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| Volume II, Issue 3 |
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3 Minutes on Permits Special Advisory Issue- Summer 2009 |
| Kevin J. Joyce, Esq. Permitting & Real Estate Advisory Services |
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As a panelist in a Boston Bar Association Forum regarding Boston Zoning Code Article 88-Wind Energy Facilities, hosted by the Boston Redevelopment Authority in June 2009, I discussed how the American Recovery and Reinvestment Act of 2009 extends the benefit of the thirty percent (30%) federal Investment Tax Credit ("ITC") to a host of Production Tax Credit or PTC facilities. As opposed to the ITC, which is based on the cost of constructing the facility, the PTC is based on the cost of producing electricity. Facilities such as wind energy, biomass, hydropower and landfill gas facilities are now authorized to elect a thirty percent (30%) ITC instead of the PTC. Solar and photovoltaic facilities have always been eligible to receive the ITC.
In addition to extending the ITC to renewable energy facilities, the American Recovery and Reinvestment Act of 2009 also established a grant in lieu of the ITC program. Known as a Section 1603 grant, the grant provides owners of many types of renewable energy facilities that are eligible to receive the 30% ITC with the ability instead to elect to receive a government grant equal to up to 30% of the cost of constructing the facility.
This Special Advisory Issue of 3 Minutes on Permits discusses the rules that the United States Treasury has just released to guide owners of renewable energy projects seeking to claim the Section 1603 grant in lieu of the ITC.
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U.S. Treasury Publishes Renewable Energy Grant Program Guidelines
Under Section 1603 of the American Recovery and Reinvestment Act of 2009
The United States Treasury has recently issued the eagerly awaited rules for converting the 30% renewable energy ITC provided for by the American Recovery and Reinvestment Act of 2009 (the "ARRA") into a 30% payment under Section 1603 of the ARRA. Under the new rules issued on July 9, 2009, to be eligible to receive a payment in lieu of the ITC under Section 1603 a renewable energy project must either be placed in service in 2009 or 2010 or begun in 2009 or 2010 and completed in 2012 (wind) or 2013 (geothermal, solid waste, hydro etc.). Solar and photovoltaic and other types of fuel cell projects continue to be eligible for the 30% ITC and hence eligible to receive the 1603 grant through 2016. The government will start to accept applications for the Section 1603 grant on August 1, 2009 with a deadline for receiving all applications by October 1, 2011. Grants will be issued to qualified projects at the time when a qualified project begins to produce electricity.
Besides specifying deadlines and the types of projects that are eligible to receive the Section 1603 grant the rules also set forth requirements for supporting materials, certifications, eligible costs, payment dates, recapture and miscellaneous provisions. Earlier predictions indicated that while only a small number of eligible PTC projects are to apply for the ITC, many more are expected to seek the payments offered under the Section 1603 grant program. The web based application package can be found at the government's web page www.treas.gov. Given the complexity of federal programs, however, renewable energy project proponents should undertake a careful review of the new rules and application process with experienced professionals to ensure that such projects are able to maximize the benefits afforded by the Section 1603 grant.
Please note that to the extent that anything in this article may be construed as tax advice, it is not written or intended to be used and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or for promoting, marketing or recommending to any person any matter discussed in this article. If you would like to read more about the implications that government regulations may have for projects that you may be contemplating, please visit my web site at www.permitlawyer.com.
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Why Now Renewable Energy Grants
Public Policy Behind Expanding the ITC and Creating the Section 1603 Grant in a Nutshell
By adopting the American Recovery and Reinvestment Act of 2009 or the ARRA the United States Government is endeavoring to initiate greater economic recovery by prompting renewed activity in the lagging ITC syndication markets and by fostering increased interest in developing new renewable energy projects and technologies. The hope is that increased activity in the ITC syndication markets will provide projects with infusions of much needed capital, and that the Section 1603 payments in lieu of the ITC will make many marginal projects, especially low income residential projects more financially feasible by assisting to reduce a project's overall initial capital requirements and energy costs to its tenants over the long term.
Indeed, the new Section 1603 grant could bode well for many nonprofit housing corporations and municipalities that are always struggling to discover new financing vehicles to alleviate the financial difficulties faced by many proposed affordable housing projects. Take for example the case of small wind energy facilities. With today's technology such a facility is capable of providing electricity for a mid-size office or apartment building at a substantial savings. As wind energy technology improves so does the design for such facilities, i.e. they become less windmill like and more amenable to serve as complements to architectural features. Therefore, it becomes more likely that it will be accepted as integral architectural design elements for new buildings and blended architectural components of existing buildings making it more attractive for owners and developers to claim the benefits provided by the ARRA.
I will continue to report on the progress the ITC and Section 1603 grants make towards bolstering the nation's economy. Please feel free to visit my web site www.permitlawyer.com for more information.
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Dear Reader,
I hope that you find the information contained in this Special Advisory Issue of 3 Minutes on Permits useful. Recently, I served as a member of a development team that successfully assisted a client to obtain a state historic rehabilitation tax credit from the Massachusetts Historical Commission. The tax credit is a component that is critical to our efforts to obtain financing for rehabilitating a dilapidated historic property in a state park and restoring it to public use. Because I have had the opportunity to witness how by employing historic tax credits as financial components many worthy but otherwise not financeable projects have been financed, I am convinced of the great promise that the ARRA's ITC and Section 1603 grant benefits could have for strengthening the economic recovery that is now underway in our country.
I am available to consult on all aspects of permitting and financing for projects in the emerging realm of renewable energy. For more information regarding this or any topic covered in previous issues of 3 Minutes on Permits, please do not hesitate to view my web site at www.permitlawyer.com or contact me by email at [email protected]. I look forward to hearing from you.
Sincerely,
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"ADVERTISING." This newsletter is intended to keep you informed of recent developments in the general aspects of real estate law. The information contained in this newsletter does not constitute legal advice and it should not be relied on without a discussion of your specific situation with an attorney of your choice. 3 Minutes on Permits is an occasional informational service provided by Kevin J. Joyce, Esq. and as such it is required to be labeled "Advertising" by SJC Rule 3:07. Kevin J. Joyce is a former Assistant Corporation Counsel for the City of Boston and a former Commissioner of the City of Boston Inspectional Services Department. 3 Minutes on Permits Copyright, 2009- Kevin J. Joyce.
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