California Center for Sustainable Energy

Summary of Energy Efficiency Provisions and Funding Opportunities – “American Recovery and Reinvestment Act of 2009”
As of February 17, 2009

Tax Incentives

Refundability: The act provides for “refundability” to alternative energy credits within sections 45 and 48 of the Internal Revenue Code (IRC) through a grant program administered by the Department of Treasury. These include both investment tax credits, such as those for CHP and microturbines, and production credits, such as that for biomass. Eligible CHP projects, which qualify for a 10% ITC, would need to begin construction during 2009 and 2010 and be completed by 2013. Grant applications will be processed by Treasury within 60 days.

Repeals Penalty for Financing Section 48 technologies ( CHP, Fuel Cells, and Solar): The act enables businesses and individuals to qualify for the full amount of the applicable tax credit, even if projects are financed with local development bonds or other subsidized energy financing.

Manufacturing Investment Credit: Provides up to $2 billion to fund a 30 percent investment tax credit for facilities engaged in the manufacture of advanced energy property. Projects must be certified by the Treasury, in consultation with the Secretary of Energy, through competitive bidding.

Bonus Depreciation: The act extends the bonus depreciation through 2010 and includes CHP, thereby allowing 50 percent of the depreciation value to be taken in the first year and the rest over the following four years.

Extension of Production Tax Credits: The act extends through 2013 the production tax credits for biomass, geothermal, hydropower, landfill gas, waste-to-energy, and marine facilities and other forms of renewable energy. Wind credits are extended through 2012.

Expansion of Investment Tax Credits: Allows developers of biomass, wind, geothermal, to claim a 30% investment tax credit, previously available only for solar and qualified fuel cell projects, instead of the production tax credit, which is tied to kwhs produced. Remedy for AMT and R&D Credits in Lieu of Bonus Depreciation: Allows a taxpayer in a loss position to use the bonus depreciation.

AMT Exemption for Private Activity Bonds: For projects financed through private activity bonds, there is a five-year exemption of the AMT for interest paid on the bonds.