Federal
Incentives/Policies for Renewables & Efficiency
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Last DSIRE Review: 04/14/2009
| Incentive Type: |
Federal Loan Program |
| State: |
Federal |
| Eligible Efficiency Technologies: |
Yes; specific technologies not identified
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| Eligible Renewable/Other Technologies: |
Solar Thermal Electric,
Photovoltaics,
Landfill Gas,
Wind,
Biomass,
Hydroelectric,
Geothermal Electric,
Municipal Solid Waste,
Hydrokinetic Power,
Anaerobic Digestion,
Tidal Energy,
Wave Energy,
Ocean Thermal
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| Applicable Sectors: |
Local Government,
State Government,
Tribal Government
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| Amount: | Varies |
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Authority 1:
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26 USC § 54A
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| Date Enacted: | 10/03/2008 |
| Date Effective: | 10/03/2008 |
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Authority 2:
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26 USC § 54D
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| Date Enacted: | 10/03/2008 (subsequently amended) |
| Date Effective: | 10/03/2008 |
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Authority 3:
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IRS Notice 2009-29
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| Date Effective: | 04/07/2009 |
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Summary:
The Energy Improvement and Extension Act of 2008, enacted in October 2008, authorized the issuance of Qualified Energy Conservation Bonds (QECBs) that may be used by state, local and tribal governments to finance certain types of energy projects. QECBs are qualified tax credit bonds, and in this respect are similar to new Clean Renewable Energy Bonds or CREBs.
The October 2008 enabling legislation set a limit of $800 million on the volume of energy conservation tax credit bonds that may be issued by state and local governments. However, The American Recovery and Reinvestment Act of 2009, enacted in February 2009, expanded the allowable bond volume to $3.2 billion. In April 2009, the IRS issued Notice 2009-29 providing interim guidance on how the program will operate and how the bond volume will be allocated.
The advantage of these bonds is that they are issued -- theoretically -- with a 0% interest rate. The borrower pays back only the principal of the bond, and the bondholder receives federal tax credits in lieu of the traditional bond interest. The tax credit may be taken quarterly to offset the tax liability of the bondholder. The tax credit rate is set daily by the U.S. Treasury Department; however, energy conservation bondholders will receive only 70% of the full rate set by the Treasury Department under 26 USC § 54A. Credits exceeding a bondholder's tax liability may be carried forward to the succeeding tax year, but cannot be refunded. Energy conservation bonds differ from traditional tax-exempt bonds in that the tax credits issued through the program are treated as taxable income for the bondholder. QECB rates are available here.
In contrast to CREBs, QECBs are not subject to a U.S. Department of Treasury application and approval process. Bond volume is instead allocated to each state based on the state's percentage of the U.S. population as of July 1, 2008. Each state is then required to allocate a portion of its allocation to "large local governments" within the state based on the local government's percentage of the state's population. Large local governments are defined as municipalities and counties with populations of 100,000 or more. Large local governments may reallocate their designated portion back to the state if they choose to do so. IRS Notice 2009-29 contains a list of the QECB allocations for each state and U.S. territory.
The definition of "qualified energy conservation projects" is fairly broad and contains elements relating to energy efficiency capital expenditures in public buildings; renewable energy production; various research and development applications; mass commuting facilities that reduce energy consumption; several types of energy related demonstration projects; and public energy efficiency education campaigns (see H.R. 1424 for additional details). Renewable energy facilities that are eligible for CREBs are also eligible for QECBs.
For more information on QECBs, contact Timothy Jones or David White of the IRS Office of Associate Chief Counsel at (202) 622-3980.
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Contact:
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Public Information - IRS
U.S. Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, DC 20224
Phone: (800) 829-1040
Web Site: http://www.irs.gov
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Please note: The information on the DSIRE web site provides an overview of incentives and other policies, but it should not be used as the only source of information when making purchasing decisions, investment decisions, tax decisions or other binding agreements. Please refer to the individual contact provided in each record to verify that a specific incentive or other policy is applicable to your specific project.
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