A preliminary application is required even if the project has not yet been placed into service.
Section 1603 of the American Recovery and Reinvestment Act of 2009 authorizes the Treasury Department to make grant payments to taxpayers who develop renewable energy projects.
Grant payments are available for projects placed into service after December 31, 2011—provided that construction began after 2008 and prior to January 1, 2012.
Under guidance issued by the Treasury Department, there are two ways in which an applicant / taxpayer can satisfy the “begin construction” requirement:
- Construction has commenced if the applicant begins “physical work of a significant nature” by December 31, 2011, or
- Construction is deemed to commence if the applicant has paid or incurred 5% of more of total grant eligible costs by December 31, 2011 (the 5% safe harbor).
For this purpose, a cost is “incurred” if it is incurred under the economic performance rules of section 461(h). Thus, for accrual method taxpayers, an analysis must be performed as to whether costs that were paid prior to 2012 have also been “incurred” prior to that time.
September 30, 2012 deadline
In order to be eligible for a grant payment, taxpayers must submit an online preliminary application to Treasury by the statutory deadline of midnight on Sunday, September 30, 2012. A preliminary application is required even if the project has not yet been placed into service.
For projects with an estimated value greater than $1 million and that are relying on the 5% safe harbor, the preliminary application must include an independent accountant’s report. Taxpayers who believe they may be eligible to receive a grant payment need to consider retaining an accountant immediately, as the statutory application deadline is now less than a month away.
For more information, contact a tax professional with KPMG’s Washington National Tax: