Two recent developments may impact Section 1603 renewable energy Treasury grant program awards: (1) audits of grant recipients by the Internal Revenue Service (IRS) and Department of the Treasury’s Office of Inspector General (OIG); and (2) a possible 7.6% sequestration haircut on grant awards made after the end of this year. Advanced preparation and strategic timing can reduce the risk of these developments negatively impacting grant awards.

Recent news reports that the IRS and OIG are auditing Section 1603 grant recipients should come as no surprise to the 7,420 recipients (so far) of Section 1603 grants. In light of the amount of funds distributed through that program, currently totaling more than $14 billion, and the size of individual grants reaching $543 million, the government’s desire to confirm, through select audits, that such amounts were properly paid out has been expected. Moreover, in light of an expected flood of applications yet to come, these audits may inform Treasury policy for future applicants regarding certain aspects of the Section 1603 grant.

For the many future Section 1603 grant applicants that preliminarily qualified for the Section 1603 grant program by virtue of having placed projects in service before the end of 2011 and having filed preliminary applications before the end of September 2012, the news that sequestration may haircut the amount of a Section 1603 grant award clearly is unwelcome. These cuts may negatively impact the financial models used to determine the economic viability of renewable energy projects.