U.S. Stimulus News for Solar: Tax Credit and Grants in lieu of ITC


Bookmark and Share

U.S. Stimulus News for Solar: Tax Credit and Grants in lieu of ITC

The U.S. government is actively implementing the provisions of the economic stimulus bill with two recent announcements favorable to the solar/PV industry. SEMI member companies are encouraged to review the details of the new advanced energy manufacturing tax credit and the grant in lieu of the investment tax credit to determine if they might be eligible.

Advanced Energy Manufacturing Tax Credit Now Available – Deadlines Soon

SEMI is pleased to announce that details and applications are now available for the newly created manufacturing tax credit (MTC) for advanced energy. This new 30 percent investment tax credit is designed to promote manufacturing of clean energy equipment in the United States. It was a major energy provision of the American Reinvestment and Recovery Act. SEMI actively supported its passage by urging congressional leaders to include the credit in the final economic stimulus bill.

This new credit is referred to by its section of the Internal Revenue Code, section 48(c). It provides a 30 percent investment tax credit for eligible projects up to the program’s cap of $2.3 billion, thereby supporting total investment over $7 billion. Projects directly involved in generating energy are not eligible for this credit. Rather, it is aimed at one step earlier in the process – advanced energy manufacturing facilities in the United States that support energy generation.

The MTC application and review process are on a fast-track. Companies are encouraged to review the credit guidelines and deadlines as soon as possible. The guidelines and applications are available at: http://www.energy.gov/recovery/48C.htm

Timeline:

  • August 14: application process opened
  • September 16: Preliminary applications due to Department of Energy
  • October 16: Final applications due to Departments of Energy and the IRS
  • January 15, 2010: IRS to decide which applications will be approved
  • April 16, 2010: IRS to send acceptance agreements

The Department of Energy (DOE) and IRS will jointly decide which applications will be approved. There are four equally-weighted criteria for decision-making:

  • Prospects for job creation
  • Reduction of air pollutants and greenhouse gas emissions
  • Technology innovation and commercial deployment
  • Length of project timeframe

In rating the proposed projects, officials also will consider diversity in terms of technology, geography and project size.

A wide range of manufacturing projects are eligible for the tax credit, including “technologies that create energy from renewable resources” such as solar. Projects must be completed within four years of acceptance of the tax credit and only new expenditures will be considered. Both new projects and expansion of existing projects are eligible.

Grants Now Available – in lieu of Investment Tax Credit

The Department of Treasury has issued guidance and application forms for companies interested in applying for a grant in lieu of the investment tax credit (ITC). The ITC is a major incentive for the PV industry, so it has been a priority issue for SEMI’s public policy efforts. At the end of last year, SEMI was instrumental in working with Congress to extend the ITC for eight years. However, many companies are not currently in a position to take advantage of the credit, so Congress included the grant program in lieu of the investment tax credit as part of the economic stimulus bill.

This grant program (“Section 1603”) provides an alternative for businesses that could otherwise claim the production tax credit or the investment tax credit for certain qualifying renewable energy projects. The Treasury Department issued program guidance on July 9 and is now accepting applications. Details are available at: http://www.treas.gov/recovery/1603.shtml

Generally, the amount of a cash grant for a qualifying project will equal either 10 percent or 30 percent of the eligible cost basis of the project, depending on the type of renewable energy technology used and subject to certain maximum payments for particular technologies. The Treasury Department estimates that about $3 billion will be paid out as grants, but there is no limit on the total amount of the grants that may be made under this program.

Property generally must be placed into service in 2009 or 2010 and applications are due by October 1, 2011. Approved applicants will receive their cash grant payment within 60 days after the submission of a complete application or the date the property is placed into service. Grant recipients will be required to provide periodic reports to Treasury.

For more information on these and other federal opportunities, please contact the SEMI Washington office at semidc@semi.org.

September 1, 2009