tax partner Greg Jenner will join a panel to discuss “What’s the most efficient and effective strategy for financing renewable energy projects?” To review the agenda and register for the conference, click here.

First Treasury Grants in Lieu of ITC Awarded

Treasury Secretary Tim Geithner and Energy Secretary Steven Chu announced the first awards of cash grants in lieu of the investment tax credit (ITC) today.  The total award value was over $502 million.  Recipients include projects in Colorado, Connecticut, Maine, Minnesota, New York, Oregon, Pennsylvania and Texas.  Click here for a detailed list of the awards announced today.  Additional awards will be announced in the coming weeks. 

For more information on this program and the application process, please see the Stoel Rives Energy Law Alert:  Treasury Issues Guidance on Applications for Grants in Lieu of the ITC and PTC.

No Preliminary Approval for ITC Grants

In recent days, there have been rumors circulating that Treasury would issue "pre-approvals" for ITC grants in cases where construction begins in 2009 or 2010 but the project is not placed in service before 2011.  You will recall that projects may still qualify for the ITC grant in those cases if they meet the placed in service deadline (12/31/12 for wind, 12/31/16 for solar and 12/31/13 for all others).

This rumor has some people excited because it is different than what Treasury had been saying and what attorneys had been advising.  Previously, it was believed that Treasury would merely "accept" applications and wait until the project was placed in service to determine if it qualified for the ITC grant.

We have been told definitively by Treasury that the rumor is false.  Treasury will not "pre-approve" projects for the ITC grant subject only to meeting the placed in service deadline.  According to Treasury:

"We will not be issuing 'advance rulings' on projects for which construction begins but are not placed in service. What we outlined on page 3 of the 1603 Guidance document, ' II. Application Procedures' has not changed. We will not issue preliminary approvals because too many things can change by the time a specified property is placed in service. We believe the applicants and lenders should have a good idea if the proposed property meets the requirements of the 1603 program upon reading the application, guidance, terms and conditions, etc.

Stoel Rives has developed an extremely good relationship with individuals at Treasury administering the ITC grant program. We appreciate their candor and willingness to clarify how they intend to run the program.

If you have any questions about this issue, please do not hesitate to contact your favorite Stoel Rives attorney.

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The Wind Energy Promotion Act: Turbo Charging the Renewable Energy Production Tax Credit

U.S. Representatives Collin Peterson (MN) and Tim Walz (MN) introduced the Wind Energy Promotion Act (WEPA) last month. If WEPA becomes federal law, the Renewable Energy Production Tax Credit (PTC) promises to become an even more potent driver for wind power project development. Under current law, the PTC may only be used to shelter passive activity income from tax liability.

If adopted, WEPA would allow the use of the PTC to shelter up to $40,000 of ordinary income, a modification that would boost the effectiveness of the PTC. 

Click here to read the full analysis on WEPA and the opportunities this presents

For more information, please contact Joel Dahlgren of our Minneapolis office, or any of our other energy attorneys.

Treasury Issues Guidance on Applications for Grants in Lieu of the ITC and the PTC


The American Recovery and Reinvestment Act of 2009 (ARRA), which was enacted in February, permits an applicant to receive a grant from Treasury in lieu of claiming investment tax credits (ITCs) or production tax credits (PTCs).

Today the U.S. Treasury Department issued much-anticipated guidance concerning applications to receive cash grants in lieu of claiming income tax credits for certain renewable energy projects. Although the guidance includes a sample application form, the U.S. Treasury has stated that it will not accept applications until August 1.

