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Federal Tax Credits
The American Recovery and Reinvestment Act of 2009 (H.R. 1) allows taxpayers eligible for the federal business energy investment tax credit (ITC) to take this credit or to receive a grant from the U.S. Treasury Department instead of taking the business ITC for new installations. The new law also allows taxpayers eligible for the renewable electricity production tax credit (PTC) to receive a grant from the U.S. Treasury Department instead of taking the PTC for new installations. (It does not allow taxpayers eligible for the residential renewable energy tax credit to receive a grant instead of taking this credit.) Taxpayers may not use more than one of these incentives. Tax credits allowed under the ITC with respect to progress expenditures on eligible energy property will be recaptured if the project receives a grant. The grant is not included in the gross income of the taxpayer.
The American Recovery and Reinvestment Act of 2009 (H.R. 1), enacted in February 2009, created a renewable energy grant program that will be administered by the U.S. Department of Treasury. This cash grant may be taken in lieu of the federal business energy investment tax credit (ITC). In July 2009 the Department of Treasury issued documents detailing guidelines for the grants, terms and conditions, and a sample application. These publications are available on the program website.
Grants are available to eligible property* placed in service in 2009 or 2010, or placed in service by the specified credit termination date,** if construction began in 2009 or 2010. The guidelines include a "safe harbor" provision that sets the beginning of construction at the point where the applicant has incurred or paid at least 5% of the total cost of the property, excluding land and certain preliminary planning activities.
Solar. The grant is equal to 30% of the basis of the property for solar energy. Eligible solar-energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat. Passive solar systems and solar pool-heating systems are not eligible. Hybrid solar-lighting systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible.
It is important to note that only tax-paying entities are eligible for this grant. Federal, state and local government bodies, non-profits, qualified energy tax credit bond lenders, and cooperative electric companies are not eligible to receive this grant. Partnerships or pass-thru entities for the organizations described above are also not eligible to receive this grant, except in cases where the ineligible party only owns an indirect interest in the applicant through a taxable C corporation. Grant applications must be submitted by October 1, 2011. The U.S. Treasury Department will make payment of the grant within 60 days of the grant application date or the date the property is placed in service, whichever is later.
*Definitions of eligible property types and renewable technologies can be found in the U.S. Code, Title 26, § 45 and § 48.
**Credit termination date of January 1, 2013 for wind; January 1, 2014 for closed-loop biomass, open-loop biomass, landfill gas, trash, qualified hydropower, marine and hydrokinetic; January 1, 2017 for fuel cells, small wind, solar, geothermal, microturbines, CHP and geothermal heat pumps.
Source:
US Department of Energy, Energy Efficiency and Renewable Energy, Database of State Incentives for Renewable and Efficiency July 9, 2009
Note: the Solar Energy Industries Association has published a four-page document that provides answers to frequently asked questions regarding the federal tax credits for solar energy. The Modified Accelerated Cost Recovery System (MACRS) five-year accelerated depreciation schedule is also applicable. |
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