The Obama Administration's implementation of energy stimulus continues to move forward as the Internal Revenue Service and the U.S. Treasury Department, together with the Department of Energy (DOE) recently released guidance on the Advanced Energy Manufacturing Tax Credit (MTC), another key energy incentive under the American Recovery and Reinvestment Act of 2009, which authorizes the Treasury to provide developers with an investment tax credit of 30 percent for facilities that manufacture specified clean energy equipment. The guidance issued on August 14 details the application procedures and evaluation criteria for the MTC grants.
The MTC program makes available $2.3 billion in tax credits to qualifying manufacturers of advanced clean energy equipment. The MTC program differs from other, previously-implemented energy tax incentives in several key ways:
Unlike other programs, the MTC is not a tax incentive for energy production. Rather, it is a tax credit for placing new manufacturing facilities in service, and is only available for the equipment portion of the project, not the entire facility or its structural components.
Receipt of the credit depends upon how a project ranks relative to other submitted projects. Qualifying manufacturers will be awarded credits in order based on scoring by the DOE until the $2.3 billion in credit has been exhausted.
Successful applicants may receive a significant award, far more than what is available under other programs and under previous tax credit programs. Treasury is authorized to make grants of 30 percent of the equipment's cost, while other tax credits are typically capped at 10 percent.
Preliminary applications must be submitted to DOE by September 16, 2009, with final applications due just a month later on October 16. An additional application, the form of which has not yet been announced, will be due to the IRS no later than December 16. The IRS will certify or deny the applications and will notify qualified manufacturers of the approved amount of the credit by January 15, 2010. Credits will be allocated until the program funding ($2.3 billion) is exhausted. The MTC is capped at $2.3 billion and credits will only be available for two years or until the cap is reached. Subsequent application opportunities will only be made available if funds remain following the initial allocation period, making it critical for qualified applicants to act quickly to meet the approaching deadlines for the first application period.
The accelerated application period (preliminary applications must be submitted by September 16, 2009) and competitive ranking process means that applicants must act quickly to prepare complete and thorough application materials and business plans in order to be considered for the MTC.
Qualifying Manufacturers - Clean Energy Equipment
Qualifying manufacturers are those who produce new, expanded, or re-equipped advanced energy manufacturing projects that include:
electric cars electric grids to support the transmission of renewable energy energy conservation technologies solar, wind and geothermal energy equipment fuel cells, micro-turbines and batteries equipment to capture and sequester carbon dioxide or reduce greenhouse gas emissions. Rankings and Application Process
As noted above, applicants for the MTC will receive tax credits based on the expected commercial viability of their project and the ranking of their project relative to other projects.
Rankings are based on the expected job creation, reduction of air pollutants and greenhouse gas emissions, technological innovation and commercial deployment (based on (i) the production of new or significantly improved technologies, (ii) improvements in levelized costs and performance, and (iii) manufacturing significance and value) of a project, as well as the expected timeframe for completion of the project. Applicants are also required to provide a calculation of energy and environmental impact on a per tax credit basis. In addition, in the ranking process, Treasury and DOE will take into consideration certain policy factors such as the geographic, technological and project size diversity among the submitted projects and the opportunity for regional economic development of the submitted projects.
Despite the accelerated application process, it is important for applications to be carefully prepared and for business plans to be well-developed and tested. The guidance indicates that the failure to include all required information may result in rejection of the application and that significant changes -- as determined by Treasury or DOE -- in a project from how it is initially described may result in later denial or recapture of credits. There is no appeal process from such a determination.