Treasury and DOE Release Guidance on Applying for Grants in Lieu of Tax Credits

The Department of the Treasury and the Department of Energy have issued guidance regarding the rules for obtaining a grant from Treasury (“section 1603 program”) in lieu of a production tax credit under section 45 of the Internal Revenue Code (“Code”) or an investment tax credit under Code section 48.  Under this program, which was enacted as part of the American Recovery and Reinvestment Act, the Department of the Treasury makes payments to eligible persons who place in service specified energy property and apply for such payments.  The purpose of the payment is to reimburse eligible applicants for a portion of the expense of such property.  Eligible property under this program includes only property used in a trade or business or held for the production of income.

By receiving payments for property under section 1603, applicants are electing to forego tax credits under Code sections 45 and 48 with respect to such property for the taxable year in which the payment is made or any subsequent taxable year.  Applicants must agree to the terms and conditions applicable to the section 1603 program.  The guidance establishes the procedures for applying for payments under the section 1603 program and is intended to clarify the eligibility requirements under the program.

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