On Aug. 13, 2009, the U.S. Treasury Department and Department of Energy released Notice 2009-72 announcing the establishment of the qualifying advanced energy project program. Under this competitive program, the Treasury Department will award up to $2.3 billion of new Qualifying Advanced Energy Project Tax Credits, a new investment credit authorized under the American Recovery and Reinvestment Act of 2009.
Projects that re-equip, expand or establish domestic manufacturing facilities for the production of certain clean energy equipment are eligible to apply for the credit. Preliminary applications are due to the Department of Energy by Sept. 16, 2009, followed by final applications due to DOE by Oct. 16, 2009, and applications for project certification due to the Internal Revenue Service by Dec. 16, 2009.
Notice 2009-72 contains program guidance and specific information required to be submitted by applicants.
The qualifying advanced energy project credit authorized by Internal Revenue Code Section 48C is an investment credit equal to 30 percent of the qualified investment with respect to the taxpayer’s qualifying advanced energy project. This credit is subject to at-risk, recapture and other special rules that apply to investment credits, as well as the progress expenditure rules.
A qualifying advanced energy project is a project that meets the following requirements:
- The project re-equips, expands or establishes a manufacturing facility (a facility that makes or processes raw materials into finished products or accomplishes any intermediate stage in that process) for the production of specified advanced energy property or property (e.g., component) that, after further manufacture, will become specified advanced energy property;
- The IRS has certified that part or all of the qualified investment in the project is eligible for a credit; and
- The project does not produce any property used in the refining or blending of any transportation fuel (other than renewable fuel).
Specified advanced energy property means any of the following:
- Property designed for use in the production of energy from the sun, wind, geothermal deposits or other renewable resources;
- Fuel cells, microturbines or an energy storage system for use with electric or hybrid-electric motor vehicles;
- Electric grids to support the transmission of intermittent sources of renewable energy, including property for the storage of such energy;
- Property designed to capture and sequester carbon dioxide emissions;
- Property designed to refine or blend renewable fuels or to produce energy conservation technologies (including energy-conserving lighting technologies and smart grid technologies);
- New plug-in electric drive motor vehicles, qualified plug-in electric vehicles or components that are designed specifically for use with such vehicles; or
- Other property designed to reduce greenhouse gas emissions as may be determined by the IRS (this determination may occur by published guidance or in the letter notifying a taxpayer that its application for credits has been accepted).
The IRS will consider allocating credits to a project only if the Department of Energy provides a recommendation and ranking for the project. In turn, the DOE will provide a recommendation and ranking only if it determines the project has a reasonable expectation of commercial viability and merits a recommendation based on the selection criteria. DOE will review and recommend projects based on the following eligibility and evaluation criteria and program policy factors:
- Qualifies as an advanced energy project
- Has a reasonable expectation of commercial viability
Evaluation criteria (equally weighted):
- Provides the greatest domestic job creation (direct and indirect) during the credit period (Feb. 17, 2009 - Feb. 17, 2013);
- Provides the greatest net impact in avoiding or reducing air pollutants or anthropogenic emissions of greenhouse gases;
- Has 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
- Has the shortest project time from certification to completion.
Program policy factors:
- Geographic diversity
- Technology diversity
- Project size diversity
- Regional economic development
The IRS will accept or reject applications for project certification by Jan. 15, 2010, and will notify taxpayers of its decisions, which will include credit allocations for accepted applications, by letter. If an application is accepted, the taxpayer must execute an agreement in the form set forth in Notice 2009-72 by March 15, 2010. A taxpayer whose application for project certification is accepted must submit, within one year after the acceptance date, documentation evidencing that the requirements for project certification have been met . A taxpayer that receives a project certification after submitting such documentation must, within three years after the certification date, place the project in service; failure to do so will result in forfeiture of the certification.
Any successor to the applying taxpayer must execute a new agreement with the IRS by the due date of the successor's tax return for the taxable year in which the transfer occurs or the credits will be forfeited or recaptured. An acceptance, allocation or certification by the IRS is not a determination that a project is eligible for the credit and the IRS may, upon examination, determine that the project does not qualify. A taxpayer does not have a right to a conference relating to the application process or any right to appeal application or certification decisions.
For projects that receive a certification, the IRS will publicly disclose the identity of the applicant and the amount of the credit certified. All applications will otherwise be considered return information exempt from disclosure.