Only a few weeks before the program was set to expire, Congress acted on the widespread pleas from the renewable energy industry to extend Section 1603 of the American Recovery and Reinvestment Act of 2009 (Section 1603). In addition to other energy-related provisions, Congress included a one-year extension of Section 1603 in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act). On December 17, 2010, President Obama signed the Tax Relief Act into law.
Section 1603 provides cash grant payments in lieu of investment tax credits (ITCs) for specified energy property. The Tax Relief Act extended the deadline for the commencement of construction of specified energy property from December 31, 2010 to December 31, 2011. However, the Tax Relief Act did not extend the placed-in-service deadlines for such specified energy property, which range from January 1, 2013 for large wind facilities to January 1, 2017 for solar and small wind projects. Thus, projects that will commence construction in 2011 have a shorter timeline to be placed in service than previously provided under Section 1603.
The Tax Relief Act also created new tax benefits and extended several current tax benefits applicable to renewable energy projects. Notably, the Tax Relief Act extended the availability of bonus depreciation for qualified property and increased the incentives under the bonus depreciation framework. Like Section 1603, the bonus depreciation provisions were set to expire at the end of 2010. However, the Tax Relief Act extended such provisions for two years. Furthermore, the bonus depreciation amount was increased from 50 percent to 100 percent for qualified property placed in service after September 8, 2010 and before January 1, 2012, provided that the taxpayer had not entered into a binding written contract for such property prior to January 1, 2008.