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Monday, October 3, 2011 - 5:30AM

In the event the Internal Revenue Service (IRS) determines that a taxpayer’s project did not qualify for all or part of a payment under the Section 1603 grant in lieu of energy tax credit program, the excessive amount of the payment is includible in the taxpayer’s gross income under § 61, notwithstanding § 48(d)(3)(A), according to Associate Chief Counsel Memorandum (AM) 2011-004. In the memo, the IRS discusses the federal income tax treatment of the receipt of excessive payments under Section 1603. Among other things, AM 2011-004 says that a taxpayer’s basis in a project for which the taxpayer receives an excessive payment under Section 1603 is not reduced by the excessive amount in either the taxable year of receipt or the taxable year of the repayment.

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