Tax Edge

By Robert Steere, Toolkit Staff Writer

The Departments of Treasury and Energy jointly announced today the initiation of the $2.3 billion Qualifying Advanced Energy Project Program enacted by the American Recovery and Reinvestment Act (Recovery Act) earlier this year. The program will award $2.3 billion in tax credits to manufacturers of advanced energy equipment. The program aims to enhance economic development and move the nation toward energy independence.

"This program will help encourage innovation in design of clean energy technologies," said Treasury Secretary Tim Geithner. "This partnership between Treasury and Energy adds an important new dimension to the incentives created in the Recovery Act to improve energy efficiency and develop alternative sources of energy."

The Recovery Act authorized this new 'qualifying advanced energy project credit' as a new form of investment tax credit. The credit is authorized in an amount equal to 30 percent of the investment made by a manufacturer in facilities and equipment used to produce specific types of advanced energy equipment. To qualify for the tax credit, facilities and equipment must be used to produce one or more of the following: equipment to produce energy from solar, wind, geothermal, or other renewable resources; fuel cells, microturbines, and batteries; plug-in electric cars and their components; electric grids to support the transmission of renewable energy; energy conservation technologies; and equipment that captures and sequesters carbon dioxide or reduces greenhouse gas emissions.

Energy Secretary Steven Chu declared, "These tax credits will help create thousands of high quality manufacturing jobs in some of the highest growth segments of the economy. This is an opportunity to develop our global leadership in clean energy manufacturing and build a secure, sustained base of jobs for America's workers."

Because the Recovery Act capped the overall authorization level for the tax credits at $2.3 billion, the law also authorized the Treasury Department to establish a program to certify projects in advance for eligibility for the tax credits. No tax credit will be allowed under the program unless a project is first recommended by the Energy Department and then certified by the Treasury Department for funding. The IRS is administering the program within Treasury. With this process in place, the IRS can assure that use of the tax credits will be limited to the authorized amount.

The IRS just issued guidance governing the program, and is now accepting applications for certification. Applications will be accepted for the first round of certifications until December 16, 2009. However, in addition to the certification application filed with the IRS, an applicant must also file with the Department of Energy (DOE) a preliminary application for DOE recommendation by September 16, 2009, and a final application for DOE recommendation by October 16, 2009. If any one of these three application forms are not filed timely, the application will not be considered for certification. Successful applicants will be notified by January 15, 2010. Information about the tax credit program, including IRS instructions and all the application forms, is available on the DOE web site. Note that DOE uses a different name for the tax credit - The Advanced Energy Manufacturing Tax Credit.

The joint announcement of the tax credit is a new facet of a unique partnership between Treasury and Energy aimed at promoting energy production and energy independence. Tax programs have provided incentives for encouraging the development of renewable energy in the past - in 2006 alone, approximately $550 million in renewable energy tax credits were provided to 450 businesses. In July, Treasury and DOE announced the availability of payments in lieu of tax credits for facilities that produce renewable energy, a program that is expected to result in more than $3 billion expended for energy development in rural and urban communities.

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