Treasury Clarifies 5 Percent Safe Harbor Ownership Guidelines for Section 1603 Grants for Renewable Energy Projects


The Treasury Department has issued guidance in the form of two new “Frequently Asked Questions” addressing when transferees or purchasers of renewable energy property will qualify for the 5 percent safe harbor for beginning construction under the grant in lieu of investment credit program.

The U.S. Department of the Treasury has issued two new “Frequently Asked Questions” (Ownership FAQ) addressing when transferees or purchasers of renewable energy property (or entities owning renewable energy property) will be deemed to have “stepped into the shoes” of the prior owner for purposes of the 5 percent safe harbor under the grant in lieu of investment credits pursuant to Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 (Grant). The Grant enables renewable energy projects to receive cash payments equal to 30 percent of the project’s qualifying cost basis in lieu of investment tax credits. In order for a renewable energy project to be eligible for the Grant, the project must have been placed in service in 2009, 2010 or 2011, or have “begun construction” in 2009, 2010 or 2011. There are two ways to show that construction has begun for purposes of the Grant: actual physical work of a significant nature or satisfaction of the 5 percent safe harbor by paying or incurring more than 5 percent of the total cost of the project.

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