On August 13, 2009 the Treasury Department issued guidance (Notice 2009-72) establishing the qualifying advanced energy project program. Under this program, the Internal Revenue Service will allocate up to $2.3 billion in tax credits to manufacturers of advanced energy equipment. Preliminary applications must be submitted by September 16, 2009.


On February 16, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the Act). The Act introduced a new Section 48C of the Internal Revenue Code of 1986, as amended (the Code), creating a new investment tax credit, the qualifying advanced energy project credit (the Credit). The Credit is intended to encourage taxpayers to reequip, expand, or establish manufacturing facilities for the production of certain energy-related property. Thus, by enacting the Credit, Congress has made available up to $2.3 billion of tax benefits to manufacturers of solar panels, wind turbines, fuel cells, electric vehicles, and other equipment either used in the production of clean energy or utilizing clean energy.

To claim the Credit, a taxpayer must first receive appropriate certification from the Internal Revenue Service (the Service) that the taxpayer’s “qualified investment” with respect to a “qualifying advanced energy project” is eligible. Taxpayers who receive this certification will be eligible to claim a credit equal to up to 30 percent of the taxpayer’s qualified investment for the taxable year. Taxpayers will have approximately four years from date of approval of their application to place their projects in service and claim any credits allocated to them.

Section 48C(d) of the Code requires the Secretary of the Treasury, in consultation with the Secretary of Energy, to establish a qualifying advanced energy program pursuant to which the Service will grant certifications to sponsors of qualifying advanced energy projects so that qualified investments in such projects may be eligible for credits. Notice 2009-72 (the Notice) has now been issued to carry out that Congressional mandate.

The Treasury Guidance

The Notice creates the qualifying advanced energy project program (the Program), and sets forth the procedure for applying for certification. The highlights of the Notice are as follows:

Qualifying Advanced Energy Project. A project may be a qualifying advanced energy project if it reequips, expands, or establishes a manufacturing facility for the production of specified advanced energy property (described below). Projects producing property that, after further manufacture, would be specified advanced energy property may also qualify. However, projects that produce any property used in the refining or blending of any transportation fuel other than renewable fuels are specifically excluded. A project will not be considered a qualifying advanced energy project unless it has been certified as such by the Service.

Specified Advanced Energy Property. Seven categories of property may be produced in a qualifying advanced energy project:

  1. Property designed for use in the production of energy from renewable resources such as the sun, wind, geothermal deposits, or other renewable resources;
  2. Fuel cells, microturbines, or energy storage systems for use with electric or hybrid-electric motor vehicles;
  3. Electric grids to support the transmission of intermittent sources of renewable energy, including property for the storage of such energy;
  4. Property designed to capture and sequester carbon dioxide and carbon dioxide emissions;
  5. Property designed to refine or blend renewable fuels (but not fossil fuels) or to produce energy conservation technologies;
  6. New plug-in electric drive motor vehicles or components designed for such vehicles; or
  7. Property designed to reduce greenhouse gas emissions as determined by the Service.

Qualified Investment. Generally, the taxpayer’s qualified investment for any taxable year – i.e., the investment with respect to which the 30 percent credit is allowable – will be equal to the basis of eligible property placed in service that year by the taxpayer as part of a qualifying advanced energy project. Eligible property is generally depreciable tangible personal property or other depreciable tangible property (not including a building or its structural components) that is necessary for the production of specified advanced energy property. In the case of self-constructed property, the Notice also provides for an election pursuant to which credit may be claimed for qualified progress expenditures prior to the time the property is placed in service.

Application Procedures – Overview. To apply for the Credit the taxpayer must submit two applications: (i) an application to the Department of Energy (the DOE) seeking the DOE’s recommendation and ranking of a proposed project, and (ii) an application to the Service seeking certification and allocation of the Credit. The Service will not consider a project under the Program unless the DOE application has been submitted, and processed and the DOE has provided a recommendation and ranking for the project. Credits will be allocated by the Service in accordance with the DOE rankings.

The Notice provides that applications will be considered in two allocation rounds. However, if the maximum $2.3 billion in tax credits are allocated to taxpayers through the initial 2009-2010 allocation round, there will be no subsequent allocation round. Otherwise, a second allocation round to apportion any remaining investment credits will begin next year.

Application for DOE Recommendation. For the 2009-2010 allocation round, preliminary applications for a DOE recommendation must be submitted by September 16, 2009. Final applications are due by October 16, 2009. The DOE will only recommend projects that both would qualify as advanced energy projects if they received certification and have a reasonable expectation of commercial viability. Furthermore, when evaluating and ranking projects, the DOE will consider which projects:

  • provide the greatest domestic job creation during the credit period (February 17, 2009 through
  • February 17, 2013);
  • provide the greatest net impact in avoiding or reducing air pollutants or anthropogenic emissions
  • of greenhouse gases;
  • have the greatest potential for technological innovation and commercial deployment, as indicated
  • by (i) the production of new or significantly improved technologies, (ii) improvements in levelized
  • costs and performance, and (iii) manufacturing significance and value; and
  • have the shortest project time from certification to completion.

In evaluating projects, the DOE will also consider geographic diversity, technology diversity, project size diversity, and regional economic development.

Application for Service Certification. For the 2009-2010 application round, the application to the Service for certification must be received no later than December 16, 2009. The Service will notify timely applicants in writing of its decision regarding certification by January 15, 2010. Acceptance letters will state the amount of tax credits allocated to the applicant.

Issuance of Certification. Once an application has been accepted, there are a number of additional requirements that must be fulfilled before the Service will issue a certification allowing the taxpayer to claim the allocated credits. Among other things, within one year of the date that appears on the taxpayer’s acceptance letter, the taxpayer must submit documentation establishing that it has received all federal, state, and local permits and has completed all steps necessary during the first year to allow the project to be placed in service within three years of the issuance of the certification. If this information is provided in a timely and acceptable fashion, the Service will issue the certification, and the taxpayer will have three years from the date of issuance to place the project in service before the certification becomes void.