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Tax Credit Bonds are taxable obligations issued by state and local governments and governmental entities for a wide array of qualifying purposes.  Unlike bonds that bear interest that is exempt from federal gross income tax, Tax Credit Bonds entitle the bondholder to a direct subsidy in the form of a federal tax credit, and in some cases receipt of interest that is includable in gross income for federal income tax purposes, rather than the issuer paying the bondholder tax‑exempt interest.  There are a variety of purposes for which Tax Credit Bonds can be issued, two of which relate to the areas of renewable energy and conservation:  (1) new clean renewable energy bonds (“New CREBs”)* and (2) qualified energy conservation bonds (“QECBs”).  Both New CREBs and QECBs are subject to certain rules applicable to tax credit bonds and to federal labor standards.  See General Tax Credit Bond Rules and Davis‑Bacon Labor Standards below. [Read more →]

Last week the Treasury issued new guidance in the form of questions and answers (FAQ) as to when “construction begins” for renewable energy projects that may be eligible for a cash grant in lieu of an investment tax credit under section 1603 of the American Recovery and Reinvestment Act of 2009.  This alert summarizes the Treasury guidance to date on this issue, including the FAQ.  You may access a copy of the new FAQ here, the Treasury Guidance document here and Treasury’s earlier FAQ here. Our prior report on the cash grant program is available here. [Read more →]

Senators John Kerry and Joe Lieberman have sponsored “The American Power Act” (“APA”), a comprehensive energy and climate change bill.  For a summary of the bill, please visit this alert. Among other things, the APA includes significant incentives for the nuclear power industry, including several tax provisions intended to encourage construction of new nuclear power plants. The APA would also establish an expedited procedure for issuing construction and operating licenses for new nuclear reactors, expand the federal loan guarantee program for nuclear energy development, and fund spent fuel recycling research. [Read more →]

The U.S. Treasury Department’s successful cash grant program will expire Dec. 31, 2010. Section 1603 in the American Recovery and Reinvestment Act of 2009 established the new grant program that allows a renewable project owner to choose a one-time grant equal to 30% of the construction and installation costs for the facility. The facility must be placed in service by the end of this year or construction must have begun in 2009 or started this year and be completed by end of 2013. [Read more →]

The recently-enacted Health Care and Education Affordability Reconciliation Act of 2010 (H.R. 4872) (the “Reconciliation Act”) provides statutory rules for applying the economic substance doctrine. See Section 7701(o) of the Code, as amended by section 1409(a) of the Reconciliation Act. The Reconciliation Act defines the economic substance doctrine as the common law doctrine under which the federal income tax benefits of a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose. New Section 7701(o) is effective for transactions entered into on or after March 31, 2010. [Read more →]