Read the full analysis on this guidance including grant details, eligibility and the application process at www.stoel.com

If you have questions about today's Treasury Department guidance and grants in lieu of ITCs or PTCs, contact:

Chris Heuer at ckheuer@stoel.com
Greg Jenner at gfjenner@stoel.com
Carl Lewis at cslewis@stoel.com
Kevin Pearson at ktpearson@stoel.com
Adam Kobos at  ackobos@stoel.com

Treasury, Energy Announce More than $3 Billion in Recovery Act Funds for Renewable Energy Projects

  Today, the U.S. Department of the Treasury (the "Treasury") and the U.S. Department of Energy (the "DOE") announced an estimated $3 billion for the development of renewable energy projects around the country.  Funded through the American Recovery and Reinvestment Act ("ARRA"), the program will provide direct payments in lieu of tax credits in support of an estimated 5,000 bio-mass, solar, wind, and other types of renewable energy production facilities.

  ARRA authorized the Treasury to make direct payments to companies that create and place in service renewable energy facilities beginning January 1, 2009.  A company can only apply for payment after the renewable energy property has been placed in service.  Previously these companies could file for a tax credit to cover a portion of the renewable energy project's costs; under the new program, applicants would agree to forgo tax credits down the line in favor of an immediate reimbursement of a portion of the property expense.  This direct payment program allows for an immediate stimulus in local economies.

  In recent years, the tax credit has been widely used.  As an example, in 2006, approximately $550 million in tax credits were provided to 450 businesses.  However, the rate of new renewable energy installations has fallen since the economic downturn, as projects have had a harder time obtaining financing.  The Treasury and DOE expect a fast acceleration of businesses applying for the announced energy funds in lieu of the tax credit.

  To expedite implementation of the program, the DOE and Treasury have made the terms, conditions, guidance, and sample application available at www.treas.gov/recovery/1603.shtml.  The Treasury and DOE are not accepting applications yet, but these available forms will allow companies to prepare applications and expedite the implementation of the program when the government is ready for submissions on August 1, 2009.  The DOE and Treasury have 60 days to process the application once submitted.


Stoel Rives Expands Its San Diego Office


We welcome energy attorneys Morten Lund and David Quinby to the firm’s San Diego office as members of the Energy and Telecommunications group. They join attorneys Howard Susman and Brian Nese. The San Diego office has relocated to a larger space at 12265 El Camino Real, Suite 303, to accommodate further expansion (new contact information below).


Morten Lund, formerly a partner with Foley & Lardner LLP in Milwaukee, has experience in a broad variety of financing transactions, with particular focus on the development and financing of wind and solar energy projects. Morten is a frequent presenter and author on renewable energy topics. He earned his law degree from Yale University in 1995 and obtained his A.B. at Augustana College in 1992. He is admitted to practice law in the state of Wisconsin and is pending bar admission to the state of California.



David Quinby is the current office managing partner of the firm’s Minneapolis office, and will now split his practice between California and Minneapolis. He concentrates his practice on corporate, securities, finance, and merger and acquisition matters, with a particular focus on renewable energy clients and their project development efforts. David is admitted to practice law in the state of Minnesota and is pending bar admission to the state of California.

The California energy team's capabilities also include real estate, land use and permitting, equipment procurement and construction, state and federal regulation, environmental matters, and dispute resolution.

Stoel Rives has received a national ranking for its Renewables and Alternative Energy practice from Chambers USA: America's Leading Lawyers for Business (2009), rating among the top law firms in this category. The firm has been at the forefront of growth in renewables in recent years and represents many of the industry leaders in solar, wind energy, geothermal, biomass, hydroelectric, ocean, combined-cycle natural gas, carbon sequestration and biofuels project development in California, the United States, Canada and abroad.

For more information about the Stoel Rives Renewable Energy Group, visit www.stoel.com/renewableenergy or contact:

Howard Susman at  (8... or hesusman@stoel.com
David Quinby at  (8... or dtquinby@stoel.com
Morten Lund at  (8... or malund@stoel.com
Brian Nese at  (8... or bjnese@stoel.com


IRS Provides Guidance on Electing ITC in Lieu of PTC

On Friday, June 5, the Internal Revenue Service issued Notice 2009-52, which provides guidance informing taxpayers how to elect to claim the Investment Tax Credit under IRC § 48 in lieu of the Production Tax Credit under IRC § 45 with respect to qualifying projects. This election was provided for as part of the American Recovery and Reinvestment Act of 2009 (ARRA”).The election to claim the ITC in lieu of the PTC applies to the following types of renewable energy facilities: 

Wind; Biomass (both closed- and open-loop); Geothermal; Landfill gas; Trash facilities; Qualified hydropower; and Marine and hydrokinetic.

