Section 1603 of the 2009 American Recovery and Reinvestment Act provided grants for up to 30% of the cost of installing energy property such as wind turbines and solar facilities. To qualify, the energy property had to have been constructed in 2009, 2010, or 2011 but placed in service after September 30, 2012. The intent of the Section 1603 program was to encourage renewable energy projects and it has been credited with contributing to the huge increase in wind and solar installations in recent years. According to a recent Treasury Inspector General Memorandum, as of May 10, 2013 Treasury has awarded 9,016 Section 1603 grants totaling $18.5 billion.
In order to avoid providing excessive subsidies to these projects, grant recipients were required to agree not to claim energy investment tax credits under Code Section 45 or Code Section 48. However, it seems that, whether by design or intentionally, some of the grant recipients are “double dipping” by claiming tax credits under Section 45 or Section 48. The IRS is working on a way to flag taxpayers that received Section 1603 grants so that a careful look can be taken at returns claiming investment tax credits. Although the IRS has begun by looking at taxpayers that received grants during 2009, a finding of significant lack of compliance may lead to a much broader review.