Treasury's 1603 Grant Program: New guidance clarifies application of the five-percent safe harbor

Alternative & Renewable Energy Tax Newsalert

To be eligible for the Treasury 1603 grant program, companies must "begin construction" on their projects by December 31, 2011. Beginning of construction can be demonstrated by either incurring at least 5% of eligible project costs ("5% test") or beginning "significant physical work" in a plan of continuous construction. Many companies currently are working to satisfy the 5% test by year-end. However, some companies and advisors have wrestled with the effect of ownership changes on how the 5% test can be applied.

Earlier this week, Treasury updated its frequently asked questions document on beginning of construction to address issues surrounding this requirement. New Q&As 23 and 24 should provide companies with additional guidance regarding the 5% test.

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