This article comes from law firm Foley & Lardner LLC
The U.S. Treasury and NREL recently revised the application process for certain projects seeking to qualify for cash grants in lieu of tax credits under Section 1603 of the American Recovery and Reinvestment Act of 2009 (Section 1603). To be eligible for a Section 1603 cash grant, applicants either must have placed their projects in service during 2009 or 2010 or “begun construction” of their projects before January 1, 2011. In short, the two ways to meet the “begun construction” test before January 1st are by performing “physical work of a significant nature” on the qualifying project, or by incurring 5% of the total project cost.
Prior to the recent application revision, all applicants had to submit a single application before October 1, 2011. Now, applicants who do not place their projects in service by 2010, yet meet the begun-construction test, must complete two applications: A “Begun Construction” Application and a “Placed in Service” Application. Applicants who placed their projects in service in either 2009 or 2010 need only submit a Placed in Service Application before October 1, 2011.
Ostensibly, the Treasury and NREL intended this new two-step application process to provide greater clarity to applicants regarding qualification under the begun-construction test. Accordingly, the Begun Construction Application features two sections not found in the prior application:
- Section 2E requires an explanation of the construction timeline for a project if the construction period is “unusually long”
- Section 6B provides greater specificity regarding the types of documentation required to establish that a project meets the begun construction test
Foley Partner Jeffery R. Atkin recently led a Web conference that provided further clarity and guidance on Section 1603 eligibility. A recording and materials from “Section 1603 Cash Grants: Guidance for Qualifying Your Project by December 31, 2010” is available at: http://www.foley.com/news/event_detail.aspx?eventid=3481.
Foley & Lardner LLC