Notice 2009-52 appears to provide the exclusive means by which taxpayers may make the election. To qualify, a taxpayer must claim the ITC with respect to qualified property that is an integral part of the facility on a completed Form 3468. Form 3468 must be filed with the taxpayer’s income tax return for the year in which the property is placed in service.

A separate election must be made for each qualifying facility. 

Observation:This requirement may be very important if the Service defines “qualifying facility” very narrowly. For example, if the qualifying facility for a wind farm is each turbine, the election procedure will be extremely onerous. There is no indication in Notice 2009-52 of how the Service will define a facility for this purpose.

The following information must be provided with each election:

1. Name, address, taxpayer ID number, and telephone number of the taxpayer.

2. For each qualified investment credit facility:

(i) A detailed technical description of the facility, including generating capacity.

(ii) A detailed technical description of the energy property placed in service during the taxable year as an integral part of the facility, including a statement that the property is an integral part of such facility.

(iii) The date that the energy property was placed in service.

(iv) An accounting of the taxpayer’s basis in the energy property.

(v) A depreciation schedule reflecting the taxpayer’s remaining basis in the energy property after the energy credit is claimed.

3. A statement that the taxpayer has not and will not claim a grant under Section 1603 of ARRA for property for which the taxpayer is claiming the energy credit. 

4. A declaration, applicable to the statement and any accompanying documents,

signed by the taxpayer, or signed by a person currently authorized to bind the taxpayer

in such matters, in the following form:

Under penalties of perjury, I declare that I have examined this statement, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of this statement are true, correct, and complete.

Observation: The Notice does not address what constitutes what property will be considered “integral” to a qualified facility. Presumably, this will be addressed in subsequent guidance.

Finally, the Notice requires that the taxpayer making the election retain adequate books and records, including the information required to be provided by the Notice and all supporting documentation.

Observation: The Notice is focuses on the procedural aspects of the PTC to ITC election. It provides virtually no guidance on grants in lieu of the ITC under Section 1603 of ARRA, and offers little in the way of substantive guidance. Treasury is expected to issue such substantive guidance on these and other issues in the coming months.

Please contact your favorite Stoel Rives attorney with any questions.

LLC Law Monitor

Renewable energy developers often use limited liability companies (LLCs) as project companies and to form entities for other purposes.  My partner Doug Batey has started a new law blog that will likely be helpful to those charged with setting up, understand and maintaining these LLCs.  Here's today's announcement: 

Stoel Rives LLP is pleased to introduce its new LLC law blog, LLC Law Monitor, at www.llclawmonitor.com

The LLC Law Monitor focuses on the rapidly developing laws affecting limited liability companies. LLCs are a popular form of business entity and are a relatively new development in the law. LLC statutes vary from state to state, and cases of first impression are being decided by state courts every month.

In light of this new and evolving legal environment, Stoel Rives has launched LLC Law Monitor to provide business executives, attorneys, accountants and other professionals engaged in or working with LLCs with timely updates and insights on the new and developing laws shaping this burgeoning business sector.

LLC Law Monitorauthor Douglas L. Batey has nearly 30 years of experience advising executives on corporate and business legal matters. His experience includes counseling clients in a wide range of industries on company formation, mergers and acquisitions, and general corporate governance matters.

We hope that you will find the LLC Law Monitor helpful.


