On December 19, 2010,
following approvals by both the U.S. Senate and House of Representatives,
President Obama signed into law the Tax Relief, Unemployment
Insurance Reauthorization and Job Creation Act of 2010, which includes a
one-year extension to the popular Section 1603 Federal Treasury Grant Program
(the Cash Grant). For developers seeking to qualify their new renewable energy
projects for the Cash Grant (in lieu of an Investment Tax Credit), this latest
extension adds a year to the deadline for beginning construction.
The Cash Grant, which
was originally approved in 2009 under Section 1603 of the American Recovery and
Reinvestment Act (ARRA), allows for the U.S. Treasury Department to appropriate
funds (usually within 60 days of a project becoming operational) to qualified
applicants installing renewable energy facilities. The Cash Grant is generally
equal to 10 to 30 percent of the cost of the project, depending on project
type. For small/large wind and solar projects, the Cash Grant is equal to
approximately 30 percent of the project value. Before last week’s extension,
qualified applicants needed to begin construction on their renewable energy
project by December 31, 2010 to qualify for the Cash Grant. The new bill
extends this deadline to January 3, 2012.
The bill also allows
for a 100 percent depreciation bonus on the value of equipment placed in
service after September 8, 2010 and through the end of 2011, provided that the
taxpayer was not committed under a binding contract to invest in the project on
or before 2008. This is a timing benefit. Instead of depreciating a project
over the normal depreciation period, the cost, minus 50 percent of the value of
the Cash Grant, can be deducted in the year the project goes into
service.
If you would like additional information about the Cash Grant,
or want to learn more about renewable energy and energy efficiency regulations,
please contact Craig
M. Tateronis, at 617 456 8021 or [email protected].