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Tax Cut Compromise Bill Extends Section 1603 Treasury Grants

Corporate Services Law Update

On Friday, December 17, 2010, the President signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The Act resulted from the compromise between Republicans in Congress and the Administration, which (i) extends the so-called Bush-era tax cuts across the board for two years, (ii) raises the threshold for alternative minimum tax, (iii) extends unemployment benefits, and (iv) lowers the rate and increases the exemption for estate tax.

The Act also extends a key incentive for renewable and alternative energy projects: the Treasury Department grant program enacted as Section 1603 of the American Recovery & Reinvestment Act of 2009. Under the Tax Relief Act, Treasury grants are now available for IRC Section 48 energy credit-eligible facilities which are placed in service by the end of 2011. Section 1603 grants are now also available as long as construction of an energy credit-eligible facility begins before January 1, 2012 and provided the facility is placed in service before the date the energy credit expires (e.g., January 1, 2017 for solar and January 1, 2014 for biomass). The deadline for grant applications has also been extended, to October 31, 2012.

Under existing rules for Treasury grants, construction is considered to begin when physical work of a significant nature commences. Examples of physical work of a significant nature include:

  • excavation for a foundation,

  • setting anchor bolts in the ground,
  • pouring concrete pads for a foundation, and
  • off-site manufacture of modular units to be assembled on-site.

A safe harbor applies where 5 percent of project costs are paid or incurred by the grant deadline.

The Tax Relief Act also extends a number of other incentives for renewable and alternative energy including biodiesel, ethanol, energy efficient homes and appliances, nonbusiness energy property, and alternative fuel vehicle refueling property.

Quarles & Brady attorneys have the experience required to assist businesses with the various tax, contract, and environmental concerns which must be addressed for successful investment in and/or development of renewable and alternative energy facilities. For more information on the Treasury grant program or the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, please contact Mark Vilaboy at (602) 229-5508 / or your Quarles & Brady attorney.