A Welcome Holiday Present: One Year Extension of the Solar Energy Tax Grant in Lieu of Credit

A Welcome Holiday Present: One Year Extension of the Solar Energy Tax Grant in Lieu of Credit

December 23, 2010 07:39

The renewable energy industry got a nice holiday present this year. On December 17, 2010, President Obama signed into law H.R. 4853, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the "Tax Relief Act"). Included among the panoply of tax cuts is a tax grant extension cheered by the renewable energy industry.

Section 707 of the Tax Relief Act extends by one year the deadline for commencing construction of specified energy property, such as solar facilities, to be eligible to receive a grant of 30% of the cost of the property from the U.S. Treasury under Section 1603 of the American Recovery and Reinvestment Act of 2009. The property will be eligible for the grant if it is placed in service during 2009, 2010, or 2011, or if it is placed in service after 2011 and before the energy credit termination date (January 1, 2017, for solar facilities) if construction began before January 1, 2012.

The extension of the tax grant in lieu of credit will allow those interested in developing solar facilities to continue to take advantage of the grant for another full year rather than work to beat the clock to demonstrate compliance by the end of 2010. Projects now under way that are expected to be placed in service in 2011 no longer have to meet Treasury's safe harbor for commencement of construction (demonstrating 5% of construction) by December 31, 2010. The safe harbor and its requirements, however, will be relevant in 2011 for projects expected to be placed in service after 2011. As participants in solar transactions plan their activities for 2011, they should be mindful of the steps that need to be taken by December 31, 2011, to document and maintain eligibility for any projects expected to be placed in service between 2012 and 2017, by either commencing construction or meeting the 5% safe harbor.

Due to the sluggish credit markets and economy in 2009, the grant in lieu of credit program was not as great a stimulus to the development of renewable energy projects as some had initially expected. This grant extension brings welcome news to the solar industry and to any large energy user that may want to reduce its energy costs by developing and installing a solar facility. It evidences Congress' continued commitment to the development of alternative energy projects and should result in the development of many more viable projects and the creation of jobs related to the construction and installation of solar energy facilities.

 

Climate Change | Legislation | Renewable Energy | Solar Energy

Comments are closed

McCARTER & ENGLISH CLIMATE CHANGE AND RENEWABLE ENERGY PRACTICE GROUP

The business case for the development of renewable energy projects, from biodiesel and ethanol to wind, solar, and distributed generation, is more compelling than ever as tax and regulatory incentives combine to attract investments. Emerging issues in environmental law and increasingly recognized principles of corporate social responsibility are encouraging public companies to voluntarily reduce greenhouse gas emissions, install clean energy alternatives, and invest overseas in projects under the Kyoto Protocol to respond to climate change concerns.

Click here for more information and a list of our group members.

MONTH LIST

© 2018 McCarter & English, LLP. All Rights Reserved. disclaimer
navbottom image