Recovery Act: Energy, Treasury Release Guidance on Payments in Lieu of Tax Credits for Renewable Energy Projects.
July 9, 2009
WASHINGTON –The U.S. Department of the Treasury and the U.S. Department of Energy (DOE) today announced the release of guidance on direct payments in lieu of tax credits for renewable energy projects. Funded through the American Recovery and Reinvestment Act (Recovery Act), the program will provide direct payments for qualified renewable energy production facilities, including biomass, solar, and wind. By providing businesses with the guidance they need to submit a successful application, this program will spur investment in renewable energy projects across the country.
"The renewable energy program provides another important avenue for the Recovery Act to contribute to economic development in communities around the country," said Treasury Secretary Tim Geithner. "It will provide additional stimulus to economies in urban and rural America by helping to develop domestic sources of clean energy. This partnership between Treasury and Energy will enable both large companies and small businesses to invest in our long-term energy needs, protect our environment, and revitalize our nation's economy."
The Recovery Act authorized Treasury to make direct payments to companies that create and place in service renewable energy facilities beginning January 1, 2009. Previously, these companies could file for a tax credit to cover a portion of the renewable energy project's cost. Under the new program, applicants would agree to forgo future tax credits in favor of receiving an immediate reimbursement for a portion of the property expense. This direct-payment program allows for an immediate stimulus in local economies.
"These payments will help spur major private sector investments in clean energy and create new jobs for America's workers." Said Energy Secretary Steven Chu. "It is part of our broad effort to double our renewable energy capacity in the next few years and make sure that America leads the world in creating the new clean energy economy of the future."
In previous years, the tax credit has been widely used, and is considered a successful incentive for encouraging the development of renewable energy. In 2006, approximately $550 million in tax credits were provided to 450 businesses. However, the rate of new renewable energy installations has fallen since the economic and financial downturns began and projects have had a harder time obtaining financing. Treasury and DOE expect a fast acceleration of businesses applying for the energy funds in lieu of the tax credit.
To expedite implementation of the program, Treasury and DOE are providing the terms and conditions, guidance, and a sample application at http://www.treas.gov/recovery/1603.shtml so that companies can prepare successful applications in advance of the launch of the Web-based application in the coming weeks. Web-based application will be another tool designed to facilitate the timely flow of program funds to eligible businesses.