31 March 2010– A requirement that new renewable energy projects needed to have begun construction to qualify for cash grants in lieu of tax credits is being revised by the Department of Treasury. The department now says that off-site work, developers hired under contract and certain costs accrued can all be considered to help a project qualify before the December 31, 2010 in-service deadline.
The revision allows certain costs incurred by a manufacturer or contractor to be taken into account, but the property must be manufactured or built for the applicant by another person under a written contract. In addition, the contract must be entered into before the property is manufactured or constructed.
The revised guidance also says that off-site work may be taken into consideration to demonstrate that physical work of a significant nature has begun, such as manufacturing parts of a wind turbine off site to be assembled on site. It also says that if a manufacturer produces components for multiple facilities, then reasonable methods must be used to associate individual components with particular facilities.
If a property uses both self-constructed components and components constructed by someone other than a contracted developer, the costs of both are combined to help reach the 5 percent threshold.
The current guidance says that if a project qualifies for a Treasury grant, it must be placed in service in 2009 or 2010. There is also a stipulation that if construction on the project begins in 2009 or 2010, it must be complete by 2012 for wind projects, 2013 for biomass, geothermal and other resources, and 2016 for solar.
The current guidance says construction on a project begins when “physical work of a significant nature begins,” but it also says an applicant can treat construction as beginning when the applicant pays or incurs more than 5 percent of the total cost of the property. However, economic performance requirements must be met for a cost to be treated as paid or incurred, but an applicant on the accumulation method of accounting would not have incurred a cost until the property was provided to the applicant.
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