Advanced Energy Manufacturing Tax Credit

On Thursday, August 13, the Department of Energy and the Department of the Treasury announced guidelines implementing the Advanced Energy Manufacturing Tax Credit (MTC), which is designed to award $2.3 billion in tax credits for qualified investments in domestic manufacturing facilities that provide clean technology products. The MTC was authorized by Section 1302 of the American Reinvestment and Recovery Act of 2009 (ARRA) and is also referred to as Section 48(C) of the Internal Revenue Code.

The MTC is unique because it is the first tax credit specifically designed to encourage the development of a domestic clean technology manufacturing base as opposed to renewable energy generation. Under Section 1302 of the ARRA, "qualifying advanced energy projects" must re-equip, expand, or establish manufacturing facilities used in the production of: (i) property designed to be used in the production of renewable energy (solar, wind or geothermal); (ii) advanced energy storage systems (fuel cells, microturbines or other storage systems for use in electric or hybrid motor vehicles); (iii) efficient electricity transmission and distribution systems (smart grids and grids able to support (and store) intermittent sources of renewable energy); and (iv) carbon capture and sequestration systems.

ARRA also provides that the MTC is only available for projects that are certified by the Secretary of the Treasury and the Secretary of Energy. Accordingly, the Internal Revenue Service and the Department of Energy will review and rank applications based on a number of factors, including but not limited to: (i) commercial viability; (ii) number of jobs created during credit period; (iii) net impact in reducing air pollutants and greenhouse gas emissions; (iv) potential for technological innovation and commercial deployment; and (v) time to complete project.

The MTC provides a 30 percent tax credit for investments made in qualifying advanced energy projects. The application period opened August 14. Preliminary applications are due to the Department of Energy and Internal Revenue Service on September 16, and final applications are due on October 16. The Department of Energy and the Internal Revenue Service will certify projects by January 15, 2010, and recipients will receive acceptance agreements from the Internal Revenue Service by April 16, 2010. The MTC is available for two years or until the program funding of $2.3 billion is exhausted.

It is important to note that projects receiving the MTC must be completed within four years of their tax credit acceptance. Additionally, the MTC is only available for future investment and not prior expenditures.