The Federal budget sequester that took effect March 1st, 2013 included cuts to the 1603 cash grant program. Treasury has announced clarifications to the expected cuts in a recent message release. According to Treasury, awards allocated to a Section 1603 applicant on or after March 1, 2013 through September 30, 2013 will be reduced by 8.7 percent, irrespective of when the application was received by Treasury. In the case of a 30% grant, the sequester would reduce the grant to 27.39% of eligible project costs. If Congress does not change the sequester laws, it is expected these changes will be carried forward.
Implications for 1603 cash grant applicants
- The recent reductions only affect awards made after March 1, 2013
- Awards that are subject to reduction are based on the date noted on the award letter from Treasury
- Applicants must calculate with Section 1603 program guidelines and laws applicable for calculating basis for federal tax purposes
- Treasury does not specifically address tax basis for underlying property
- Any award made prior to March 1, 2013 will not be affected
- Withdrawing an application and considering tax credits is an option. The Production Tax Credit (PTC) and Investment Tax Credit (ITC) were not affected by the sequester.
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Treasury plans to continue to review applications with the current changes taken into account. For more information, contact a Baker Tilly tax professional to understand fully how the sequestration may affect your specific project.
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