The American Reinvestment and Recovery Act of 2009 (ARRA) authorizes the Department of Treasury to award $2.3 billion in tax credits for qualified investments in advanced energy projects, to support new manufacturing facilities.  The tax credit, known as the Advanced Energy Manufacturing Tax Credit (MTC) or the Section 48C credit, provides a 30% credit for the qualified costs of investments in new, expanded, or re-equipped renewable energy manufacturing projects located in the United States.  Unlike the regular investment tax credit, which supports renewable energy generation, this credit encourages investment in the manufacturing facilities that support generation (e.g., solar panel manufacturing).

Up to $2.3 billion in MTCs will be allocated to support total capital investments of almost $7.7 billion in new renewable and advanced energy manufacturing projects. Last week the Departments of Energy (DOE) and Treasury issued guidance and opened the applications window for the MTC credit.  The DOE press release and related documents can be accessed here:

The Department of Treasury last week issued guidance on the implementation of the MTC program.  Notice 2009-72 provides important information concerning eligibility prerequisites, application procedures and deadlines, and allocation criteria for the MTC credit.  Notice 2009-72 can be accessed at:

The 30% MTC manufacturing credit differs from the 30% investment tax credit (ITC) for renewable generation projects.  First, the maximum amount of MTC credits available to all taxpayers, on a nationwide basis, has been capped by Congress at $2.3 billion.  Unlike the regular ITC, awards of the MTC credit will be made under a “competitive” application process for determining the allocation and award of the credits.  Treasury’s cash grant in lieu of tax credit program (also enacted as part of ARRA) will not available to the MTC credit.  General tax credit restrictions will apply to the MTC credit.  For example, the eligibility restrictions with respect to tax-exempt investors, and limitations on individual investors’ ability to claim the ITC (such as the passive activity loss and at-risk rules), will apply to the MTC credit

MTC credits will be allocated and awarded to individual projects based on a multi-stage process involving separate applications to the Internal Revenue Service (IRS) and the DOE.  First, the DOE must “recommend” each project for “certification” to the IRS.  The DOE then will evaluate MTC credit applications based on criteria outlined below, and will assign a priority “ranking” to each project according to its merit evaluation.  The IRS, in turn, will award MTC credits based on the priority “rankings” assigned by the DOE. The project receiving the highest ranking (that is, first) will be allocated the full amount of credit requested before any credit is allocated to a lower-ranked project.  The amount of credit allocated to a project reduces the amount of credit available to lower-ranked projects.  The same process will apply to the second and lower-ranked projects until the amount available for allocation is exhausted.  DOE will recommend and rank projects only to the extent necessary to exhaust the amount available for allocation.  Applicants will receive tax credits based on the expected commercial viability of their project and the ranking of their project relative to other projects. Rankings will be based on: expected job creation, reduction of air pollutants and greenhouse gas emissions, technological innovation, and ability to have the project up and running quickly.  Technology, geographic and project size diversity, and regional economic development will also be considered when rating projects.

A qualifying manufacturing facility eligible for the MTC credit is defined as a project that “re-equips, expands or establishes” a manufacturing facility for the production of the following types of green technology:

  • property used to produce energy from renewable resources (such as the sun, wind and geothermal sources);
  • fuel cells, microturbines, or an energy storage systems for use with certain electric vehicles;
  • electric grids to support the storage or transmission of intermittent sources of renewable energy;
  • property designed to capture and sequester carbon dioxide;
  • property designed to refine or blend renewable fuels or to produce energy conservation technologies (including energy-conserving lighting technologies and smart grid technologies);
  • certain electric vehicles and certain related components; and
  • other property designed to curb emissions, as supplemented to this list by Treasury.

A number of critical deadlines apply to the MTC credit application process.  The application period opened August 14, 2009.  Very brief “preliminary” applications are due to DOE by September 16, 2009, followed by a more extensive “final” applications being due to DOE and IRS on October 16, 2009.  If a final application for DOE recommendation is received on or before October 16, 2009, DOE will determine the feasibility of the project and (for projects determined to be feasible) provide the DOE recommendation to the IRS by December 16, 2009.  By January 15, 2010, IRS will certify or reject applications, and notify the certified projects with the approved amount of their tax credit. Accepted applicants will be required to enter into a tax credit agreement with the IRS, and will have one year from the date of the acceptance letter to start the project and provide documentation to the IRS that the certification requirements will be satisfied.  After receiving an official certification from the IRS, applicants will have three years to place the project in service.

Credits will be allocated until the program funding ($2.3 billion) is exhausted.  Subsequent allocation periods will depend on remaining funds. If MTC credits are not fully subscribed up to the $2.3 billion ceiling in this initial allocation round, the IRS intends to conduct another allocation round in 2010-2011, and will issue additional guidance with respect to such subsequent round.


Howard A. Cooper