On December 17, President Obama signed into law H.R. 4583, The Tax Relief; Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the “Act”) extending for two years the Bush-era individual income tax rate cuts.  The Act also extends a number of energy related incentives that were set to expire at the end of this year.  The most significant is a one-year extension of the deadline to begin construction of “specified energy property” for purposes of the Treasury cash grant provisions enacted by Section 1603 of the American Recovery and Reinvestment Act of 2009.  In addition, the Act extends 50 percent bonus depreciation for two years (for qualifying property placed in service before January 1, 2013), and allows 100 percent bonus depreciation for qualified property placed in service after September 8, 2010, and before January 1, 2012.

The Section 1603 Treasury grant program allows owners and certain lessees of qualifying property that generates renewable energy (including most wind and solar projects) to receive a cash grant of 30 percent of the qualified cost of the project instead of claiming production tax credits or investment tax credits with respect to the project.  Under prior law grants were available only for “specified energy property”  placed in service in 2009 or 2010 or placed in service after 2010 (and before the expiration date of the tax credit otherwise available for the property), so long as construction of the property began in 2009 or 2010.  The Act allows grants to be paid with respect to specified energy property placed in service in 2009, 2010, or 2011, or placed in service after 2011 so long as construction of the property begins during 2009, 2010, or 2011 and the property is placed in service before the expiration date of the credit otherwise available for the property.  The placed-in-service deadlines (credit expiration dates) remain unchanged: December 31, 2012 for wind facilities; December 31, 2013 for most biomass,  geothermal, landfill gas, municipal solid waste, hydroelectric and marine and hydrokinetic facilities; and December 31, 2016, for qualified solar property.  The deadline to file an application for a grant has also been extended one year (to September 30, 2012).  The most practical implication of these changes is that the December 31, 2010 deadline for “beginning of construction” has been lifted and extended to December 31, 2011.

For more information about the Section 1603 Treasury cash grant program generally, please click here. For a summary of the rules governing when “construction begins” click here.  For more information about bonus depreciation, please click here.

CONTACT

Craig M. Kline
Project Development & Finance Practice
212.704.6150