Practice Areas:
Section 1603 Payments for Specified Energy Property in Lieu of Tax Credits
American Recovery and Reinvestment Tax Act (ARRA) Section 1603 appropriates funds for payments to persons who place in service specified energy property during 2009 or 2010, or after 2010 if construction began on the property during 2009 or 2010 and the property is placed in service by certain dates. The grant payments are generally equal to 10% or 30% of the basis of the property, depending on the type of property. Applicants who receive these payments are not eligible for the production or investment tax credit under sections 45 and 48 of the IRC with respect to the same property.
Grant application and registration assistance
Grant applicants must submit applications to the Treasury no later than the statutory deadline of October 1, 2011. Additionally, grant applicants must apply for several identifying data elements including a Data Universal Numbering System (DUNS) number from Dun and Bradstreet. Applicants are also required to register with the Central Contractor Registration (CCR). Novogradac can assist you in preparation of the required applications and registrations to ensure the information submitted is complete and satisfactory.
Cost certifications
Applicants must submit documentation to support the cost basis claimed for the property with their grant application. Supporting documentation to be provided includes a detailed breakdown of all costs included in the basis. Other supporting documentation, such as contracts, copies of invoices, and proof of payment must be retained by the applicant and made available to Treasury upon request. For properties that have a cost basis in excess of $500,000, applicants must submit an independent accountant’s certification attesting to the accuracy of all costs claimed as part of the basis of the property. Novogradac has extensive experience in reviewing and certifying project costs that are includable in eligible basis.
Assessments of leased property fair market value
A lessor who is eligible to receive the grant with respect to a property may elect to pass through the grant payment to a lessee. The election will treat the lessee as having acquired the property for an amount equal to the independently assessed fair market value of the property on the date the property is transferred to the lessee. Novogradac can provide you with the required independent assessment of fair market value conducted in accordance with the requirements of the grant program.
General consulting services
Novogradac professionals have a comprehensive knowledge of and broad experience with complex tax, accounting, business and transactional issues inherent in financing and developing renewable energy projects, and our professionals are committed to staying abreast of the latest developments, industry trends and rules and regulations. We can help you navigate through the provisions of the ARRA, determine whether your proposed project meets the stimulus plan’s eligibility requirements and resolve various accounting and tax issues.
Transaction structuring and analysis
Novogradac can assist you in your transaction analysis, including preparing preliminary financial models to determine appropriate deal structure, negotiating with potential tax credit equity investors, lenders, etc. and participating in conference calls with various parties to the transaction. We can assist you in packaging the project in a format that is easily understood by potential investors, resolving issues noted during the due diligence process and navigating the business, tax and compliance aspects of the transaction.
Financial models and forecasts
The preparation of a financial model will allow the parties to the transaction to address many of the structuring and deal issues including an analysis of the financial risks and rewards along with a myriad of tax and compliance issues related to the transaction. Novogradac can assist by compiling from information you provide, financial projection models and forecasts including sources and uses of cash, net operating income, taxable income, summary of tax benefits and estimated tax credits as well as a list of significant assumptions. Additionally, we can issue a compilation report, in accordance with attestation standards established by the American Institute of Certified Public Accountants, on the financial projection model or any financial statements in connection with this engagement.
Alternatively, we can review financial forecasts prepared by others and make comments and suggestions not only to strengthen the financial performance of the deal, but also to suggest opportunities to maximize the benefits to you.
Placed in service certifications
Applicants must demonstrate that the property is placed in service, as applicable, by providing a report that certifies that the equipment has been installed, tested, and is ready and capable of being used for its intended purpose. Novogradac can assist you by providing an independent certification that the equipment meets the placed in service requirements.
Safe harbor compliance testing
Construction begins when physical work of a significant nature begins. An applicant may treat physical work of a significant nature as beginning when the applicant incurs or pays more than 5 percent of the total cost of the property, excluding the cost of any land and preliminary activities. Novogradac can provide a 5 percent test of total property costs to ensure compliance with the economic performance standards of IRC section 461(h).
Reporting
Applicants must provide periodic reports as required by the Treasury. A project performance report is required on an annual basis for a period of five years after the property is placed in service. Annual performance reports are due no later than 21 days following the end of the reporting period. The first reporting period begins on the date the property is placed in service. Novogradac can assist you in preparing the project performance report and submitting any other reports the Treasury deems necessary.
Financial statement audits
Novogradac can audit the balance sheet for the purpose of expressing an opinion on the financial statements, as of the fiscal year end, and the related statements of income and cash flows for the years then ended. The purpose of an audit is to enable us to express an opinion whether the financial statements present fairly the financial position and the result of operations and cash flows, according to accounting principles generally accepted in the United States of America.
Tax return preparation
We can prepare the federal and state income tax returns from information that you furnish to us.
On-site trainings
Novogradac can provide on-site training for your team. We will spend several hours with the appropriate members of your team to discuss transaction structuring options and examples, investor negotiation, compliance and reporting requirements, and other program implementation issues. We will tailor this training to your needs based on preliminary discussions with you.
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