The release of the President's 2011 budget proposal continues the administration's interest in clean energy technology. A significant provision included within the budget proposal is an additional $5 billion in tax credits toward the extension of the Section 48C Advanced Energy Manufacturing Tax Credit.
The credit is expected to be operate similarly to the previous credit, which was part of the American Reinvestment and Recovery Act of 2009 (ARRA). The ARRA previously authorized $2.3 billion to manufacturing companies in the form of a 30% tax credit for qualified investments in advanced energy projects to support new, expanded, or re-equipped domestic manufacturing equipment.
Based on the first 48C round, a qualifying advanced energy project is a project that re-equips, expands, or establishes a manufacturing facility for the production of:
- Property designed to produce energy from renewable resources
- Fuel cells, microturbines, or an energy storage system for use with electric or hybrid-electric vehicles
- Electric grids to support the transmission, including storage, of intermittent sources of renewable energy
- Property designed to capture and sequester carbon dioxide emissions
- Property designed to refine or blend renewable fuels or to produce energy conservation technologies
- Electric drive motor vehicles that qualify for tax credits or components designed for use with such vehicles
- Other advanced energy property designed to reduce greenhouse gas emissions
The actual implementation of the proposed provisions would require action by Congress. The fundamental push toward renewable energy and the reduction of greenhouse gases highlights the importance of planning for the grant application in anticipation of the proposed credit availability.
According to the Department of Energy, the tax credits issued by the first 48C round were oversubscribed by a ratio of 3 to 1. If adopted, the proposed plan is likely to see similar, if not more, interest. As with any competitive application, compliance with all of the requirements can be cumbersome and difficult to understand. However, completing the application correctly is imperative; even if a single item is missed or filled out incorrectly, the application could be moved to the end of the queue.
Plante & Moran assisted clients in obtaining more than $125 million of tax credit allocations as part of the first round of the Advanced Energy Manufacturing Tax Credit. If your manufacturing company plans to expand into or continue to serve the clean energy market, understanding the benefits of this credit may provide the edge during the application period.