On March 4, 2013, U.S. Treasury released guidance on the impact of the across-the-board spending cuts known as “sequestration” to the Section 1603 cash grant program.
As stated in the message, payments under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 for specified energy property in lieu of tax credits are subject to sequestration.
This is what you need to know:
The 1603 cash grant community knew that sequestration was going to affect cash grants. However, it is helpful that Treasury has released this guidance to understand how sequestration would be implemented. It is possible that the U.S. Congress will act to minimize the effects of sequestration. That said, any relief for the Section 1603 program would likely be part of an overall agreement on deficit reduction and grant applicants should not assume that Treasury would be authorized to make adjustments to Section 1603 payments that were made during the period in which the across-the-board spending cuts are in effect.
The 30 percent investment tax credit (or ITC) is not subject to reduction as a result of sequestration. This means that grant applicants should carefully consider whether the Section 1603 cash grant (as reduced by 8.7 percent as a result of sequestration) remains preferable to claiming the 30 percent ITC.
Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:
John A. Eliason