IRS Guidance on Electing ITC
(Copyright 2009 Stoel Rives LLP)
On Friday, June 5, 2009, the Internal Revenue Service issued Notice 2009-52,
which provides guidance informing taxpayers how to elect to claim the
Investment Tax Credit ("ITC") under IRC § 48 in lieu of the Production Tax
Credit ("PTC") under IRC § 45 with respect to qualifying projects. This
election was provided for as part of the American Recovery and Reinvestment
Act of 2009 ("ARRA"). The election to claim the ITC in lieu of the PTC
applies to the following types of renewable energy facilities:
1. Wind;
2. Biomass (both closed- and open-loop);
3. Geothermal;
4. Landfill gas;
5. Trash facilities;
6. Qualified hydropower; and
7. Marine and hydrokinetic.
Notice 2009-52 appears to provide the exclusive means by which taxpayers may
make the election. To qualify, a taxpayer must claim the ITC with respect to
qualified property that is an integral part of the facility on a completed
Form 3468. Form 3468 must be filed with the taxpayer's income tax return for
the year in which the property is placed in service.
A separate election must be made for each qualifying facility.
Observation: This requirement may be very important if the IRS defines
"qualifying facility" very narrowly. For example, if the qualifying facility
for a wind farm is each turbine, the election procedure will be extremely
onerous. There is no indication in Notice 2009-52 of how the IRS will define
a facility for this purpose.
The following information must be provided with each election:
1. Name, address, taxpayer ID number, and telephone number of the taxpayer.
2. For each qualified investment credit facility:
(i) A detailed technical description of the facility, including generating
capacity.
(ii) 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.
(iii) The date that the energy property was placed in service.
(iv) An accounting of the taxpayer's basis in the energy property.
(v) A depreciation schedule reflecting the taxpayer's remaining basis in
the energy property after the energy credit is claimed.
3. A statement that the taxpayer has not and will not claim a grant under
Section 1603 of ARRA for property for which the taxpayer is claiming the
energy credit.
4. 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
andbelief, the facts presented in support of this statement are true,
correct,and complete."
Observation: Notice 2009-52 does not address what constitutes what property
will be considered "integral" to a qualified facility. Presumably, this will
be addressed in subsequent guidance.
Finally, Notice 2009-52 requires that the taxpayer making the election
retain adequate books and records, including the information required to be
provided by Notice 2009-52 and all supporting documentation.
Observation: Notice 2009-52 focuses on the procedural aspects of the PTC to
ITC election. It provides virtually no guidance on grants in lieu of the ITC
under Section 1603 of ARRA, and offers little in the way of substantive
guidance. The Treasury is expected to issue such substantive guidance on
these and other issues in the coming months.
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