Earn More Green by Being More Green

by Stephan King & Kelli Franco

The American Recovery and Reinvestment Act of 2009 authorized the U.S. Treasury to make cash grants to eligible taxpayers who place in service specified renewable energy property, such as solar, wind, landfill gas, geothermal, and biomass. The provisions of this legislation were extended until the end of 2011 by the Tax Relief Act of 2010.

What does this mean for contractors? It gives you the opportunity to gain a competitive advantage and win financially by understanding how the grants work and determining whether – and to what extent – they’re available to your project owners.

Under the provisions of the legislation, 30% of the depreciable basis of specified energy property or 10% of the depreciable basis for all other property qualifies for cash grants. Specified energy property includes:

  • Qualifying electricity production facilities such as wind, closed- or open-loop biomass, geothermal, landfill gas, and hydropower;
  • Qualifying fuel cell property;
  • Solar property; and
  • Qualifying small wind energy property.

The cash grant is in lieu of the credits normally allowed for these types of energy property. And, the grant is payable 60 days from the later of the dates of application for the grant or the date the property is placed in service.

The grant termination date is January 1, 2017, which means all qualifying energy property must be placed in service before that date. Unfortunately, the Treasury cannot make a grant to any person under the above rules unless his or her application for a grant is received before October 1, 2012.

Governments, tax-exempt organizations under Section 501(c) of the Internal Revenue Code, and certain lenders, cooperatives, or pass-through entities with disqualified organizations aren’t eligible for the grants.

Any grant received in lieu of the energy or electricity production credits reduces the basis of the energy property by 50% of the amount of the grant. For example, let’s say a taxpayer receives a $30,000 grant for qualifying 30% energy property of $100,000. The basis in the energy property is reduced by 50% of the grant, or $15,000. The basis after reduction would therefore be $85,000.

It’s a significant opportunity for contractors. But hurry – time is running out to make your cash even greener.

Stephan King is a Partner at Moss Adams LLP. He has more than 25 years of experience consulting with privately held contractors on federal, state, and local tax issues, including multistate sales and use tax. He can be reached at 480-366-8340 or stephan.king@mossadams.com.

Kelli Franco is a Partner at Moss Adams LLP. She has provided taxation and financial accounting services for 18 years. In addition to leading Moss Adams’ Construction Tax Committee, she sits on both CFMA’s and AGC’s Tax & Legislative Affairs Committees. She can be reached at 509-777-0116 or kelli.franco@mossadams.com.