Support for Energy in the Stimulus Package
The House has passed today the American Recovery and Reinvestment Act. The Senate is expected to approve the bill this evening. This $789 billion bill includes billions of dollars for renewable energy and energy efficiency programs, as well as support for infrastructure and other energy measures. The President is expected to sign the bill over the President’s Day weekend.
Key energy provisions in the bill are summarized below:
Spending Provisions
Renewable Technologies
Temporary Loan Guarantee Program. $6 billion is provided for a temporary loan guarantee program for renewable energy systems (including facilities of component manufacturers of renewable energy technology), biofuel projects, and electric power transmission systems (including upgrading and reconductoring projects). Eligible projects must commence construction by September 30, 2011. Funding for biofuel projects is limited to $500 million. The conference report states that the $6 billion in appropriated funds will support $60 billion in loans for these projects. These projects will not have to meet the "innovative technology" or other requirements of section 1703 of the Energy Policy Act of 2005, but presumably will have to meet other rules presently in place for Title XVII loan guarantees (including the requirements of section 1702).
Renewables R&D. $2.5 billion is provided for applied research, development, demonstration and deployment activities, including $800 million for projects related to biomass and $400 million for geothermal activities and projects.
Energy Efficiency
Block Grants. $3.2 billion is provided for Energy Efficiency and Conservation Block Grants for implementation of programs authorized under subtitle E of title V of the Energy Independence and Security Act, with $2.8 billion available through the applicable formula and the remaining $400 million to be awarded on a competitive basis.
State Energy Program. $3.1 billion is to be used for the State Energy Program authorized under part D of title III of the Energy Policy and Conservation Act. These grants are awarded based on a set formula provided the governor of the recipient State notifies the Secretary that the governor has obtained the necessary assurances that the applicable State regulatory authority will seek to implement a general policy that ensures that utility financial incentives are aligned with helping their customers to use energy more efficiently and that the State will implement certain energy efficient building codes. The State will to the extent practicable prioritize the grants toward funding existing energy efficiency and renewable energy programs.
GSA Facilities. $4.5 billion is provided to convert GSA facilities to High-Performance Green buildings as defined in P.L. 110-140, with $4 million appropriated for the Office of Federal High-Performance Green Buildings, authorized in the Energy Independence and Security Act of 2007.
Military R&D. $300 million is provided to the military for research and development for energy efficiency and development of energy from renewable resources.
Transmission and Smart Grids
Transmission and Smart Grid Funding. $4.5 billion is provided for Electricity Delivery and Energy Reliability. Of this amount, funds shall be available for expenses necessary for electricity delivery and energy reliability activities to modernize the grid, to include demand responsive equipment, enhance security and reliability of the energy infrastructure, energy storage research, development, demonstration and deployment, and facilitate recovery from disruptions to the energy supply, and for implementation of programs under title XIII of the Energy Independence and Security Act of 2007 (smart grids). Of this amount, $100 million shall be available for worker training activities. To facilitate the development of regional transmission plans, $80 million is provided to the Office of Electricity Delivery and Energy Reliability to conduct a resource assessment and an analysis of future demand and transmission requirements after consultation with the Federal Energy Regulatory Commission. The Office of Electricity Delivery and Energy Reliability shall coordinate with FERC to provide technical assistance to the North American Electric Reliability Corporation and others for the formation of interconnection-based transmission plans for the Eastern and Western Interconnections and ERCOT. $10 million is provided to implement section 1305 of Public Law 110-140 (Smart Grid Interoperability Framework).
Temporary Loan Guarantee Program. (see above under Renewable Technologies)
BPA/WAPA Borrowing Authority. The Bonneville Power Administration and the Western Area Power Administration are each provided an additional $3.25 billion in borrowing authority to assist in financing the construction, acquisition, and replacement of the transmission systems in their respective systems.
Congestion Study. In completing the 2009 National Electric Transmission Congestion Study, the Secretary of Energy shall include an analysis of the significant potential sources of renewable energy that are constrained in accessing appropriate market areas by the lack of adequate transmission capacity and make recommendations for achieving adequate transmission capacity.
Smart Grid Projects. Title XIII of the Energy Independence and Security Act of 2007 is modified to provide financial support to smart grid demonstration projects, including those in urban, suburban, rural and tribal areas and DOE is authorized to fund up to 50% of the cost for qualifying advance grid technology demonstration projects made by electric utilities or other parties.
Advanced Vehicles and Battery Technologies
Manufacturing Grants. $2 billion shall be available for grants for the manufacturing of advanced batteries and components and the Secretary shall provide facility funding awards under this section to manufacturers of advanced battery systems and vehicle batteries that are produced in the United States, including advanced lithium ion batteries, hybrid electrical systems, component manufacturers, and software designers.
Loan Program. $10 million is made available for administrative expenses for the Advanced Technology Vehicles Manufacturing Loan Program.
Advanced Federal Fleet. $300 million is provided for the acquisition of motor vehicles for the Federal fleet.
Fossil Energy
Fossil R&D. An additional $3.4 billion is provided for the Fossil Energy Research and Development Program, of which $1 billion is to be used for fossil energy research and development programs, $800 million is to be used for additional amounts for the Clean Coal Power Initiative Round III funding; and $1.5 billion is to be used for a competitive solicitation for a range of industrial carbon capture and energy efficiency improvement projects.
Low-Income Support
Weatherization. $5 billion is to be used for the Weatherization Assistance Program.
HUD Housing. $250 million is provided to support a program to upgrade HUD sponsored low-income housing to increase energy efficiency, including new insulation, windows, and furnaces.
