Energy & Utilities
and Tax Alert
February 2009
Authors:
Eric E. Freedman
eric.freedman@klgates.com
+1.206.370.7627
Dirk Michels
dirk.michels@klgates.com
+1.650.798.6709
Scott C. Nelson
scott.nelson@klgates.com
Grants in Lieu of Investment Tax Credit or
Production Tax Credit
On February 13, 2009, the House and Senate passed, and on February 17, 2009,
President Barack Obama signed, the American Recovery and Reinvestment Act of
2009 (the “2009 Recovery Act”). Included in the 2009 Recovery Act was Section
1603, which provides that taxpayers may, in lieu of claiming the investment tax
credit or production tax credit, apply to the Treasury Secretary for a grant when they
place “specified energy property” in service. The grant reimburses the taxpayer for a
portion of the expense of such property.
+1.503.226.5756
Charles H. Purcell
charles.purcell@klgates.com
+1.206.370.8369
Specified Energy Property. For purposes of these rules, the term “specified
energy property” includes:
•
Any property that is part of qualified wind facility, closed-loop biomass facility,
open-loop biomass facility, geothermal, landfill gas facility, trash facility,
hydropower facility, or marine and hydrokinetic renewable energy facility
(together, “Qualified Facilities”);
•
Qualified fuel cell property;
•
Certain solar energy property;
•
Qualified small wind energy property;
•
Certain geothermal energy property;
•
Qualified microturbine property;
•
Combined heat and power system property; and
•
Geothermal heat pump property, but only if depreciation or amortization is
allowable with respect to such geothermal heat pump property.
Roger S. Wise
roger.wise@klgates.com
+1.202.778.9023
K&L Gates comprises approximately
1,700 lawyers in 29 offices located in
North America, Europe and Asia, and
represents capital markets participants,
entrepreneurs, growth and middle
market companies, leading FORTUNE
100 and FTSE 100 global corporations
and public sector entities. For more
information, please visit
www.klgates.com.
Grant Amount.
In General. In the case of Qualified Facilities, qualified fuel cell property, solar
energy property, and qualified small wind energy property, the amount of the grant is
equal to 30% of the property’s basis. In the case of all other specified energy
property, the amount of the grant is equal to 10% of the property’s basis.
Dollar Limitation. In the case of qualified fuel cell property, the grant may not
exceed an amount equal to $1,500 for each 0.5 kilowatt of electric generating
capacity of such property. In the case of qualified microturbine property, the grant
may not exceed an amount equal to $200 for each kilowatt of electric generating
capacity of such property. In the case of combined heat and power system property,
the amount of the grant is limited if such property’s electric generating capacity
exceeds a specified amount.
Energy & Utilities and Tax Alert
The provision appropriates to the Treasury Secretary
the funds necessary to make the grants.
Placed in Service and Application
Requirements. To receive a grant under these
provisions, the applicable property must be placed in
service either:
•
During 2009 or 2010; or
•
After 2010 and before the credit termination
date with respect to such property, but only if
the construction of such property began in 2009
or 2010.
Credit Termination Date.
•
For property that is part of a qualified wind
facility, the credit termination date is January 1,
2013.
•
For property that is part of a qualified closedloop biomass facility, open-loop biomass
facility, geothermal, landfill gas facility, trash
facility, hydropower facility, or marine and
hydrokinetic renewable energy facility, the
credit termination date is January 1, 2014.
•
For qualified fuel cell property, solar energy
property, qualified small wind energy property,
geothermal energy property, qualified
microturbine property, combined heat and
power system property, and geothermal heat
pump property, the credit termination date is
January 1, 2017.
In addition, the Treasury Secretary is prohibited
from making any grant to any person unless the
application for the grant is received before October
1, 2011.
Time for Payment of Grant. The Treasury
Secretary must pay the grant during the 60-day
period beginning on the later of (1) the date of the
application for such grant or (2) the date the
specified energy property for which the grant is
being made is placed in service.
Reduction of Credits and Recapture of Grant
Amounts. Section 1603 of the 2009 Recovery Act
provides that, in making grants, the Treasury
Secretary shall apply rules similar to those
contained in Section 50 of the Internal Revenue
Code of 1986, as amended (the “Code”).
Accordingly, the basis of property for which a grant
is made will be reduced by a certain percentage of
the grant amount. In addition, a certain percentage
of grant amounts will be recaptured if (i) the
taxpayer disposes of the property for which the
grant was made, or (ii) the property for which the
grant was made ceases to be specified energy
property.
Grants Not Allowed for Certain Taxpayers.
The Treasury Secretary is prohibited from making
grants to:
•
The Federal or any State or local government
(or any political subdivision, agency, or
instrumentality thereof);
•
Any organization described in Section 501(c) of
the Code and exempt from tax under Section
501(a) of the Code;
•
Any clean renewable energy bond lender,
cooperative electric company, or governmental
body; or
•
Any partnership or other pass-through entity
having one of the categories of entities
described above as a partner (or other holder of
an equity or profits interest therein).
K&L Gates comprises multiple affiliated partnerships: a limited liability partnership with the full name K&L Gates LLP qualified in Delaware and
maintaining offices throughout the U.S., in Berlin and Frankfurt, Germany, in Beijing (K&L Gates LLP Beijing Representative Office), and in
Shanghai (K&L Gates LLP Shanghai Representative Office); a limited liability partnership (also named K&L Gates LLP) incorporated in England and
maintaining our London and Paris offices; a Taiwan general partnership (K&L Gates) which practices from our Taipei office; and a Hong Kong
general partnership (K&L Gates, Solicitors) which practices from our Hong Kong office. K&L Gates maintains appropriate registrations in the
jurisdictions in which its offices are located. A list of the partners in each entity is available for inspection at any K&L Gates office.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon
in regard to any particular facts or circumstances without first consulting a lawyer.
©2009 K&L Gates LLP. All Rights Reserved.
February 2009
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