One of the most innovative features of the American Recovery and Reinvestment Act of 2009 was the option for commercial solar projects to opt for a cash grant from the US Treasury in lieu of the 30% investment tax credit. Receiving cash equal to 30% of your total investment roughly two months after your commercial operation date is a very nice incentive—and as we close in on the end of the year, we expect a flurry of construction to lock in these incentives on solar projects throughout the USA.
In order to receive a cash grant for eligible energy property, such property must either (1) be placed in service during 2009 or 2010 or (2) be placed in service after 2010 and before a specified termination date, but only if the construction of such property began during 2009 or 2010. We have to either substantially start construction or meet a safe harbor requirement of incurring or paying >5% of total construction cost [no planning, financing, or land costs included]. Treasury guidance here.
The real issue is how you demonstrate that construction has begun prior to the end of 2010. Here is a very helpful FAQ from Treasury that helps to define what they mean by beginning construction. A “developer-friendly” look-through rule is described in Q16A, Q17, and Q18.
For most of our projects, we will be providing a copy of the construction contract, a certificate for payment for completed work, and an independent engineer’s report including:
- a detailed construction schedule,
- project budget, and
- description of work commenced including all invoices for work performed,
to Treasury to confirm our grant eligibility.
