In a March 4 message posted to its website, the Treasury Department said grants under the “1603” stimulus program would be reduced by 8.7 percent to meet obligations imposed by the March 1 across-the-board “sequestration” budget cuts. The 1603 grant program was part of the American Recovery and Reinvestment Act in 2009 and provides a cash payment in lieu of production and investment tax credits equal to 30 percent of the cost basis of wind, solar, geothermal, and other renewable energy projects. The cuts will apply to all awards made between March 1 and September 30, 2013, and will extend to grant applications filed prior to March 1 that are still being processed, regardless of when the application was received by Treasury. Payments made after the end of the government’s fiscal year, September 30, may also be subject to cuts with the sequestration rate subject to change at that time. Payments made before March 1 will not be affected.
Although the 1603 program sunset in 2011 with payments already received by developers, projects that began construction or met a safe harbor before the end of 2011 still qualified for grant payments when the project is placed in service. This cut will likely have a significant impact on these pending projects as the cash grant is a significant component of modeling the cash flows associated with each project.
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