1603 Grant Election - Frequently Asked Questions
Question: What Type of Business Qualifies for a 1603 Grant?
Answer: The Internal Revenue Code has very specific guidelines for the types of projects that qualify for a 1603 Grant. Qualified property includes development or expansions of an existing property that is qualified property under section 45 or 48 of the IRC. A listing of the Qualified Facilities can be found on the HCM website or in the IRS guidelines.
Question: What costs qualify for a Section 1603 payment?
Answer: The amount of the Section 1603 payment is a percentage of the eligible basis of the property. The basis of property generally is its cost (IRC section 1012), unreduced by any other adjustment to basis, such as that for depreciation, and includes all items properly included by the taxpayer in the depreciable basis of the property, such as installation costs and the cost for freight incurred in construction of the specified energy property.
Question: Is there a cap on funds available to a specific project or applicant?
Answer: No, funding for the program has no overall cap. The amount payable to any applicant for a qualifying project or projects is not limited. However, the maximum amount payable for any project is limited to 30% or 10% of the eligible costs depending on the type of project. The payment may not exceed a specified amount for each kilowatt of capacity for qualified fuel cell property and qualified microturbine property.
Question: Is an applicant who has received a prior USDA or other federal or state-funded grant for the same property eligible?
Answer: Yes, receipt of other federal or state grants does not impact an applicant’s eligibility. However, receipt of other federal grants, state grants, or rebates may have an impact on the eligible cost basis of the property. If the rebate or grant is includable in taxable income of the applicant, the basis on which the payment is computed is not reduced. If the rebate or grant is not includable in the income of the applicant, a basis reduction may be required.
Question: When should an application be submitted if the property has not yet been placed in service but construction has begun?
Answer: The purpose of submitting an application for a property that is not yet placed in service and will not be placed in service in 2009,2010, or 2011 is to demonstrate that construction has begun during the required time period of 2009, 2010, or 2011. If the eligible property will be placed in service before the end of 2011, submitting an application after construction has begun but before the property is placed in service will not accelerate payment and is not recommended. If the property will not be placed in service by the end of 2011, the applicant should submit the application after construction has begun but no later than September 30, 2012.
Question: When does supplemental information need to be submitted for properties not yet placed in service?
Answer: For properties that are placed in service on or after October 1, 2012, applicants have 90 days after the property is placed in service to provide Treasury with supplemental information necessary to make a determination.
Question: Must an applicant submit all of the required documentation at the same time the application is submitted?
Answer: An applicant should submit all of the required documentation at the same time the application is submitted. Not doing so will delay payment. An application will not be considered complete until all required documentation has been submitted. All applicants must submit documentation demonstrating that (1) the property is eligible; (2) the property has been placed in service; and (3) the amount requested is accurate. Applications should not be submitted until all costs are known and final.
Question: Are decisions on applications final? What options are available to an applicant whose application is denied?
Answer: While we will make every effort to work with an applicant during the review process to ensure that the applicant has the opportunity to address any deficiencies in its application, once a determination is made, that determination is final. No administrative appeal is available.
Qualified Properties and Grant Award
Qualified property must be originally placed in service between January 1, 2009, and December 31, 2011, (regardless of when construction begins) or placed in service after 2011 and before the credit termination date if construction of the property begins between January 1, 2009, and December 31, 2011. Qualified property includes expansions of an existing property that is qualified property under section 45 or 48 of the IRC. Placed in service means that the property is ready and available for its specific use.
Following is a chart from the Department of Treasury Guidelines that indicates Project Type, Placed in Service date and potential percentage of benefit.
|
Specified Energy Property |
Credit Termination Date |
Applicable Percentage of Eligible Cost Basis |
|
Large Wind |
Jan 1, 2013 |
30% |
|
Closed-Loop Biomass Facility |
Jan 1, 2014 |
30% |
|
Open-loop Biomass Facility |
Jan 1, 2014 |
30% |
|
Geothermal under IRC sec. 45 |
Jan 1, 2014 |
30% |
|
Landfill Gas Facility |
Jan 1, 2014 |
30% |
|
Trash Facility |
Jan 1, 2014 |
30% |
|
Qualified Hydropower Facility |
Jan 1, 2014 |
30% |
|
Marine & Hydrokinetic |
Jan 1, 2014 |
30% |
|
Solar |
Jan 1, 2017 |
30% |
|
Geothermal under IRC sec. 48 |
Jan 1, 2017 |
10%* |
|
Fuel Cells |
Jan 1, 2017 |
30%** |
|
Microturbines |
Jan 1, 2017 |
10%*** |
|
Combined Heat & Power |
Jan 1, 2017 |
10% |
|
Small Wind |
Jan 1, 2017 |
30% |
|
Geothermal Heat Pumps |
Jan 1, 2017 |
10% |
(Source for FAQ- US Dept of Treasury)
