Tax Credits for Alternative Energy Manufacturing Facilities Just Announced

by Dechert LLP

In order to foster investment and job creation in clean energy manufacturing, the American Recovery and Reinvestment Act of 2009 included a tax credit for investments in manufacturing facilities for clean energy technologies. The Section 48C Advanced Manufacturing Tax Credit originally provided a 30 percent investment tax credit, valued at an aggregate of $2.3 billion, to 183 domestic clean energy manufacturing facilities. The IRS has just announced the availability of additional 48C allocations, releasing $150 million in remaining tax credits that were never fully utilized by previous awardees. 

Qualifying manufacturing facilities include:

  • solar, wind, geothermal, or other renewable energy equipment;
  • electric grids and storage for renewable energy;
  • fuel cells and microturbines;
  • energy storage systems for electric or hybrid vehicles;
  • carbon dioxide capture and sequestration equipment;
  • equipment for refining or blending renewable fuels;
  • equipment for energy conservation, including lighting and smart grid technologies; and
  • other advanced energy property designed to reduce greenhouse gas emissions as may be determined by the Secretary of the Treasury.

Statutorily specified review criteria for granting the credit include:

  • greatest domestic job creation (direct and indirect);
  • greatest net impact in avoiding or reducing air pollutants or emissions of greenhouse gases;
  • lowest levelized cost of energy; 
  • greatest potential for technological innovation and commercial deployment; and
  • shortest project time from certification to completion.

The application period for certification begins on February 7, 2013, and ends on July 23, 2013. The following steps are involved in the application process. A concept paper for Department of Energy (“DOE”) consideration must be submitted by April 9, 2013. If, after review of the concept paper, DOE invites a taxpayer to submit an application for DOE recommendation, the application must be submitted by July 23, 2013. All applications submitted by the deadline will be evaluated and ranked on their merit, regardless of when in the application period they are submitted. 

The IRS will accept or reject the taxpayer’s application for Section 48C certification by November 15, 2013, and will notify the taxpayer, by letter, of its decision. If the application is accepted, the date of this letter will be treated as the acceptance date and the acceptance letter will state the amount of the credit allocated to the project. If a credit is allocated to a taxpayer’s project, the taxpayer will be required to execute an agreement in the form set forth in Appendix A of Notice 2013-12. The taxpayer must execute and return the agreement to the IRS by January 10, 2014. The IRS will execute and return the agreement to the taxpayer by March 14, 2014.

For more information or if we may be able to assist you in considering applying for this valuable tax incentive, please contact the attorney listed below, or any Dechert attorney with whom you regularly work.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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