1603 Grant Attestation and Filing
The deadline to file your 1603 treasury grant pre-application has passed as of September 30, 2012. If you have a renewable energy project in process, you may also need a certified public accountant (CPA) to attest to your safe harbor spend or to the eligible project costs once you place your project in service. Baker Tilly can help you through the attestation on your project if you met safe harbor. If you missed the 1603 deadline, the Investment Tax Credit (ITC) may be an option.
Contact our experienced 1603 grant attestation and filing team today. As one of the largest CPA firms in the United States, Baker Tilly has an active record of helping companies meet safe harbor, file the grant application, and ultimately prepare the independent accountants’ examination of the incurred costs or establish a report of Agreed-Upon Procedures.
Available 1603 attestation and filing services
In addition, our Renewable Energy Development (RED) practice group actively works with anaerobic digestion, biomass, wind, biofuels, and solar development companies. Our team will seamlessly interact with your design build firm, process technology provider, legal counsel and/or funding parties to help you with a range of comprehensive development support services.
1603 Grant program considerations in review:
- Will your project have gross cost basis in excess of $500,000?
- Does your project require a CPA firm to attest to either your five percent safe harbor spend and/or the ultimate project costs?
- Do you anticipate receiving a grant amount in excess of $1 million?
- Have you considered how the other grants you will receive impact your 1603 tax basis?
- Have you considered the use of the Investment Tax Credit (ITC) if you were unable to meet safe harbor?
If you answered "yes" to any of the above questions, your project may greatly benefit from consulting with one of our RED team specialists. Give us a call today or email us with any questions you may have: Renew@BakerTilly.com.
Overview of the Section 1603 Grant program from the American Recovery and Reinvestment Act
The grant is in lieu of the Section 45 Production Tax Credit, or the Investment Tax Credit under Section 48. The grant was primarily created to bridge the tax equity dearth created by the late 2008 financial system crisis. In most instances, the grant is equal to thirty percent of the eligible cost basis of the property.
The US Treasury released the initial guidance on the program in July 2009, with supplemental guidance since issued. The recently released guidance consolidates all of this into the revised guidance with a date listed as July 2009 / Revised March 2010 / Revised April 2011.
Placed in service and beginning of construction
The grant is available for property placed in service in 2009, 2010, and 2011. For projects that were near the beginning of construction at the time the grant was enacted, meeting these deadlines was fairly achievable.
However, for larger solar and most wind projects, meeting the placed in service date of December 31, 2011 was known to be problematic. Therefore, a provision in the guidance allows projects to still be eligible for the grant if the project has begun construction by the end of 2011 AND is placed in service by the end of 2012 for large scale wind, the end of 2013 for several technologies such as landfill gas, trash, and biomass, and by the end of 2016 for solar.
Construction begins when "physical work of a substantial nature" begins. Under the updated guidance, both on-site and off-site work can be taken into consideration. This could include beginning site excavation for a wind turbine foundation, pouring a slab for the wind turbine, or the offsite manufacture of the wind turbine or its blades.
The update further provides that for property being manufactured by a third-party, reasonable efforts must be made to identify which equipment is being manufactured for the applicant.
Last, the updated guidance provides a more blended approach to determining the physical work being performed on the project. The initial guidance addressed issues related to self-construction, or to contract-based construction by third parties. The revised guidance looks to the totality of the work, whether self-performed or contract-based. Additionally, the guidance provides that one component of the project, or an aggregation of separate components, can be taken into consideration when reviewing whether physical work of a substantial nature has begun.
Safe harbor rule
The original guidance provided a safe harbor rule that allowed an applicant to deem "Beginning of Construction" as having commenced when more than five percent of the total cost of the property has been paid or incurred. Note that this cost may not include the cost of land. The revised guidance provides additional information about this rule. Notably, the revised guidance eliminates the requirement that the five percent of costs must satisfy the economic performance standards under Section 461(h).
For property constructed by the applicant, costs are considered paid or incurred when they are actually paid or incurred by the applicant.
For property produced for the applicant under a binding, written contract with a third party, costs are treated as paid or incurred when the property is provided to the applicant. For periods before the property is provided to the applicant, costs paid or incurred with respect to the property by the third party are treated as paid or incurred when paid or incurred by the third party.
Additionally, if the property includes both self-constructed and contract-produced components, these costs may be combined in determining if the five percent of total costs has been exceeded.
Notably, the revised guidance provides that all costs that will be taken into account in determining the property's basis may be utilized in determining if the five percent threshold has been met. This can include nonphysical capitalized costs such as planning, design, and contract costs.
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