Treasury Grant Program
The Treasury Department recently released “Frequently Asked Questions and Answers,” providing supplemental guidance under Section 1603 of the American Recovery and Reinvestment Act of 2009 — i.e., the Treasury Grant program for specified energy property (the “Supplemental Guidance”). The Supplemental Guidance consists of answers to 35 questions that were raised with respect to the Treasury Grant program and the Treasury Guidance released previously in July 2009. The Supplemental Guidance confirms a number of key questions summarized in more detail in this client alert, Treasury Releases Grant Program Questions and Answers.
The Supplemental Guidance provides a significant planning opportunity with respect to energy transactions involving governmental entities and other tax-exempt entities. Under the investment tax credit (“ITC”) rules, energy property that is leased to governmental or tax-exempt entities is not eligible for the ITC. Moreover, proportional disallowance of the ITC results in the case of leases to partnerships with governmental or tax-exempt partners. However, the Supplemental Guidance provides that property may be leased by an eligible entity to ineligible entities under the Treasury Grant program as long as the lease is a true lease and not a disguised sale. Read our client alert, Planning Opportunity: Treasury Grant Guidance Permits Leasing to Governments and Tax-Exempts, regarding this structure.
On December 2, 2009, House Ways & Means Committee Chairman Rangel and Ranking Member Camp introduced H.R. 4169, the Tax Technical Corrections Act of 2009 (the “Bill”). The Bill would make numerous technical corrections to energy tax credit provisions in the Internal Revenue Code (the “Code”) and the Treasury Grant program provided under Section 1603 of the American Recovery and Reinvestment Act of 2009. Read the details in our client alert, House Tax Technical Corrections Act Introduced; Energy Tax Credit Update.
Manufacturing Investment Tax Credit Allocations
On January 8, 2010, President Obama announced the allocation of $2.3 billion in Section 48C manufacturing investment tax credits for 183 domestic clean energy manufacturing projects. The tax credit program was established by the American Recovery and Reinvestment Act of 2009, and the credits support $7.7 billion of investment in manufacturing projects. The full $2.3 billion of available tax credits was allocated in the first round. However, the Administration and certain Members of Congress have already expressed support for providing an additional amount of tax credits to replenish the program. Read our updates regarding the announcement, Internal Revenue Service Releases Manufacturing Investment Tax Credit Program Guidance, and about the projects that received an allocation of tax credits, President Obama Announces Allocation of $2.3 Billion of Manufacturing Investment Tax Credits.
IRS Rules that Reflective Roof Surface is “Energy Property”
In PLR 200947027, the IRS ruled that a reflective roof surface was “energy property” eligible for the energy tax credit under Section 48 of the Code “when installed over an existing roof in connection with the System.” The reflective surface was installed together with an array of cylindrical photovoltaic cells on top of an existing roof. The spacing between the cylinders allows light to pass through the array and hit the reflective surface underneath. That surface reflects the light back onto the underside of the cells. The cylindrical cell design in conjunction with a reflective surface allows light to be collected from many angles, potentially increasing the amount of energy produced compared to a conventional array. For more details regarding the ruling, read our client alert, House Tax Technical Corrections Act Introduced; Energy Tax Credit Update.
Treasury Allocates $2.2 Billion in Clean Renewable Energy Bonds
On October 27, 2009, the U.S. Department of Treasury announced the allocation of $2.2 billion in Clean Renewable Energy Bonds (“CREBs”). The CREBs, or “New CREBs” as they are referred to in the legislation and the market, are intended to help government agencies, public power providers and cooperative electric companies obtain lowercost financing for renewable energy projects. For more information regarding the allocations, including a list of the applicants to which an allocation of New CREBs was made, please read our client alert, Treasury Allocates $2.2 Billion in Clean Renewable Energy Bonds.