President Signs 2010 Tax Bill into Law: Renewable and Other Energy Provisions Extended

President Obama recently signed into law H.R. 4853 which extends the “Bush” ear tax cuts for all taxpayers at every income level for the next two years. Many energy provisions were also included in the bill. One of the timeliest provisions is the extension of the law passed in the American Recovery and Reinvestment Act of 2009 enacting Section 1603 Grants.

Section 1603 Grant in Lieu of Investment Tax Credit:
The existing law, under ARRA Section 1603, allows a taxpayer to elect to have certain property which is part of a qualified renewable electricity production facility qualify for a cash grant in lieu of the investment tax credit. In most cases the grant amount is 30 percent of the basis of the qualified property. The previous law required eligible property to be placed in service in calendar years 2009 or 2010, or at a minimum to have begun substantial construction or have met a 5% safe harbor test during that period.

The new law extends the Treasury Secretary's authority to provide grants in lieu of credits for one year (through 2011). The new law provides that eligible property must be placed in service in calendar years 2009, 2010, or 2011, or for property placed in service later, its construction must begin during that period. The extension provided by the new legislation does not extend the deadline to have the qualified projects completed, which relates to the expiration of the underlying tax credits for these types of properties. The qualified projects must still be completed prior to 2013 (in the case of wind facility property), 2014 (in the case of other renewable power facility property eligible for credit under Section 45), or 2017 (in the case of any specified energy property described in Section 48). The grant application due date has also been pushed back a year. Applications must now be filed before October 1, 2012.

The Section 1603 Grant in lieu of credit program has been popular among those who are not able to benefit from a tax credit, and has served to provide a much-needed source of funding during the financial system's challenges over the past two years. The extension is a welcome development for investors and developers of renewable energy projects.
Other alternative energy points of interest pertaining to the passage of the 2010 Tax Bill include:

-100% Bonus Depreciation: 100% bonus depreciation applies to new assets acquired and placed in service starting September 9, 2010 through December 31, 2011. The 50% depreciation structure will again apply for 2012. These accelerated depreciation provisions can enhance the tax benefits when investing in renewable energy projects.

-NOT INCLUDED - Advanced Energy Manufacturing Tax Credit (48C): The first $2.3 billion of credits were designed to jump-start domestic manufacturing of renewable energy components. Unfortunately, even with allocation support from President Obama, the new tax law did not extend this program.

For more information on the Section 1603 Grant or other alternative energy provisions please contact a member of the Baker Tilly Renewable Energy and fellow WI Wind Works Alliance Member:
Rich Frohmader: 608 240 2340
richard.frohmader@bakertilly.com

Sam Blahnik: 608 240 2464
sam.blahnik@bakertilly.com

Visit: www.bakertilly.com/Renewable-Energy