1. What is the 30% DOE cash grant program?
The US Department of Energy and the US Treasury will pay 30% of the cost of new solar power installations started and/or completed in 2011. The American Recovery and Reinvestment Act of 2009 [1] signed into law by President Obama earlier this year authorizes the DOE to accept and evaluate applications for stimulus funds that, when approved, will be distributed by the Treasury.
2. Why are 30% cash grants being offered now?
Renewable energy has relied on tax subsidies to offset part of the initial capital investment. Since 2005, individuals, businesses, solar developers, and investors were granted a tax credit based on 30% of the cost of a solar power system. However, in a declining economy, few had the tax liability to fully use the tax credit. The stimulus package offers short term relief by allowing tax payers to employ a cash grant in place of the tax credit.
3. Who is eligible?
Owners of a “solar property” are eligible to apply. The term solar property refers to a solar power system or solar power facility. An owner may be an individual, household, partnership, and/or business entitythat holds title or ownership of the solar power system or facility.
4. Who is not eligible?
Governments, counties and municipalities, and publicly funded special districts (fire, water, waste) are not eligible. Public schools, 501 (c) non-profits and other tax-exempt entities are not eligible. Real Estate Investment Trusts, (with some exceptions) and cooperatives organized under 1381 (a) of the IRC are not eligible.
5. What is included in “solar property”?
Tangible construction costs including labor, material, permits, subcontracts, and construction services contributing to the completed solar power system or facility
6. What other costs can be included when calculating 30% of the solar property costs?
Items that directly provide structural support or link the solar power system to the grid may be included when calculating 30% of the project cost. This could also include, for example, reinforcement of a roof structure, watertight tie-ins to roof coating, and underground conduits and wiring.
Some believe there may be an argument for including the cost of a new roof prior to installation, but check with a tax attorney before including that cost in your calculations.
7. How to Apply?
A relatively simple, 6-page application is available online along with a 3-page “Terms and Conditions” (signature required), and a 20-page “Guidance Document.” [2]
8. Key dates and date brackets
Projects that began before January I, 2009, must be completed and placed in service by December 31, 2011. Applications for pre-2009 projects must be submitted after the solar power system is in service, but before October 1, 2011.
Projects starting construction in 2010 or 2011 must be completed and placed in service by December 31, 2016. Applications must be submitted after construction begins, but before October 1, 2012
9. What’s the minimum requirement for starting construction as you near the December 31, 2011 cut-off date?
At least 5% of the physical construction based on total project cost (excluding land costs, planning, design, financing, or general project development prior to actual construction) must be complete by December 31, 2011.
10. When will Owners receive the funds?
The Treasury will make a direct deposit within 60 days of a properly completed application, or within 60 days of the date the project is placed in service, whichever is later.
11. How is the 30% calculations justified or supported?
The Treasury reserves the right to review the cash grant after the project is complete and the grant is issued. In general, the same detailed construction and finance records you would provide for a tax audit are required. Be sure to document start date, date of substantial completion, and the date the solar power system is placed in service.
The Guidance document also requires plans for the solar power system, signed and stamped by a professional engineer. On projects over $500,000, …”applicants must submit an independent accountant’s certification attesting to the accuracy of all costs claimed as part of the basis of the property.”
See the Guidance Document for a complete list of requirements.
12. How does this new rule effect federal tax subsidies for solar?
The 30% federal cash grant replaces the 30% investment tax credit (ITC). Owners of solar property may elect to use the grant or the subsidy, but not both.
As with the ITC, MACRS accelerated depreciation also reduces project costs over time by reducing taxable income. When electing to use the cash grant, MACRS accelerated depreciation reduces taxable income over 5 years. 50% of the cash grant is deducted from the project cost before calculating depreciation.
13. How does the cash grant program effect state subsidies and incentives?
State incentive programs like the California Solar Initiative (CSI) and the Oregon Business Energy Tax Credit (BETC) are not affected by the 30% cash grant.
14. Are other technologies eligible?
Yes. They include: fuel cells, micro-turbines, small wind energy, combined heat and power systems, geothermal power production, and geothermal heat pumps.
Though the DOE has done an admirable job of creating simple application documents and guidelines, the cash grant is still based on the Internal Revenue Code. Always obtain the advice of your CPA and/or an attorney familiar with renewable energy law when financing on-site solar power through grants, subsidies, and incentives.
[1] http://www.gpo.gov/fdsys/pkg/PLAW-111publ5/pdf/PLAW-111publ5.pdf
[2] Guidance Document http://www.treas.gov/recovery/docs/guidance.pdf Terms and Conditions http://www.treas.gov/recovery/docs/energy-terms-and-conditions.pdf Application http://www.treas.gov/recovery/docs/Application.pdf
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