In a number of previous postings, I have referred to the program created by Senator Jeff Bingaman to provide tax credits for domestic clean energy technologies. In mid August, the Energy Department posted the notice of funds, with applications due by mid-September (see Advanced Energy Manufacturing Tax Credit (48C)).
The program has $2.3 billion of tax credit to award--providing up to a 30% credit for "new, expanded, or re-equipped advanced energy manufacturing projects" for a total investment supported of $7.7 billion. Types of project eligible include:
• Technologies that create energy from renewable resources (sun, wind, geothermal and other renewable resources)
• Energy storage technologies (fuel cells, microturbines or other energy storage systems used in electric vehicles)
• Advanced transmission technologies that support renewable generation (including storage)
• Renewable fuel refining or blending technologies
• Energy conservation technologies (advanced lighting, smart grid)
• Plug-in electric vehicles & vehicle components (motors, generators)
• Property to capture and sequester carbon dioxide
• Other property designed to reduce greenhouse gas emissions
DOE has also provided an illustrivative list of projects.
The program is forward looking: "Projects must be completed within 4 years of their tax credit acceptance. Eligible investment credits cover future expenditures and do not award past investment."
As good as the program is, however, let me suggestion the next step. One of the problems that companies trying to start up these types of facilities often face is the high up front costs. Manufacturing is a capital intensive undertaking. Tax credits only come later, when there is a profit to be taxed.
The same funding limitations have affected clean energy generating projects. In recognition of that problem, the stimulus bill included a provision to essentially monetize already existing tax credits. The Treasury Department has now up and running its program authorized under Section 1603 of the bill for Payments for Specified Energy Property in Lieu of Tax Credits.
Congress should seriously consider a similar type of program for the Advanced Energy Manufacturing Tax Credit. At the very least, Congress should take a close look at the regulations to ensure that private market monetization options are available. Under the existing regulations, the gaining the tax credit requires the taxpayer to execute an agreement with the IRS. Any "successor in interest" must execute a new agreement with the IRS. While the agreement is rather standardized, it is not clear that a purely financial "successor in interest" - as opposed to one actually taking over control and operation of the manufacturing facility - would qualify.
Private sector monetization of tax credits is an accepted, although not completely noncontroversial, practice. Done right, it could be a useful way to provide financing for US companies in the green technology manufacturing race.
The program has $2.3 billion of tax credit to award--providing up to a 30% credit for "new, expanded, or re-equipped advanced energy manufacturing projects" for a total investment supported of $7.7 billion. Types of project eligible include:
• Technologies that create energy from renewable resources (sun, wind, geothermal and other renewable resources)
• Energy storage technologies (fuel cells, microturbines or other energy storage systems used in electric vehicles)
• Advanced transmission technologies that support renewable generation (including storage)
• Renewable fuel refining or blending technologies
• Energy conservation technologies (advanced lighting, smart grid)
• Plug-in electric vehicles & vehicle components (motors, generators)
• Property to capture and sequester carbon dioxide
• Other property designed to reduce greenhouse gas emissions
DOE has also provided an illustrivative list of projects.
The program is forward looking: "Projects must be completed within 4 years of their tax credit acceptance. Eligible investment credits cover future expenditures and do not award past investment."
As good as the program is, however, let me suggestion the next step. One of the problems that companies trying to start up these types of facilities often face is the high up front costs. Manufacturing is a capital intensive undertaking. Tax credits only come later, when there is a profit to be taxed.
The same funding limitations have affected clean energy generating projects. In recognition of that problem, the stimulus bill included a provision to essentially monetize already existing tax credits. The Treasury Department has now up and running its program authorized under Section 1603 of the bill for Payments for Specified Energy Property in Lieu of Tax Credits.
Congress should seriously consider a similar type of program for the Advanced Energy Manufacturing Tax Credit. At the very least, Congress should take a close look at the regulations to ensure that private market monetization options are available. Under the existing regulations, the gaining the tax credit requires the taxpayer to execute an agreement with the IRS. Any "successor in interest" must execute a new agreement with the IRS. While the agreement is rather standardized, it is not clear that a purely financial "successor in interest" - as opposed to one actually taking over control and operation of the manufacturing facility - would qualify.
Private sector monetization of tax credits is an accepted, although not completely noncontroversial, practice. Done right, it could be a useful way to provide financing for US companies in the green technology manufacturing race.
Leave a comment