Douglas L. Batey
Stoel Rives Corporate Attorney

"Show Me The Money"


We announce the publication of a guide to federal clean energy funding opportunities under the $787 billion American Recovery and Reinvestment Act (“ARRA”). Titled “Show Me The Money,” the guide reviews the various programs and potential sources of federal funding for clean energy companies and projects. The guide addresses funding opportunities under the ARRA for each of the following energy industry areas: wind, solar, biofuels, biomass, smart grid, transmission, geothermal, marine and hydrokinetic, green building, energy efficiency, advanced battery and fuel cell technology, clean energy equipment manufacturing, green vehicles and clean coal. The guide also contains information about some of the funding opportunities and updates at the federal and state level which we will continue to track closely.

Tax and Project Finance Structuring Issues for Renewable Energy Projects

The key ingredient to any successful renewable energy project is financing. A central element related to finance is the maximum use of tax benefits. Please join me and my colleagues as we explore a range of issues that can impact the viability of a project's financing, including: alternative legal structures, general costs and economics, debt vs. equity financing, and efficient use and monetization of tax and other governmental incentives. We will address the impact of the current economy on these matters, including issues relating to availability, pricing, and structure. We will also address the impact on these matters arising from recent changes in tax incentives enacted by Congress in the stimulus legislation.

When: 4/27/2009, 2:30 p.m. - 4:00 p.m. Eastern Time
Where: EUCI Webinar

You can also follow #EUCI for a live Twitter feed of the webinar.

For more information and registration visit:


Upcoming Webinar: Four Primary Ways the Stimulus Bill will Impact the U.S. Wind & Biofuels Industries

Biofuels Journal and Wind Today Magazine are hosting this free webinar on April 14, 2009 at 2 p.m. Central Time.

Please join me and my colleague, Graham Noyes, as we discuss the Obama Administration’s economic stimulus package and how it will impact the wind and biofuels industries.

REGISTER HERE: https://www1.gotomeeting.com/register/244944960  

There will also be a live Twitter feed available at #stimulusbill

Topics covered include:

• Stimulus Grants and the DOE Loan Guarantee Program - the Administration has provided $2.5 billion in grants for R&D and Demonstration projects; expanded the Loan Guarantee Program by $5 billion; as well as promised to streamline the application processes and speed the release of funds to biofuels plants and other projects under these programs.

• The Production Tax Credit vs. the Investment Tax Credit - review of the varying incentive programs available for wind energy projects.

• Grants In Lieu of Tax Credits - consideration of when grants will provide the highest value for projects.

• The Pending Smart Grid and how this is likely to impact the rapidly growing but transmission constrained wind industry in the U.S.

President Obama Clamps Down on Lobbyists and First Amendment

On March 20th, President Obama issued a directive to the heads of executive branch departments and agencies.  The directive is aimed at achieving the laudable goal of ensuring merit based decision-making for grants and other forms of stimulus funds provided by the American Recovery and Reinvestment Act of 2009 (usually referred to as the Stimulus Bill).  It seems that while candidate Obama promised repeatedly during his campaign to limit the influence of lobbyists in Washington DC, the passage of the Stimulus Bill has sent record numbers of lobbyists to D.C. to scramble for federal dollars.

In apparent response to this, President Obama has singled out registered lobbyists and regulated their contacts with the executive branch.  His directive provides that “executive department or agency officials shall not consider the view of a lobbyist registered under the Lobbying Disclosure Act of 1995, concerning particular projects, applications, or applicants for funding under the Recovery Act unless such views are in writing.”  Officials are directed to inquire regarding the possible presence of registered lobbyists both upon the scheduling and commencement of phone calls and in-person conversations “with any person or entity concerning particular projects, applications, or applicants for funding under the Recovery Act.”  If any registered lobbyists are detected, the directive forbids them from attending the meeting or participating in the phone call.

Not surprisingly, the American League of Lobbyists (ALL) has objected to the Obama Administrations restrictions.  In a demonstration that politics does indeed sometimes make strange bedfellow, ALL has been joined by the ACLU and the Citizens for Responsibility and Ethics in Washington (CREW).  In a letter to the President released Tuesday, these three groups requested that President Obama rescind the constitutionally offensive provisions of the directive immediately.   

