TREASURY DEPARTMENT COMMENTS ON CASH GRANTS

Source:   Nixon Peabody Alerts Published May 22, 2009    http://www.nixonpeabody.com/publications_detail3.asp?ID=2745

Treasury Department Comments on Cash Grants

At a conference regarding solar energy financing yesterday, a Treasury Department official commented favorably on the new program that lets renewable energy producers claim cash grants in lieu of tax credits.

Ellen Neubauer is the Program Grants Manager within the Treasury Department’s Office of Fiscal Assistant Secretary. In her remarks at the IPED solar energy conference, she confirmed that her office has been delegated the management and supervision responsibility of the grants in lieu of tax credits (the “Cash Funding”) program under Section 1603 of the American Recovery and Reinvestment Act of 2009 (the “ARRA”).

Section 1603(b) of the ARRA provides that the amount of the Cash Funding is equal to the tax credits which could be claimed on certain energy property and is generally equal to 30% of the cost basis of the energy property.

Under the ARRA, the Secretary of the Treasury shall make payment of any Cash Funding during the 60-day period beginning on the later of (1) the date of the application for such Cash Funding, or (2) the date the specified energy property for which the Cash Funding is being made is placed in service.

There has been much uncertainty about the new Cash Funding program as Treasury has yet to issue guidance. Ms. Neubauer explained that Treasury continues to be on pace to issue its published guidance in late-June or July and she emphasized that no final decisions have been made as to the information required or the process of compliance with the new program. The following represents Treasury’s current thinking, which may change as the regulation process progresses:

• Treasury does not expect to issue formal rulemaking.
• Published guidance likely will include an application form for the Cash Funding and instructions for such application and may also include additional guidance regarding the Cash Funding program's rules and procedures.
• The Cash Funding program will follow rather closely the Section 48 rules.
• Treasury may be partnering with other branches of the government, including the Department of Energy and the Internal Revenue Service to implement and manage the Cash Funding program.
• There may be an upfront verification of the eligibility of projects applying for the Cash Funding.
• The National Environmental Policy Act (“NEPA”) will not apply, so there will be no independent need for an environmental impact study or NEPA assessment.
• Treasury does not anticipate any liens or levies against the project and, in the event of a recapture, the Department of Justice would pursue the recapture of the Cash Funding proceeds under non-tax claim procedures.
• The owner of the energy property will be the entity receiving the Cash Funding, and Treasury may issue guidance permitting the assignment of the Cash Funding proceeds.
• Treasury continues to investigate whether it will treat each turbine in a wind farm as a separate project or the entire wind farm as a single project.
• Davis Bacon prevailing wage provisions under Division A of ARRA will not apply to provisions under Division B of ARRA.
• Projects under construction—it is possible that Treasury may permit a sponsor to apply for the Cash Funding prior to placement in service, with Treasury responding that the project and application meets the criteria for a Cash Funding, pending placement in service and proof of such placement in service.

It should be noted that Treasury has established an informal Q&A e-mail site at: 1603questions@do.treas.gov.

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