The U.S. Department of the Treasury has released new guidance addressing the 5 percent safe harbor for determining whether a renewable energy project developer seeking a 1603 Grant has met the requirement that construction on the project must commence before the end of 2011.  

The grant program, created under Section 1603 of the American Recovery and Reinvestment Act of 2009, provides cash grants in lieu of energy credits that would otherwise be available under Section 48 of the Internal Revenue Code.

Specifically, the new guidance focuses on cases where the renewable energy property is acquired by one party in 2011 and then transferred to the 1603 Grant applicant after 2011.

Under the guidance, Treasury will apply different 1603 Grant eligibility rules to determine whether applicants will be treated as having acquired the energy property in 2011, depending on (1) how the applicant acquired the property—whether it was through an asset transfer or the transfer of an ownership interest in the original owner—and (2) in the case of an asset transfer, whether the applicant is a related party to the original owner.

Several new fact-specific requirements are imposed in the new guidance. If you have questions about how the requirements may apply to a specific 1603 Grant transaction, please feel free to contact Charles S. Henck, 202.661.2209 or

For background on the 1603 Grant program, read our earlier legal alerts on program clarifications, application procedures, and cost benchmarks.


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