IRS Clarifies the Treatment of 1603 Energy Grants
By Caitlin Jones
1 min read
Tax Credit Advisor, December 2009: The Internal Revenue Service has clarified the treatment and other aspects of Section 1603 federal energy grants, in a new guidance (Chief Counsel Advice 200943029).
Under the American Recovery and Reinvestment Act, owners of new qualified renewable energy projects can elect to obtain a cash grant from the U.S. Treasury Department instead of the investment tax credit (ITC) under Section 48 of the federal tax code. The ITC is equal to 30% of the basis of qualified energy property placed in service during a taxable year.
The new guidance clarifies that (1) a Section 1603 grant is not a tax credit and not taxable income to the recipient, and (2) that the Section 48 ITC or Section 45 production tax credit may not be claimed on property on which the taxpayer receives a 1603 grant.
The guidance also says the federal government will recover any grant overpayment, or recapture a grant due to property ceasing to be qualified during the five-year recapture period, through a Justice Department lawsuit if the taxpayer doesn’t make voluntarily repayment.