Tax Incentives
Tax Incentives for Renewable Energy
Long-term Extension and Modification of Renewable Energy Production Tax Credit (“PTC”). The bill extends the placed-in-service date for wind facilities for three years (through December 31, 2012). The bill also extends the placed-in-service date for three years (through December 31, 2013) for certain other qualifying facilities: closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropower; landfill gas; waste-to-energy; and marine renewable facilities.
Temporary Election to Claim the Investment Tax Credit (“ITC”) in Lieu of the PTC. The bill allows owners of certain renewable energy facilities to elect to claim the 30 percent ITC in lieu of the PTC. Facilities are eligible if placed in service by December 31, 2012, for wind or December 31, 2013, for other types of qualifying facilities.
Treasury Department Energy Grants in Lieu of Tax Credits. The bill allows taxpayers to receive a grant from the Treasury Department in lieu of the PTC or the ITC. This grant will operate like the current-law ITC. The Treasury Department will issue a grant in an amount equal to 30 percent (or in some cases 10 percent) of the cost of the qualifying renewable energy facility within sixty days of the facility being placed in service or, if later, within sixty days of receiving an application for such grant. The grant provision applies if property is placed in service during 2009 or 2010 or is placed in service after 2010 and before the credit termination date with respect to the property, but only if the construction of the property began in 2009 or 2010.
Repeal Subsidized Energy Financing Limitation on the ITC. Under current law, the ITC must be reduced if the property qualifying for the ITC is also financed with industrial development bonds or through any other Federal, State, or local subsidized financing program. The bill repeals this subsidized energy financing limitation on the ITC in order to allow businesses and individuals to qualify for the full amount of the ITC even if such property is financed with industrial development bonds or through any other subsidized energy financing.
Clean Renewable Energy Bonds ("CREBs"). The bill authorizes an additional $1.6 billion of new clean renewable energy bonds to finance facilities that generate electricity from the following resources: wind; closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropower; landfill gas; marine renewable; and trash combustion facilities. This $1.6 billion authorization will be subdivided into thirds: 1/3 will be available for qualifying projects of State/local/tribal governments; 1/3 for qualifying projects of public power providers; and 1/3 for qualifying projects of electric cooperatives.
Tax Credits for Alternative Refueling Property. For 2009 and 2010, the bill increases the 30 percent alternative refueling property credit for businesses (capped at $30,000) to 50 percent (capped at $50,000). Hydrogen refueling pumps remain at a 30 percent credit percentage; however, the cap for hydrogen refueling pumps will be increased to $200,000. In addition, the bill increases the 30 percent alternative refueling property credit for individuals (capped at $1,000) to 50 percent (capped at $2,000).
Advanced Energy Investment Credit. The proposal establishes a new 30 percent ITC for facilities engaged in the manufacture of advanced energy property. Credits are available only for projects certified by the Secretary of Treasury, in consultation with the Secretary of Energy, through a competitive bidding process. The Secretary of Treasury must establish a certification program no later than 180 days after date of enactment, and may allocate up to $2.3 billion in credits. Advanced energy property includes technology for the production of renewable energy, energy storage, energy conservation, efficient transmission and distribution of electricity, and carbon capture and sequestration.
Tax Incentives for Businesses
Extension of Bonus Depreciation. Last year, Congress temporarily allowed businesses to recover the costs of capital expenditures made in 2008 faster than the ordinary depreciation schedule would allow by permitting these businesses to immediately write-off 50 percent of the cost of depreciable property acquired in 2008 for use in the United States. The bill extends this temporary benefit for capital expenditures incurred in 2009 if the property is placed in service in 2009 (placed in service in 2010 in the case of certain longer-lived and transportation property).
Election to Accelerate Recognition of Historic AMT/R&D Credits. Last year, Congress temporarily allowed businesses to accelerate the recognition of a portion of their historic AMT or research and development (“R&D”) credits in lieu of bonus depreciation. The amount that taxpayers may accelerate is calculated based on the amount that each taxpayer invests in property that would otherwise qualify for bonus depreciation. This amount is capped at the lesser of six percent of historic AMT and R&D credits or $30 million. The bill extends this temporary benefit through 2009.
Financing Incentives
Delayed Recognition of Certain Cancellation of Debt Income. Under current law, a taxpayer generally has income where the taxpayer cancels or repurchases its debt for an amount less than its adjusted issue price. The amount of cancellation of debt income ("CODI") is the excess of the old debt's adjusted issue price over the repurchase price. Certain businesses will be allowed to recognize CODI over 10 years (defer tax on CODI for the first four or five years and recognize this income ratably over the following five taxable years) for specified types of business debt repurchased by the business after December 31, 2008 and before January 1, 2011.
De Minimis Safe Harbor Exception for Tax-Exempt Interest Expense for Financial Institutions. In determining the portion of interest expense that is allocable to investments in tax-exempt municipal bonds, the bill excludes investments in tax-exempt municipal bonds issued during 2009 and 2010 to the extent that these investments constitute less than two percent of the average adjusted bases of all the assets of the financial institution.
Eliminate Costs Imposed on State and Local Governments by the Alternative Minimum Tax (“AMT”). Under current law, interest on tax-exempt private activity bonds is generally subject to the AMT. The bill excludes interest on tax-exempt private activity bonds from the AMT if the bond is issued in 2009 or 2010. The bill also allows AMT relief for current refunding of private activity bonds issued after 2003 and refunded during 2009 and 2010.
Delay Application of Withholding Requirement on Certain Governmental Payments for Goods and Services. For payments made after December 31, 2010, the Code requires withholding at a three percent rate on certain payments to persons providing property or services to Federal, State, and local governments. The provision delays for one year (through December 31, 2011) the application of the three percent withholding requirement on government payments for goods and services. |
