The change applies to Cash Grants paid on or after October 1, 2015, and on or before September 30, 2016, regardless of when the application was submitted to Treasury.
The effect of the sequester is that, if a solar project has an “eligible basis” of $1,000, then the 30 percent Cash Grant would be $300; however, the 6.8 percent sequester results in it being only $279.60 (as opposed to $278.10 for Cash Grants paid in the prior fiscal year). If a project owner wishes to avoid the sequester, it has the option to claim the 30 percent investment tax credit under Section 48 of the Internal Revenue Code; however, efficient use of that credit requires a federal income tax liability that can be offset by the credit.
To be eligible for a Cash Grant, solar projects have until the end of 2016 to be “placed in service”; however, a preliminary Cash Grant application must have been filed before the end of 2012. Wind projects must have been placed in service before the end of 2012.
The decrease in the sequestration rate from 7.3 percent for fiscal year 2015 to 6.8 percent for fiscal year 2016 suggests that the federal budget deficit is slightly lower relative to the statutory target than it was last year.
1 The Cash Grant is provided for in Section 1603 of Division B of the American Recovery and Reinvestment Act, as amended. For wind and solar projects, the Cash Grant is 30 percent of “eligible basis.”