Jenner Explains the Section 1603 Grant Program in Biomass Magazine
9/20/2010

Summary:

Stoel Rives attorney Greg Jenner discussed the U.S. Department of Treasury's Section 1603 grant program with Rona Johnson of Biomass Magazine. The program, created as part of the Stimulus Bill, gives renewable energy project developers the ability to offset costs through a 30 percent grant, and is expected to provide about $5 billion for the development of renewable energy projects around the country.

"There are a lot of deals that are getting done based on 1603," Jenner said. "It really has been a game changer. In fact, I think it has kept the renewable energy industry alive for the past two years."

Jenner noted the program will sunset at the end of this year, meaning that projects must have begun construction before the end of 2010 to qualify. He said there are two ways to meet the beginning construction requirement and benefit from the program. "One of them requires that you pay or incur more than 5 percent of the total project costs. When you think pay or incur, most laymen or nontax people think, 'Oh well, if I just pay it that's enough,' but it isn't. Pay or incur has a very specific meaning in the tax world and it's gotten a lot of people in trouble when they think the rule goes one way and it goes another."

The Treasury Department has also deemed that physical activity that occurs before the end of the year can meet the beginning construction test but the activity must be continuous. That means that a developer can't go out on New Year's Eve and start digging around and then cease activity for a year, he said. "On the other hand, it doesn't have to be the developer itself that begins construction," he added. "Beginning construction can be met by work off-site, and so there are different ways that you can meet that requirement as well."

"Biomass conference will address project finance options" was published by Biomass Magazine, September 13, 2010.