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.
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.
DOE to release eagerly awaited commercial solicitation
On a webinar yesterday, Michael Fraser, Senior Program Manager at the DOE, advised that the DOE plans to release a commercial solicitation for the loan guarantee program later this month or in early October. The current solicitation that is active for renewable energy projects requires that projects satisfy the innovative requirement. A project is defined as innovative only if it has not been employed in three or more similar applications in the US of five years duration. Thus many established renewable energy projects such as those utilizing wind or geothermal technology that is tested and proven, cannot apply under the current solicitation. The release of a commercial soliciation has been eagerly awaited by renewable energy project developers. These loans will be backed by private banks as well with DOE typically only guaranteeing 80-90% of the loan. DOE hopes that this structure will motivate private lenders to perform much of the due diligence necessary and only bring shovel-ready and bankable projects to the table. Interest rates on the loan are anticipated to run at Treasury plus 25 to 75 basis points. This is a very attractive interest rate but there are substantial fees associated with the program that will offset a portion of this value. The other key factor for projects to consider is whether they will be able to meet American Reinvestment and Recovery Act requirements and thus be eligible to have their credit subsidy costs covered by government funding. I am cautiously optimistic that DOE will be successful with these efforts and we will see a flurry of good projects moving forward Q1-Q2 2010 with the assistance of this program.
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.
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.
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.
