The U.S. Department of the Treasury has released its long-anticipated guidelines and application instructions for payments for renewable energy property under Section 1603, commonly known as cash grants.
The cash grants, which have been eagerly awaited since February's passage of the American Recovery and Reinvestment Act of 2009, would be given to wind developers who choose to forego all federal tax credits and instead receive a nontaxable cash grant from the U.S. government equal to 30% of the project's cost.
Section 1603 applies to all specified energy projects, including wind energy, for projects placed into service during 2009 or 2010.
Applications will be reviewed and payments will be made within 60 days from the later of either the completed application or the date the project was placed into service.
The Treasury's announcement finally answers some nagging questions posed by developers since February.
For example, the cash grants did not fully apply to foreign-ownership of U.S. wind projects if the foreign investor had not set up the acquisition as part of ‘blocker’ corporation. Payment would be based on the percentage of foreign ownership. But the announcement paves the way for foreign investors to participate in the cash grants provided each entity can receive 1603 payments.
Also, it was thought that developers applying for cash grants had to subject their wind projects to the onerous environmental review process under the National Environmental Protection Act (NEPA). But applying for the cash grants does not trigger a NEPA review. Nor does the Davis Bacon Act of 1931, which established the requirement for paying prevailing wages on public works projects.
The fact that Treasury took so long to release the guidelines created a bit of a backlog in terms of project development as developers waited to see which form of stimulus, such as the production tax credit and investment tax credit, best suited project development financially. Apparently, it was worth the wait.
‘Based on a quick read of the documents, it looks as if Treasury got most of it right,’ says Eli Katz, an attorney with New York-based law firm Chadbourne & Parke. ‘The dominoes fell today in favor of the wind industry.’
Applicants interested in receiving payments under Section 1603 can submit an application online at treasury.gov. All applications must be received by October 1, 2011. The Treasury will review the applications and make payment to qualified applicants within 60 days from the date the completed application is received by the Treasury.
The U.S. Treasury estimates that more than 5,000 wind, solar, biomass and other types of renewable energy production facilities will apply for cash assistance.