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The U.S. Treasury Department will begin accepting grant applications this July for investments by businesses in alternative-energy-generating assets. The grants can be taken in lieu of federal income tax credits that would otherwise be available for property placed in service in 2009 and 2010.
These grants are available for either the Code Sec. 45 production tax credit or Code Sec. 48 energy tax credit, and are worth up to 30 percent of the qualifying investments. Some of the most significant types of alternative energy property that qualify for the grants include:
- Wind energy property;
- Fuel cell property;
- Solar property; and
- Geothermal property.
According to tax consultant firm Grant Thornton, the grant (cash) may be a better option for taxpayers without taxable income. It could also be beneficial for taxpayers as part of a financing package. However, keep in mind that, like the Code Sec. 48 credit, the grant will require a percentage (typically half of the credit or grant amount) of basis reduction in the asset for tax depreciation purposes.
This could cut into valuable depreciation deductions under a number of cost-recovery methods, the firm noted - including regular five-year tax depreciation, 50 percent bonus tax depreciation, or Code Sec. 179 expensing.
Grants are not subject to any overall funding limitation imposed by the U.S. Congress, and the Treasury could grant well over $100 billion.