Green Jobs and Renewable Energy are Cornerstones of
Proposed Economic Recovery Legislation

As President Barack Obama seeks to make good on campaign promises related to the creation of green jobs and promotion of renewable energy, the United States Congress is in the process of passing economic recovery legislation that if enacted would expand existing, and establish new, tax incentive programs to further those goals. Specifically, the Senate Finance Committee version of the American Recovery and Reinvestment Tax Act contains several provisions of interest to, among others, manufacturers, energy producers, financial institutions and developers. The Act also contains some other items of interest to businesses who are facing the toughest economy in 25 years. The version passed by the House of Representatives contains many of the same provisions, with some exceptions. This article hits the highlights of the Senate version. We'll know more as the wrangling continues on Capitol Hill, but currently the Act would, among other things:

· Create a new 20% credit for all qualified energy research expenses paid or incurred in 2009 or 2010. Qualified energy research expenses include expenses related to the fields of fuel cells and battery technology, renewable energy, energy conservation technology, efficient transmission and distribution of electricity, and carbon capture and sequestration.

· Establish a 30% credit for investment in qualified property used in a qualified advanced energy manufacturing project. A qualified advanced energy manufacturing project is a project that re-equips, expands, or establishes a manufacturing facility for the production of property designed to:

o be used to produce energy from the sun, wind or geothermal deposits;

o manufacture fuel cells, microturbines or an energy storage system for use with electric or hybrid-electric motor vehicles;

o manufacture electric grids to support the transmission of intermittent sources of renewable energy; or

o manufacture equipment for use for carbon capture or sequestration.

· Extend Code Section 45 renewable energy production tax credits by increasing the placed in service date for three years (generally through 2013; through 2012 for wind) for qualified facilities producing electricity from wind, closed-loop biomass, open-loop biomass, geothermal energy, municipal solid waste and qualified hydropower).

· Allow taxpayers to make an irrevocable election to have certain qualified facilities placed in service in 2009 and 2010 be treated as energy property eligible for a 30% investment credit under Code Section 48 (specifically, wind power, which is currently eligible only for the Code Section 45 production tax credits).

· Eliminate the credit caps applicable to qualified small wind energy property.

· Expand the volume for Clean Renewable Energy Bonds (CREBs), which are tax credit bonds, the proceeds of which may be used to finance renewable energy projects.

· Expand the volume for Qualified Energy Conservation Bonds (QECBs), which like CREBs, are tax credit bonds, and were recently established in the bailout legislation of October 2008. The proceeds of QECBs, however, can be used for several types of projects, including:

o implementing green community programs;

o rural development involving the production of electricity from renewable energy resources, or most facilities eligible for the production tax credit under Code Section 45;

o research projects related to the development of cellulosic ethanol or other nonfossil fuels, technologies for the capture and sequestration of carbon dioxide produced through the use of fossil fuel, increasing the efficiency of existing technologies for producing nonfossil fuels, automobile battery technologies, and technologies to reduce energy use in buildings;

o demonstration projects related to similar programs, but also including projects designed to promote the commercialization of green building technology;

o mass commuting facilities and related facilities that reduce the consumption of energy; and

o public education campaigns to promote energy efficiency.

The Act contains several other provisions, including those that would make changes concerning new markets tax credits, tax-exempt bonds, cancellation of debt income, net operating losses, and alternative minimum tax. If you have any questions, please contact Paul Jones partner in the Tax Practice Group and member of the Firm's Green Industries Initiative.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.