Greg Jenner
Greg Jenner is a partner in the Tax practice group. Greg has broad experience in virtually all Federal tax matters, with particular focus on planning and implementing complex tax-related transactions, partnerships and joint ventures, and mergers and acquisitions. He has worked extensively on energy-and insurance-related tax issues, and has successfully represented taxpayers in Federal and state tax controversies, in both audit and litigation. Greg has been active for many years in the Federal tax policy process, working closely with senior policy makers in Congress, the Treasury Department, and the Internal Revenue Service.
Proposed Legislation to Limit ITC Grants for Renewable Projects
Proposed legislation in the Senate would greatly limit the effectiveness of the grant in lieu of tax credits for renewable energy projects under section 1603 of the American Recovery and Reinvestment Act.
The section 1603 grant currently applies to renewable energy projects, such as wind, solar, geothermal and biomass, that are placed in service before 2011 or for which construction begins in 2009 or 2010 (and that are placed in service by certain dates). In its current form, if a project qualifies for the grant, the Treasury Department is required to pay the grant.
Expressing concern that a significant portion of the grants paid so far have gone to non-U.S. companies, Senator Charles Schumer (NY) and three other Democratic senators have sponsored a bill that would make payment of the grant subject to the discretion of the Treasury Department. It also would make the grant subject to the Buy American requirements of the stimulus bill, and would require that Treasury conduct an analysis of the "domestic job preservation and creation provided by" a project for which a grant application is submitted.
Various trade associations involved in renewable energy (such as AWEA, GEA and SEIA) are taking immediate action to register their opposition. Their focus will be on the incorrect assumptions underlying the proposal (for example, that it does not create U.S. jobs) and that, if enacted, it likely would destroy the effectiveness of the program.
We encourage our readers to register their strong opposition with their members of Congress and with the trade associations with which they are associated. The more opposition that is registered, and the longer the proposal drags out, the less likely it is to be enacted.
Read the March 4, 2010 Stoel Rives Law Alert on this proposed legislation.
POSSIBLE RESTRUCTURING OF 1603 GRANTS
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 ...
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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.
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.
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.
IRS Issues Notice on Depreciation of Ethanol Facilities
On Monday, August 24, the IRS issued Notice 2009-64. The notice sets forth a proposed revenue ruling that concludes that ethanol facilities are depreciable over 7 years (rather than 5 years). A link to the notice appears below.
The proposed ruling classifies ethanol facilities as assets used in Waste Reduction and Resource Recovery Plants (7 years) and not assets used for manufacture of Chemical and Allied Products (5 years).
The IRS did not state when it will issue a final revenue ruling. The notice does request comments , which must be submitted by November 23, 2009.
The reasoning underlying the proposed ruling is subject to potential criticism. This may explain why the ruling was issued in proposed form and comments requested.
Clients that are interested in learning more about the proposed ruling or submitting comments should speak with their favorite Stoel Rives attorney.
Applications Now Being Accepted for ITC Grants
The U.S. Department of Treasury announced today that it has begun accepting applications for grants in lieu of tax credits pursuant to section 1603 of the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA permits an applicant to receive a Treasury Department grant rather than claiming investment tax credits (ITCs) or production tax credits (PTCs) for certain renewable energy property.
To be eligible for a grant, the property must be placed in service in 2009 or 2010, or if construction starts in 2009 or 2010, must be placed in service by the end of 2012 (for wind), 2013 (for biomass, geothermal and other resources) or 2016 (for solar). The grant amount is typically equal to the amount of the ITC for which the project owner would otherwise have qualified (for example, generally 30% of the qualified cost of the project).
The Treasury Department has also provided a means by which applications may be submitted online, as well as a form for obtaining an accountant’s certification for projects with cost bases that exceed $500,000. For applicants who want to assign grant payments to another person, the Treasury Department provides a notice of assignment form and a link to register with the Central Contractor Registration, which is required to qualify for the grant.
To see the full client alert, visit http://www.stoel.com/showalert.aspx?Show=5779.
To see a description of ARRA and previously issued Treasury guidelines, see our previous alert at http://www.stoel.com/showalert.aspx?Show=5682.
TREASURY GUIDANCE -- GRANT IN LIEU OF ITC
UPDATE!!!!!
Just informed by Treasury that guidance will "go live" at noon EDT.
Treasury Guidance -- Grant in Lieu of ITC
UPDATE!!!!!!
We have just been informed that the release of the Treasury guidance for the grant in lieu of ITC has been postponed until tomorrow -- Thursday, July 9. This is being done in order to all ow Treasury to first brief Members of Congress and their staffs on the details of the guidance.
Stay tuned for further updates.
Treasury Guidance -- Grant in Lieu of ITC
We have just been informed by the Treasury Department that they plan to release their first set of guidance on the new grant in lieu of the ITC (section 1603 of ARRA) tomorrow afternoon (Wednesday, July 8). We are not certain yet of the time, although we're told it will be in the afternoon at a press event..
We will publish updates as more information becomes available.
