New Federal tax incentives established by the ARRA for financing wind projects [sell] The American Recovery and Reinvestment Act of 2009 (ARRA) added two new and significant provisions, enacted as part of an effort to spur domestic development and installation of renewable energy, that are available to developers to help finance their wind projects.
The first provision of the ARRA permits the wide-range of renewable energy facilities that qualify for the federal production tax credit (PTC) under Section 45 of the Internal Revenue Code, including those powered by wind energy, to claim the federal investment tax credit (ITC) under Section 48 of the Code in lieu of the PTC. While the PTC is based on the amount of electricity produced and sold to an unrelated person during the 10-year period beginning on the date the facility is placed in service (currently at the rate of 2.1¢ per kWh of such electricity for wind), the ITC is a one-time credit claimed in the year the facility is placed in service that is generally equal to 30 per cent of the cost of the renewable energy facility.
The second provision created a new program that enables PTC-eligible and ITC-eligible facilities to receive a cash grant from the Treasury in lieu of the PTC or the ITC, in an amount generally equal to the amount of the ITC that would otherwise be available to the facility.
This grant is designed to be paid out faster, and to be claimed more conveniently by developers, than traditional tax credits. Two notices were recently issued by the Federal Government establishing the procedures that must be followed to qualify for and claim these incentives. Specifically, in June 2009, the IRS provided guidance for taxpayers wishing to claim the ITC in lieu of the PTC, and in July 2009, Treasury issued guidance for applicants who decide to claim the grant in lieu of the PTC or the ITC.