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Detailed Description of Novogradac & Company's Renewable Energy Services

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On December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, extended the Section 1603 Treasury grant in lieu of investment tax credit program for specified property (the Grant) for one year. The program was created in February 2009 as part of the American Recovery and Reinvestment Act of 2009 (ARRA).  The Grant is equal to 10% or 30% (depending on type of property) of the eligible costs of certain renewable energy facilities and is available to projects placed in service in 2009, 2010 or 2011, or after 2011 if construction began on the property during 2009, 2010 or 2011.  Projects receiving the Grant are not eligible for the production or investment tax credit with respect to the same property.

Federal, state and local government agencies, charitable organizations that fall under section 501(c) of the Internal Revenue Code (IRC) and any qualified issuer of clean renewable energy bonds or cooperative electric company as described in IRC section 54 are not eligible for the Grant.  Similarly, any pass-through entity of which one of the above entities is a partner is also ineligible for the Grant.  However, the guidance issued by the Treasury states that if one or more of the ineligible entities listed holds an interest in a pass-through entity through a taxable C corporation, it does not affect the ability of the pass-through entity to claim the Grant.

In order for an applicant to be eligible to receive the Section 1603 Grant payment, it must be the owner or the lessee of the qualified energy property and must have originally placed the property in service.  Applicants may submit a Notice of Assignment along with their application and make an irrevocable election to assign the Grant to a third party, provided the requirements of the Federal Assignment of Claims Act are met. 

Qualified energy property includes property defined in section 45 or 48 of the IRC (listed below) that was placed in service during 2009,2010 or 2011, regardless of when construction started, or placed in service after 2011 and before the applicable credit termination date (see below), provided that construction commenced during 2009, 2010 or 2011.

*Geothermal property that meets the definition of qualified property under both IRC Section 45 and 48 may qualify for either the 10% or the 30% Grant, but not both.
**to $1,500 per 0.5 kW of capacity.
***The Grant available for microturbine property is limited to $200 per kW of capacity.

Novogradac & Company’s Renewable Energy Tax Credit Practice services are based on comprehensive knowledge of, and broad experience with complex tax, accounting, business and transactional issues inherent in financing and developing renewable energy projects.  Our Renewable Energy team has assembled and developed the critical resources necessary to provide outstanding professional service to help navigate the challenges associated with these emerging technologies.  Our professionals are dedicated to meeting each client’s needs in a thorough, efficient and creative manner.  The firm’s work in the renewable energy industry includes  services in connection with the investment and production tax credits and the related Section 1603 Treasury Grant payment, including:

Grant Application and Registration Assistance
Grant applicants must submit applications to the Treasury no later than the statutory deadline of October 1, 2012.  Additionally, Grant applicants must apply for several identifying data elements including a Data Universal Numbering System (“DUNS”) number from Dun & 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.

Treasury Grant and ITC Cost Certifications
Grant 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 the Treasury upon request.  For properties that have a cost basis in excess of $500,000, applicants must submit a report of Agreed-Upon Procedures (AUP) prepared by an independent accountant to evaluate the specified property costs and the eligible cost basis for the Grant.  Similarly, projects requesting a Grant payment of over $1 million (cost basis exceeding $3,333,333) must submit an independent accountant’s examination option attesting to the accuracy of all costs claimed as part of the basis of the property.  Novogradac has extensive experience in auditing and certifying project costs for purposes of determining what costs are includable in eligible energy tax credit basis.

Treasury Grant Safe Harbor Compliance Testing - The 5% Test
The Section 1603 Treasury Grant program is set to expire on December 31, 2011. In order for an applicant to be eligible for a Treasury Grant, the applicant must "begin construction" by the end of 2011. Beginning of construction is defined as when physical work of a significant nature begins or when the applicant incurs or pays more than 5% of the total cost of the energy property for certain eligible costs pursuant to the 5% safe harbor rule. Novogradac can prepare an agreed-upon procedures or an audit report in support of the costs incurred as of a specified date for purposes of providing evidence to Treasury that an applicant has begun construction by the end of 2011 for purposes of meeting the requirements of the 5% safe harbor rule.

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, 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 efficiently identify and address many of the structuring and deal issues and includes an analysis of the financial risks and rewards along with a myriad of tax and compliance issues related to the transaction. Novogradac assists client by compiling information into financial projection models and forecasts that include sources and uses of cash, net operating income, taxable income, investor and developer IRR schedules (summary of tax benefits etc.), capital account analysis, a list of inputs and significant assumptions in addition to other schedules. Additionally, we issue compilation reports, in accordance with attestation standards established by the American Institute of Certified Public Accountants, on the financial projection model as necessary and as requested.

Alternatively, we also analyze financial forecasts prepared by others and make comments and suggestions on a consulting basis in connection with the reasonableness of the inputs and assumptions used, the transaction structure employed and various tax and business issues. We do this in an effort to add value to our clients proactively resolving issues and by strengthening the financial projection so that it is reflective of the current marketplace.  The end result of these efforts is to help our clients get the maximum benefit from the transactions they have worked so hard to put together.

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 complicated aspects of the IRC and ARRA, determine whether your proposed project meets various eligibility requirements, and practically identify and solve various accounting and tax issues. 

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 about whether your financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles.

Tax Return Preparation
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.  We can prepare the federal and state income tax returns from information that you furnish to us. 

Assessments of Leased Property Fair Market Value
A lessor who is eligible to receive the Grant with respect to energy property may elect to pass through the Grant payment to a lessee.  The election would 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 energy property is transferred to the lessee.  Novogradac can provide you with an independent assessment of fair market value conducted in accordance with the requirements of the Grant program.

On-Site Training
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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