In mid-August, the U.S.Department of Energy (DOE) and the Department of the Treasury unveiledthe Advanced Energy Manufacturing Tax Credit, a new tax-credit offeringtargeted at the manufacture of renewable energy equipment (e.g., solarcells and modules).
Under this program, qualifying projects – which may include newmanufacturing facilities, as well as expansions and modifications ofexisting facilities – are eligible to receive a 30% investment taxcredit, subject to recapture rules, tax-exempt rules,project-expenditure rules and a series of similar regulations.
Solarequipment manufacturers interested in applying for a share of the $2.3billion in available credits should note that the program is expectedto be wildly popular – and the application window is already open, withthe preliminary application due Sept. 16.
"For many of us whowere familiar with prior tax programs similar to this one, this is avery fast application process with tight deadlines," remarked LauraEllen Jones, a tax partner at Hunton & Williams LLP, during arecent webinar sponsored by the Solar Energy Industries Association(SEIA).
To complete the preliminary application this month, applicants needonly provide the name of the company applying, the total qualifiedinvestment amount for the proposed project, the number of tax creditsrequested and a description no longer than 300 words that details theproject. These submitted forms will not be formally considered in theDOE’s final decision-making process, Jones added.
Rather, the preliminary application is simply a resource-planning toolfor the DOE. Jones said the department plans to use the preliminarysubmissions to gauge how large a staff will be needed to review finalapplications and the types of expertise the reviewers will need toaccurately evaluate applicants.
The final application,due to both the DOE and the Internal Revenue Service (IRS) on Oct. 16,must be submitted in the form of a project information memorandumincorporating the DOE’s standardized spreadsheets in order to promotefair comparisons of projects. Applicants must limit themselves to 30pages, not including appendices.
"If you’re over the page limit, DOE will not consider the application," Jones warned. "This is a hard and fast rule."
Atthe same time, the DOE may opt to immediately discard an applicationthat would require additional information or clarification from theapplicant. Because the process lacks any avenue for appeals, Jonesurged applicants to provide clear, complete and concise applications.
"TheIRS will only consider projects that receive the DOE’s recommendationand ranking," she added. "It is important, in order to get to the pointwhere the IRS is actually allocating and awarding the credits, that yousubmit a complete and responsive application, and that you carefullycomply with all of the requirements in Appendix B."
Providedthat a project meets certain initial eligibility requirements,including manufacture of equipment specific to renewable energy and areasonable expectation of commercial viability, each application willbe evaluated on the basis of four equally weighted criteria.
TheDOE will favor projects with the greatest direct and indirect jobcreation during the credit period of six years; projects with thegreatest net impact on avoiding or reducing greenhouse gas emissions;projects with the most potential for technological innovation andcommercial deployment; and projects with the shortest time lines tocompletion.
Additionally, the DOE will take into account lessprecisely defined factors to sort through the applications, which areforecasted to number over 1,000. Values may be assigned for suchattributes as project location or specific technology employed.
"Itis unclear how these [considerations] mesh with numerical rankings,"noted Joe Pasetti, counsel for government affairs at Applied MaterialsInc. and co-chair of SEIA’s Tax Working Group. "Are they going to takea lower-ranked project over a higher-ranked project simply to meet ageographical or technological diversity goal?"
By Jan. 15, 2010,selected tax-credit recipients will be informed of their certificationand the number of tax credits they are receiving. Although the quickpromised turnaround has surprised many observers, the DOE may haveparticular motives for seeking to roll out the credits as soon aspossible, according to Pasetti.
"I think a lot of it has to dowith how this program was a part of the stimulus, and maybe some ofthose provisions aren’t moving out as fast as they would have liked,"he noted.
Companies selected to receive tax credits will besubject to a series of closely monitored deadlines and other follow-uprequirements. For instance, all federal, state and local permits -including applicable environmental reviews and authorizations – must besecured within a year after tax-credit certification.
Tax-creditrecipients must also immediately inform the DOE and the IRS of anysignificant changes to their original plan, as submitted, or potentialfailures to meet promised stages of completion. Certain shortcomingscan trigger immediate forfeiture of the tax credits.
"Receivingan award and allocation of these credits does not prevent a subsequentexamination," Jones warned. "This is what I view as the mostsignificant audit risk for projects that do receive tax allocations."
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