Status of Federal Spending and Tax Incentives for CleantechR&D and ProjectsConnect Public Policy ForumMay 20, 2010
PL-38668-v2
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Federal Incentives for Cleantech R&D, Manufacturingand Project Deployment
R&D
ARPA-E (https//arpa-e-foa.energy.gov)
Other Funding Opportunity Announcements
More targeted and still primarily single deadline rather than rolling submission FOAs
How to Protect Intellectual Property in Department of Energy Funding Programs, K&L GatesWhite Paper, January, 2010, available for download at http://tinyurl.com/ybljw55
Federal section 1603 30% cash grant in lieu of investment tax credit or ITC(http://www.treas.gov/recovery/1603.shtml)
ITC in lieu of production tax credit (http://www.irs.gov/irb/2009-19_IRB/ar07.html)
50% bonus depreciation (expired 12/31/09) (not cash)-has not been extended
Manufacturing Tax Credit (http//www.energy.gov.recovery/48C.html)
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Federal Incentives for Cleantech R&D, Manufacturingand Project Deployment
Loan guarantee program (www.lgprogramenergy.gov)
Timing, application costs and complexity, conservative positions
FIPP program also moving slowly
Clean Renewable Energy Bonds (CREBs)(www.ustreas.gov/press/releases/tg333.htm)
$2.2B in bond issuances approved in October, 2009 by U.S. Treasury forqualified issuers such as local utilities, electric coops, etc.
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Federal Cash Grant in Lieu of Investment Tax Credit
30% cash as opposed to investment tax credit in the deployment of certain renewableenergy projects
Simpler ITC may be acceptable to investors with tax liability since no application isneeded but this market has not recovered
Cash grant payments by Treasury have been key to the financeability of wind andsolar project projects
Project must be “under construction” by December 2010
Many projects will not make this deadline
Legislation proposed to extend and modify – Feinstein/Schumer
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Manufacturing Tax Credit
$2.3B in awards fully allocated by Treasury in a detailed application process
Not eligible for cash grant in lieu of ITC although proposed legislation wouldincrease allocation, extend and authorize cash grant option
Administration has publicly stated it wants to increase by $5B
Not assignable – may be used only by the tax payer that entered into the awardagreement with Treasury
Incentive has the potential for meaningful job creation
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Summary
Targeted R&D programs
No single federal and/or state incentive is sufficient for project finance; combinationof incentives is needed that can be applied at the same time
The federal 30% cash grant is the single most important incentive for deployment ofrenewable energy projects but is not sufficient by itself
Bonus depreciation should be extended so it has time to be a financing tool
Manufacturing tax credit allocation should be increased and availability extended
American Power Act may be the legislative vehicle in which various pendinglegislation is consolidated
Best case this year for extensions may be late year action, particularly on cash grant