Originally published June 8, 2009
Keywords: Investment tax credit, production tax credit, IRS Notice 2009-52, renewable energy facilities, ITC election, Form 3468
On June 5, 2009, the Internal Revenue Service issued Notice 2009-52, which describes the much anticipated procedures for electing to claim the investment tax credit (ITC) under Section 48 in lieu of the production tax credit (PTC) under Section 45 with respect to certain renewable energy facilities (the ITC Election). The flexibility to make the ITC Election was provided in the American Recovery and Reinvestment Act of 2009 (the Recovery Act) that was enacted on February 17, 2009.
Depending on the technology or resource, Section 48 allows the ITC in an amount equal to 30% or 10% of the basis of certain types of energy properties, most notably including solar. The ITC is claimed in the year the property is placed in service. Section 45 allows the PTC for the production and sale of electricity from certain renewable resources, including wind, closed-loop biomass, open-loop biomass, geothermal, landfill gas, trash, qualified hydropower, and marine and hydrokinetic renewable energy.
The ITC Election allows taxpayers to claim the ITC instead of the PTC with respect to a qualified investment credit facility (Qualified Facility) (i) that otherwise would have qualified for the PTC, including the requirement that the facility be placed in service after December 31, 2008, and before the placed-in-service deadline for the applicable Section 45 facility (as extended by the Recovery Act), (ii) for which the taxpayer makes an irrevocable election to claim the ITC in lieu of the PTC, and (iii) for which no PTCs have been allowed. No PTCs are allowed for a Qualified Facility if an ITC Election has been made. The amount of the ITC is 30% of the basis of the qualified property that is integral to the facility although Notice 2009-52 provides no guidance on what types of properties are considered integral.
Notice 2009-52 requires that a taxpayer make the ITC Election for a Qualified Facility by claiming the energy credit on a completed Form 3468. The taxpayer must make a separate election for each Qualified Facility, although the Notice provides no guidance on what constitutes a facility. Thus, the question remains whether, in the case of a wind farm, a single wind turbine or an entire wind farm constitutes the Qualified Facility.
Along with Form 3468, a taxpayer must submit a statement including the following information:
- Name, address, taxpayer identification number, and telephone number of the taxpayer.
- For each Qualified Facility:
- A detailed technical description of the facility, including generating capacity.
- A detailed technical description of the energy property placed in service during the taxable year as an integral part of the facility, including a statement that the property is an integral part of such facility.
- The date that the energy property was placed in service.
- An accounting of the taxpayer's basis in the energy property.
- A depreciation schedule reflecting the taxpayer's remaining
basis in the energy property after the ITC is claimed.
- A statement that the taxpayer has not claimed and will not claim a grant under Section 1603 of the Recovery Act for property for which the taxpayer is claiming the ITC.
- A declaration, applicable to the statement and any accompanying
documents, signed by the taxpayer or by a person currently
authorized to bind the taxpayer in such matters, in the following
form:
"Under penalties of perjury, I declare that I have examined this statement, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of this statement are true, correct, and complete."
In addition to the Form 3468 and the informational statement, Notice 2009-52 requires taxpayers making the ITC Election to retain adequate books and records, including the information and all supporting documentation necessary for submission under the Notice. The Form 3468 and the informational statement must be included as part of the taxpayer's timely filed return (including extensions) for the taxable year in which a Qualified Facility is placed in service.
Notice 2009-52 reiterates that neither the ITC nor the PTC is available when a taxpayer receives a grant in lieu of tax credits under Section 1603 of the Recovery Act. Thus a taxpayer may not make an ITC Election and later "change its mind" and receive a grant, which may eliminate the possibility that an ITC might have to be accounted for like a grant for financial accounting purposes.
We anticipate that the Treasury Department will provide guidance on grant procedures and substantive rules in the coming months.
Learn more about our Tax Transactions & Consulting, Energy and Projects practices.
Visit us at www.mayerbrown.com
Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.
This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
Copyright 2009. Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved.
