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The American Recovery and Reinvestment Act of 2009 (.pdf)
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U.S. Treasury Department and DOE Jointly Announce Guidance for Renewables Grant Program
By V&E lawyers Price Manford, Christine Vaughn, and Debra Duncan
July 10, 2009
Eligibility and Recapture
Placed in Service
Application Requirements
On July 9, 2009, the Treasury Department and the Department of Energy (DOE) jointly announced guidance for the grant program established under Section 1603 of the American Recovery and Reinvestment Act of 2009 (ARRA) authorizing Treasury payments for specified renewable energy property in lieu of tax credits (Section 1603 payments). Section 1603 payments are available for wind, solar, geothermal, and other renewable energy investments placed in service (or in some cases under construction) in 2009 or 2010.
The guidance establishes procedures for applying for payments and clarifies certain eligibility requirements under the program. Treasury will begin accepting grant applications in August.
Eligibility and Recapture
A partnership is eligible to receive Section 1603 payments if its partners include taxable C corporations (so-called blocker corporations) whose shareholders include governmental entities, organizations described in section 501(c) of the Internal Revenue Code (Code), or other persons not eligible to receive Section 1603 payments.
Section 1603 payments will be recaptured if any direct or indirect interest in the qualified property or the grant recipient is acquired by an ineligible person during the five-year period after the property is placed in service.
A grant recipient may dispose of the qualifying property without recapture if it is sold to a person other than an ineligible person, the property continues to be specified energy property, and the purchaser agrees to be jointly liable with the applicant for any recapture.
Any recaptured Section 1603 payments will become debts to the United States “enforceable by all available means†against any assets of the applicant. The debts are not tax liabilities.
Placed in Service
“Placed in service†means the property is ready and available for its specific use.
In determining whether property placed in service after December 31, 2010, is eligible for Section 1603 payments, construction of the property begins when physical work of a significant nature begins.
For purposes of determining the beginning of construction of property or placed in service dates:
- all the components of a larger property are a single unit of property if they are functionally interdependent. For example, each wind turbine on a wind farm (the turbine, its tower, and supporting pad) is a single unit of property.
- the owner of multiple units of property at the same site that will be operated as part of a larger unit may elect to treat the units as a single unit of property. If, on the credit termination date, less than all of the units are in service, the applicant can receive a grant for the units that are in service.
The original use of the property must begin with the applicant. Property will be considered new if the cost of any used property is not more than 20 percent of the total cost of the property.
A lessee may receive a Section 1603 payment under rules that generally mirror Code section 50 if certain conditions are satisfied.
Qualified property eligible for Section 1603 payments includes an expansion of an existing property that is qualified property under Code section 45 or 48.
Application Requirements
Applications will be filed online. Applicants must provide substantial engineering, commissioning, and cost documentation, but will not be required to post bonds. Applicants must sign a terms and conditions statement under penalties of perjury.
Applicants agree to permit Treasury to release publicly their names, information about the property, and the amount of funding provided.
Applicants will be required to provide annual project performance reports to Treasury and to recertify satisfaction of eligibility under penalties of perjury for the five-year recapture period. Applicants agree to give Treasury the right of access to their facilities, books, and records, including those of their direct and indirect partners. Failure to satisfy these requirements may result in disallowance of all or part of the Section 1603 payment.
If Treasury notifies an applicant that its application does not qualify for a Section 1603 payment, the notification will be considered the final agency action.
The guidance, including a sample application form and the terms and conditions statement, is available at the Treasury Department website.
For further information on this topic, please contact V&E attorneys Price Manford, Christine Vaughn, or Debra Duncan. Visit our website to learn more about Vinson & Elkins’ Energy, Energy Regulation, and Climate Change Regulation practices.