A discussion draft of the Domestic Manufacturing and Energy Jobs Act of 2010 was introduced by acting Chairman of the House Way and Means Committee last week. The Chairman’s discussion draft (the “Bill”) proposes significant changes to the current federal incentive structures for renewable energy.
One major change is that the Bill allows the Section 1603 Grant program to expire. Section 1603, which was funded through the American Recovery and Reinvestment Act (ARRA), allowed companies who installed solar energy systems to receive a cash grant in lieu of Investment Tax Credits or Production Tax Credits. In other words, a business investing $100,000 in a solar energy project could receive a one-time payment from the Treasury for $30,000. This allowed businesses who did not have a tax appetite (due to the recession of 2009-2010) to receive the same financial benefits as they would have received with a tax credit. (Click here for more information on Sec. 1603 Grants).
In place of renewing Section 1603, the Bill would allow the taxpayer to elect a refundable deemed tax payment in lieu of the Investment Tax Credit or Production Tax Credit. Using the example above, a deemed tax payment means that the $30,000 cash grant would be treated as a $30,000 tax payment. In the event that $30,000 exceeds the actual tax liabilities of the business, the taxpayer could file for a refund. Treating the ITC and PTC as refundable deemed tax payments means the system owner will likely need to wait longer to receive the value of the federal incentive, but would not need to have the full tax appetite to fully utilize the subsidy.
Sol Systems will continue to track this and other solar legislation.