As tempting a political target as they may be, registered lobbyists have a place in our political system and rights under our Constitution.  The President should heed the groups’ advice and tailor his directive to enable transparency while not muzzling any voices--including those paid to advocate.

Stoel Teams with EUCI to Present Law of Renewable Energy Webinars

Stoel Rives LLP is teaming up with EUCI to present a series of webinar’s based on our series of “Law of” books about renewable energy. The Law of Renewable Energy web conferences will address the major legal issues associated with the development of renewable energy projects.  The web conferences will include the following topics:

Tax and Project Finance Structuring Issues for Renewable Energy Projects
April 27, 2009

Real Estate and Site Rights for Renewable Energy Projects
May 11, 2009

PPAs for Renewable Energy Projects
May 18, 2009

Siting and Permitting for Renewable Energy Projects
June 1, 2009

EPC, Major Component, Construction and Balance of Plant Contracts for Renewable Energy Projects
June 8, 2009

Regulatory and Transmission Issues for Renewable Energy Projects
June 15, 2009

Please sign up here if you’d like to get your own copy of any book in our “Law of” series. We update the “Law of” books regularly, and we'll have copies of the Law of Wind (5th edition) at Booth No. 3148 at the AWEA conference in Chicago on May 4-7, 2009. In addition, please sign up here if you’d like to receive our Stoel Rives Energy Law Alerts and other periodic updates.

New tax credit for "qualifying advanced energy project"

Although this blog is focused on renewable energy, manufacturers in the renewable space should be aware of a new tax credit included in the stimulus bill.  The provisions is complicated and unlike most tax credits.  Nevertheless, its benefits, especially for manufacturers on the cutting edge, may be too great to ignore. 

Taxpayers who qualify are entitled to a 30 percent tax credit for investment in a “qualifying advanced energy project."  A "QAEP" is defined as one that reequips, expands or establishes a manufacturing facility that produces:

1.  property designed to produce energy from the sun, wind, geothermal, and other renewable resources,

2.  fuel cells, microturbines, or an energy storage system for use with electric or hybrid-electric motor vehicles

3.  electric grids to support the transmission of intermittent sources of renewable energy, including storage of such energy,

4.  property designed to capture and sequester carbon dioxide emissions,

5.  property designed to refine or blend renewable fuels or to produce energy conservation technologies, and

6.  new qualified plug-in electric drive motor vehicles (and components),

The program is to be established by IRS, in consultation with Energy Department, on or before August 26, 2009. 

Once the program is established, the Secretary of Treasury is to award certifications for tax credit.  Applications must be submitted within 2 years, and applicants will have one year from the date their application is accepted to provide evidence that requirements for certification have been met.  After certification awarded, an applicant has 3 years to place project in service.

The following are the criteria for certification:

    -- Reasonable expectation of commercial viability

    -- Greatest domestic job creation (both direct and indirect)

    -- Greatest net impact in reducing air pollutants, greenhouse gases, etc. 

    -- Greatest potential for technical innovation and commercial deployment

    -- Lowest levelized cost of energy generated or stored or of measured reduction in energy consumption or greenhouse gas emissions

   -- Shortest project time from certification to completion.

The credit generally applies only to construction, etc. after February 17, 2009. 

The credit is new and unlike anything IRS has ever administered before.  Therefore, it is reasonable to expect that IRS will take some time to get the program fully functional.  Nevertheless, it makes considerable sense to begin assembling materials that explain the company’s project and address the criteria for selection.  In addition, it would be advisable to submit any applications as soon as possible after the program is established.

Stoel Rives would be pleased to assist in planning for and submitting applications for the credit.


Congressional leaders have just announced that they have reached an agreement on the details of a stimulus package.  The details have yet to be announced, other than the total cost of the bill is estimated to be $789 billion.  That amount is less than either the House or Senate bill.

We will post details as they become available and will be sending out an alert.  Congressional leaders are currently meeting with their respective caucuses to obtain their approval.  The Conference Committee is expected to meet in formal session immediately after.