On Friday, June 5, 2009, the IRS released guidance on the election to utilize the Investment Tax Credit (the “Energy Credit”) in lieu of the Production Tax Credit with regard to certain qualifying renewable energy facilities, as permitted under the American Recovery and Reinvestment Tax Act of 2009 (the “Act”). Enacted in February, the Act expands the availability of the 30% Energy Credit for qualified facilities, including qualifying open- and closed- loop biomass, solar, geothermal, hydropower, landfill gas, waste-to-energy and marine facilities placed in service in 2009 through 2013, as well as qualifying wind facilities placed in service in 2009 through 2012. The Act provides that, in order to qualify for the expanded Energy Credit, a taxpayer must make an irrevocable election (the “Election”) to apply the Code section 48 Energy Credit in lieu of the Code section 45 Production Tax Credit with respect to qualified renewable energy facilities.

The Energy Credit is available only for a qualified facility for which an Election has been made to treat it as a "qualified investment credit facility." No Production Tax Credit is available with respect to a qualified investment credit facility. Thus, if the taxpayer claims the Energy Credit with respect to any property included within such facility, no Production Tax Credit will be available with respect to production from that facility.

In Notice 2009-52, 2009-25 IRB 1, the IRS sets forth the procedure to make the Election to treat a qualified facility as a qualified investment credit facility. Specifically, a taxpayer must file IRS Form 3468 claiming the Energy Credit with a timely filed tax return (including extensions) for the taxable year in which the qualified facility is placed in service. A separate election is required for each qualified facility. In addition, the taxpayer must attach to the IRS Form 3468 a statement, signed under penalties of perjury, that includes certain identifying information about both the taxpayer and the qualified facility, as well as an affirmation that the taxpayer has not and will not claim a Section 1603 grant with respect to the qualified facility.

The Notice further provides that a taxpayer must retain adequate books and records, including the Election documentation described in the preceding paragraph and all supporting documentation relating to the Election and the taxpayer’s claimed Energy Credit.

The Election is available for qualified facilities placed in service after December 31, 2008. 

This article was prepared by David A. Gillespie (dgillespie@fulbright.com or 212 318 3073), Bill Bowers (bbowers@fulbright.com or 214 855 3903), Girard P. Miller
(girard.miller@fulbright.com or 612 321 2252) and Jennifer A. Morgan (jamorgan@fulbright.com or 212 318 3242) from Fulbright's Alternative Energy Practice Group and Fulbright's Tax Practice Group.

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