Tax Relief Bill Includes Extension of Section 1603 Cash Grant Program

Early this morning, the House of Representatives passed the Senate compromise tax bill that includes an  extension of the § 1603 cash grant program to facilities that begin construction by December 31, 2011.  The § 1603 program allows developers of most renewable energy projects to receive a cash grant in lieu of the investment tax credit, typically 30% of the project cost, upon entering commercial service.  The program was first enacted in 2009 in the American Recovery and Reinvestment Act, to address the sharp decline in the tax equity markets resulting from the economic downturn.  Over the past two years, the Treasury Department has disbursed more than $5.5 billion in § 1603 grants. Without an extension, the program would have expired at the end of this year.

The bill also includes a 100% depreciation bonus on new equipment placed in service after September 8, 2010, through December 31, 2011, allowing businesses to depreciate the entire cost of the project (less ½ of the cash grant or investment tax credit)  in the year that it is placed in service.

President Obama is expected to sign the bill this afternoon.

For more information, please contact Rob Ravenelle at rravenelle@pierceatwood.com or Kris Eimicke at keimicke@pierceatwood.com.