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.