Oregon Department of Energy Issues New Temporary Rules Governing the Business Energy Tax Credit ("BETC")
On Tuesday, November 3, the Oregon Department of Energy ("ODOE") issued temporary administrative rules relating to the Business Energy Tax Credit ("BETC"). For a description of the BETC, see our previous alerts on 2/27/2008
. ODOE issued the temporary rules in the face of increasing publicity regarding a perceived lack of control in the administration of the BETC program. One of the most significant issues giving rise to the publicity relates to the implementation of the limit on the amount of the BETC per facility. For large projects generating electricity from renewable sources, the amount of BETC available generally is limited to $10 million per "facility." The temporary rules attempt to define what constitutes a single facility, and also make a wide variety of additional changes.
Informally, ODOE has acknowledged that some of the provisions in the temporary rules may be modified. ODOE intends to work closely with the legislative leadership, and some provisions in the temporary rules may appear (potentially with modifications) in legislation in the February 2010 session. In addition, the temporary rules will expire May 1, 2010, and a formal rulemaking procedure, including opportunity for public comment, will occur in March and April 2010.
ODOE's announced purposes of the temporary rules are:
- Elimination of the "multiple application" practice for the same or similar projects.
- Elimination of the cost overrun allowance between pre-application and final application approval.
- Establishment of new criteria for project eligibility and maximum project eligibility cost.
- Establishment of new criteria for performance standards and application approval/denial standards.
- Enhancement of the ability to revoke, suspend and/or condition applications.
- Establishment of data reporting requirements.
The effective date language of the temporary rules is very broad. The temporary rules provide that all changes apply to all new and pending applications received on or before November 3, 2009 for which no "final determination" has been made. In addition, the temporary rules provide that the new rules may apply to any final determinations that ODOE already has made if ODOE determines that "failure to apply the new criteria set forth in these rules may hamper the Department's efforts to reduce the costs of the BETC program." The temporary rules leave the term "final determination" undefined. Informally, ODOE has indicated that it generally has no intention of changing its approval of precertified or certified facilities, but it wants to reserve the right to do so, presumably in unusual circumstances.
The substantive changes in the temporary rules include:
- Adding a "three strikes" provision for determining whether multiple facilities exist. The rules include a list of criteria that ODOE will consider, and, if three or more of the criteria are present, a facility will be considered one facility regardless of the number of applications filed. The criteria include location on adjacent parcels of land; recognition as a single facility by state, local or county authorities; existence of a single construction contract; shared ownership, supporting facilities, financing, costs or expenses, net metering, power purchase or other applicable transmission agreements; and any other factors that demonstrate that a facility is not separate and distinct from another facility. Requiring additional information with the preliminary certification application, including information relating to the number and types of jobs to be created, the amount of energy saved and whether the facility will be operated or maintained for five years; and a declaration that the applicant or other facility owners do not have property tax deficiencies related to the facility.
- Providing that an application for preliminary certification that is filed late (i.e. after the "facility start" date) may be considered if it would have been "impracticable" to file timely (as opposed to the former "hardship" standard). However, the temporary rules also provide that failing to file an application for preliminary certification before "signing contracts" for the facility will not be considered a special circumstance supporting a waiver.
- Eliminating the 10-percent cost overrun allowance that formerly permitted an applicant to obtain, for example, a final BETC amount of $11 million even though the preliminary certified costs would have yielded a BETC of only $10 million.
- Requiring additional accounting information relating to an applicant's solvency to be provided with a final certification application. If an applicant has any binding contracts or loan agreements, an applicant or certified public accountant must provide sufficient information to demonstrate that the accounts directly related to the facility are not in default.
- Providing that a preliminary or final certification application may be denied if the applicant is unable to demonstrate "that the facility is economically viable without the receipt of BETC." (ODOE has stated informally that the intention of this provision is to test the solvency of the applicant's business as a whole, not the solvency of the facility on a stand-alone basis.)
- Providing that an applicant must notify ODOE if a facility is subject to a bankruptcy proceeding.
- For renewable energy resource manufacturing facilities, allowing ODOE to require an applicant to enter into "a performance agreement or other similar agreement" before ODOE will issue final certification.
The temporary rules also make the changes to the following definitions:
- Significantly amending the definitions of "costs," "facility" "facility start," "transportation facility."
- Amending the definitions of "energy facility," "high efficiency combined heat and power," "high performance home, "qualified transit pass contract," "recycling facility," "renewable energy resource," "transportation provider," and "transportation services contract" to refer only to those definitions in chapter 469 of the Oregon Revised Statutes.
- Deleting the definitions of "completed application" and "rideshare matching services program."
- Amending the definitions of "pass-through option" and "pass-through partner" to conform with H.B. 2068, which was passed during the 2009 legislative session. H.B. 2068 allows a credit to be transferred only one time, and only to C corporations, S corporations and personal income taxpayers. H.B. 2068, in effect, precludes a BETC from being transferred to a partnership.
For more information on the BETC legislation and its requirements, or legal assistance with the BETC-related projects, please contact:
Stephen Hall at firstname.lastname@example.org or (503) 294-9625
Chris Heuer at email@example.com or (503) 294-9206
William Holmes at firstname.lastname@example.org or (503) 294-9207
Robert Manicke at email@example.com or (503) 294-9664
Kevin Pearson at firstname.lastname@example.org or (503) 294-9622
Eric Kodesch at email@example.com or (503) 294-9684
Adam Kobos at firstname.lastname@example.org or (503) 294-9246
Elisabeth Shellan at email@example.com or (503) 294-9887
IRS Circular 230 notice: Any tax advice contained herein was not intended or written to be used, and cannot be used, by you or any other person (i) in promoting, marketing or recommending any transaction, plan or arrangement or (ii) for the purpose of avoiding penalties that may be imposed under federal tax law.
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