Corporate taxpayers that have invested in renewable energy or “green” equipment or systems may be overlooking an opportunity to receive significant government reimbursements in lieu of certain investment tax credits under the American Recovery and Reinvestment Act of 2009, according to Paul Lo, director with WTP Advisors’ Global Business Incentives practice.
“Companies that have placed renewable energy systems in service or have begun construction on such systems in between 2009-2011 may qualify for a substantial rebate, but they need to begin the reimbursement process now,” says Lo.
Lo was recently the guest speaker at a U.S. Department of Commerce conference in Frankfurt regarding the SelectUSA Initiative, a U.S. government-wide initiative to attract and expand foreign business investment to the United States. As an expert in tax and business incentives with over 20 years of experience, Lo spoke about trends in foreign direct investment and offered strategies on facilitating inbound business investment with investment incentive programs, including renewable energy-related programs, found at the federal, state and local levels.
The Section 1603 Program, also known as the United States Tax Grant Program, allows corporations to receive a cash reimbursement instead of the 30 percent federal Investment Tax Credit (ITC) for the installation of certain renewable energy systems. Companies across numerous industries would qualify as long as they have installed or are in the process of installing (if begun prior to December 31, 2011) renewable energy equipment. Companies as varied as telecommunications providers and manufacturers, to hotels and furniture stores have taken advantage of the reimbursement program.
The benefit, for the majority of the systems that are typically installed, is a reimbursement of 30 percent of the qualified costs.
For example, a solar project with total qualified costs of $500,000 would be eligible to receive a grant of $150,000 in lieu of the ITC if the company met all of the stated requirements of the Section 1603 Program and filed by September 30, 2012.
Reimbursement amounts vary from 10 percent of the capital costs for geothermal heat pumps and microturbines, to 30 percent for solar, wind, biomass, and fuel cells (which have a limitation based on each .5kW of capacity).
“However, since the process for applying for this reimbursement can be lengthy and requires external audit services to verify project costs, companies are advised to start the course of action immediately before the program expires this Fall,” says Lo.