Posted: March 30, 2009
More greenbacks for green projects
The stimulus bill provides additional tax incentives for renewable energy projectsBy Cathryn Milkey and Maureen McInerney
The American Recovery and Reinvestment Act of 2009 (commonly referred to as the stimulus bill), signed into law by President Obama on Feb. 17, contains more than $787 billion in government spending and tax incentives, including $63 billion directed to renewable energy programs and related tax incentives. The stimulus bill also continues federal benefits previously available to the industry.
The new cash grant program created by the stimulus bill allows investors and developers of certain renewable energy projects the option to receive a cash grant in lieu of tax credits, which are discussed below. The renewable energy community is excited about the cash grant, as it provides an upfront payment.
The cash grant will be equal to 30 percent of the project costs for wind, solar, fuel cell, biomass, landfill gas, trash, qualified hydropower and marine and hydrokinetic renewable energy facilities and 10 percent of the project costs for microturbine, combined heat and power, and geothermal heatpump facilities. To be eligible for a cash grant, the facility must either be placed in service in 2009 or 2010 and otherwise be eligible for tax credits, or be placed into service after 2010 yet before the tax credit termination date, as long as construction of the facility began in 2009 or 2010. In all cases, the application deadline is Sept. 30, 2011. The grant program will be administered by the Treasury Department (not the Department of Energy), and the grant amount will be paid within 60 days of the later of the application date or the date the property is placed in service. The grant will not be deemed taxable income, but, similar to the tax credit programs, the grant would reduce the tax basis of the property. The particulars of the cash grant program are still being developed, and there might be additional reporting or other federal requirements for developers and investors who opt for the grant rather than tax credits.
In addition to creating the cash grant program, the stimulus bill extends the deadline of the already-existing production tax credit program. The deadline has been extended for three years, so for operational large-scale wind projects the deadline is Dec. 31, 2012, and for other renewable projects, such as geothermal, landfill gas, biomass and qualified hydropower, the deadline is Dec. 31, 2013. PTCs are federal income tax credits based on produced energy generated from a renewable energy project (e.g., for a large-scale wind project, the current PTC rate is 2.1 cents/kilowatt-hour).
The stimulus bill also extends the deadline for the already-existing investment tax credit program. In lieu of PTCs, developers may now claim a 30 percent investment tax credit for wind facilities placed in service before the end of 2012 and for biomass, geothermal, landfill gas, trash, qualified hydropower and marine and hydrokinetic renewable energy facilities placed in service before the end of 2013. ITCs are federal income tax credits that are based on a percentage of renewable energy project costs. The ITC amount is the same amount available under the cash grant program discussed above. Developers and investors must choose to take advantage of only one program (PTCs, ITCs or the cash grant) for each project.
In addition to the benefits provided for large-scale projects, the Stimulus Bill also provides benefits to the developers of small-scale projects. One of these benefits is investment tax credits equal to 30 percent of the total installed cost of the system, which are available for owners of small wind systems on homes, farms and businesses. Additionally, the stimulus bill provides for a tax credit for individuals of 30 percent of amounts paid for qualified energy efficiency improvements placed in service in 2009 and 2010, up to an aggregate of $1,500.
Whether you have a large project or a small one, the stimulus bill was designed to encourage renewable energy projects. New incentives, plus the extension of old incentives, are now available for green energy developers. To receive federal government updates on the stimulus bill, please visit www.recovery.gov.
Cathryn Milkey and Maureen McInerney are attorneys in the Denver office of Holland & Hart LLP. Ms. Milkey advises renewable energy and real estate developers in matters relating to project development and finance. She can be reached at (303) 295-8479 or firstname.lastname@example.org. Ms. McInerney advises clients in the development of renewable energy facilities, focusing on site acquisition and control. She can be reached at (303) 295-8161 or email@example.com.