One-year extension of the ARRA grant for Specified Energy Property.

• Author: Weber, Neal A.
• Position: American Recovery and Reinvestment Act of 2009

On Friday, December 17, 2010, President Barack Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312 (Tax Relief Act of 2010). This law brings good news to taxpayers planning to invest in renewable energy sources, extending for one year the American Recovery and Reinvestment Act of 2009, P.L. 111-5 (ARRA), Section 1603, grant in lieu of credit for specified energy property (1603 grant) application deadline from October 1, 2011, to October 1, 2012, and also extending for one year the construction start date or 5% safe-harbor requirement from December 31, 2010, to December 31, 2011. The Tax Relief Act of 2010 extends only the deadlines. It does not alter any other aspect of the 1603 grant program, which provides relief for many taxpayers that were struggling to structure construction projects and financial arrangements in time to start construction or incur 5% of the qualified costs by the end of the year.

Overview of the Section 1603 Renewable Energy Grant Program

Under Section 1603, a taxpayer can receive 10% or 30% of the cost basis of a qualified energy project as a cash grant for certain renewable energy property that is (1) placed in service in 2009, 2010, or 2011 (2009 or 2010 under the original law) or (2) placed in service after 2011 (originally 2010) but before the "applicable placed in service" deadline for such facility, but only if the construction of the property began during 2009, 2010, or 2011 (2009 or 2010 under the original Section 1603). The grant is in lieu of tax credits otherwise available under Sec. 48 for placing qualified energy property in service or under Sec. 45 for producing electricity from specified renewable sources. The purpose of the grant is to encourage investment in alternative energy sources and provide cash payments to taxpayers who during the economic downturn could not use the tax credits due to net operating losses or alternative minimum tax.

Property That Qualifies for the Grant and Respective Deadlines

To qualify for the 1603 grant, a taxpayer must place in service "specified energy property," which includes only tangible personal property where depreciation or amortization is allowable. Specified energy property is defined in relation to Sees. 45 and 48 and is summarized in the exhibit on p. 220.

In order to receive the grant:

* The qualified property must be placed in service between January 1, 2009, and December 31, 2011; or

*...