Thursday, July 16, 2009

IRS guidance on claiming a payment in lieu of investment tax credits for renewable energy facilities: Update

This is an update on energy provisions in the American Recovery and Reinvestment Act of 2009 (ARRA). In this post, we cover the recently released guidance under Section 1603 of ARRA for converting the credit into a direct payment from the U.S. Treasury. Our previous post on the payment in lieu of the ITC is here.

The U.S. Treasury recently published its guidance and draft application for claiming Section 1603 Payments. Here is a brief summary of some of the key points.

Qualifications: Eligible facilities must be placed in service in 2009 or 2010. Under some circumstances, an eligible facility can be placed in service as far out as 2017; however, construction must begin in 2009 or 2010). The project must be commissioned to receive a grant, although applications can be submitted prior to being placed in service. Therefore, projects will need to obtain pre-funding.

Eligibility: In general, facilities that qualify for the federal “production tax credit” and/or the Federal Energy Credit ("ITC”) are eligible. These include wind, biomass, geothermal, landfill gas, municipal solid waste and hydro as well as solar, fuel cell, microturbine and small wind. Applicants receiving the cash grant cannot also receive a tax credit.

The Treasury guidance can be found here.

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