Treasury's 1603 Grant Program: When can you use the "3 1/2 month rule" to take delivery of property in 2012 and still reach the 2011 construction safe harbor?

To be eligible for the Treasury 1603 grant program, companies must "begin construction" on their projects by December 31, 2011. Construction begins when a company either (a) incurs at least 5% of eligible project costs ("5% test") or (b) begins "significant physical work" in a plan of continuous construction. For potential applicants relying upon the 5% test, the important milestone is the date the costs are incurred. Where a project asset is produced, manufactured, or constructed for the applicant by another person, the cost of that asset is incurred when the property and/or services are provided to the applicant, under the "economic performance" test of Treas. Reg. §1.461-1. One notable exception to the economic performance general rule is Treas. Reg. §1.461-4(d)(6), which allows property or services that are reasonably expected to be provided within 3 1/2 months of the date of payment to meet the economic performance requirement when payment is made.