Treasury Department Issues Further Guidance on Section 1603 Grant Program

Yesterday, the Department of Treasury released guidance in the form of frequently asked questions (FAQs) on the cash-grant program enacted in Section 1603 of the American Recovery and Reinvestment Act of 2009, P.L. 111-5. The FAQs address the so-called "5 percent safe harbor" used to determine whether construction of the energy property will be considered to have begun before the end of 2011, which is one of the requirements to be eligible to receive the cash grant. Please visit http://www.treasury.gov/initiatives/recovery/Pages/1603.aspx to access the Treasury Department's FAQs.

Background

The cash-grant program allows owners and certain lessees of specific types of renewable energy property to receive a cash grant of, generally, 30 percent of the cost of the property in lieu of claiming certain tax credits with respect to the property. Grants are available for property placed in service in 2009, 2010, or 2011, and for property placed in service after 2011 (and before the expiration date of the credit available for the property) so long as construction of the property began in 2009, 2010, or 2011. Previously, the Department of Treasury released guidance on various aspects of the cash-grant program, including a set of FAQs on how to meet the requirement that construction of the energy property begin in 2009, 2010, or 2011. Earlier guidance generally provides that the "commencement-of-construction" requirement can be satisfied either by (i) beginning "physical work of a significant nature" in 2009, 2010, or 2011, or (ii) paying or incurring at least 5 percent of the total cost of the specified energy property before the end of 2011 (the "5 percent safe harbor"). In March 2010, the Treasury Department revised its published guidance to clarify a number of issues regarding the commencement-of-construction requirement and later issued guidance in question-and-answer form. Please visit http://www.treasury.gov/initiatives/recovery/Pages/1603.aspx to access the earlier guidance.