Renewable Energy Grant

The enactment of the American Recovery and Reinvestment Act of 2009 includes a renewable energy grant program that will help businesses and homeowners offset the initial cost of installing a solar system. To better understand how this grant works, we’ve compiled a short list of key points to the grant that you should consider:

1. Who is eligible?
Only tax-paying entities are eligible for this grant. Federal, state and local government bodies, non-profits, qualified energy tax credit bond lenders, and cooperative electric companies are not eligible to receive this grant. Partners or pass-thru entities for the organizations described above are also not eligible to receive this grant.

2. How much is the renewable energy grant?
30% of the basis of the property for solar energy.

3. What types of solar is eligible for the renewable energy grant?
Eligible solar-energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat. Passive solar systems and solar pool-heating systems are NOT eligible. Hybrid solar-lighting systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are also eligible.

4. How is the grant paid?
The U.S. Treasury Department will make payment of the grant within 60 days of the grant application date or the date the property is placed in service, whichever is later.

5. Is the grant taxable?
The renewable energy grants will not be included in the federal gross income of the taxable entity, but it is unclear whether the federal grant will be treated as taxable income in the states. Check with your CPA for more information.

6. How long will the grant be available?
Grants are available to eligible property placed in service in 2009 or 2010, or placed in service by the specified credit termination date, if construction began in 2009 or 2010. For solar this is January 17, 2017 – which means the solar property must be placed in service by this date. In addition, grant applications must be submitted by 10/1/2011 in order to reserve the grant.

Solar and the American Recovery and Reinvestment Act

On February 17, 2009, President Obama signed the Economic Recovery Legislation. This bill marks a historic milestone within the solar industry and proposes to create 60,000 jobs in the solar industry in 2009 and a total of 110,000 over the next two years.

Three key points to the bill specific to photovoltaic and thermal solar are:

1. Renewable Energy Grants
2. Repeals Penalty for Subsidized Renewable Energy Financing
3. Remove Limits on Solar Water Heating

The renewable energy grants is a new program administered through the Department of Treasury that provides grants equal to 30 percent of the cost of solar property placed in service during 2009 and 2010. This grant replaces the section 48 investment tax credit. (Div. B, Sec. 1104, p. 38)

The bill also repeals the penalty for subsidized renewable energy financing. This allows businesses and individuals to qualify for the full amount of the solar tax credit even if projects receive subsidized energy financing (e.g. below market loans, tax preferred bonds, state grants etc.). This amendment shall apply to periods after Dec. 31, 2008. (Div. B, Sec. 1103, p.36)

The stimulus bill also removes the $2,000 monetary cap on solar water heating, providing a full 30% credit for qualified solar water heating property (Div. B, Sec. 1122(a), p. 46). Qualified solar water heating property is defined as used for a purpose other than heating swimming pools and hot tubs. In addition, the credit may be claimed against the alternative minimum tax.