Wednesday, November 3, 2010

New Guidance Issued on Section 1603 Renewable Energy Grants

The Treasury Department has revised its previous guidance regarding what constitutes the beginning of construction for purposes of accessing the grant under Section 1603 of the American Recovery and Reinvestment Act, in lieu of renewable energy tax credits.  For projects that will be placed in service after 2010, construction must begin by December 31, 2010.  The applicant can show that construction has begun either (i) by showing that physical work of a significant nature has taken place, or (ii) by satisfying a 5% safe harbor test. 

In order to satisfy the safe harbor test, applicants requesting payments of $1 million or more must submit an independent accountant's examination opinion attesting to the accuracy of the costs claimed.  Applicants requesting less than $1 million, but whose eligible basis is more than $500,000, may submit a report of Agreed Upon Procedure (AUP) by an independent accountant in lieu of the examination opinion.  To further assist taxpayers and accountants in complying with these requirements, Treasury has provided new guidance that includes AUP report instructions and example, as well as a checklist of requirement under both tests to show beginning of construction.