John Marciano Co-Authors Article on Unused Advanced Energy Manufacturing Tax Credits

Tax partner John Marciano has co-authored an article for North American Windpower regarding unused advanced energy manufacturing tax credits released by the U.S. Department of Energy (DOE) and Internal Revenue Service (IRS).

In “How To Benefit From The DOE’s Clean Energy Manufacturing Tax Credits,” the authors note that the DOE will rank proposals provided by companies with clean energy and energy efficiency manufacturing projects across the United States in order to determine how to allocate the $150 million in unused credits.

For companies seeking to apply, the authors note important items to consider, including:

  • Significant changes to a project may result in a loss of credits “A change is considered significant if it might have caused the DOE to assign the project a different ranking. In a later audit, the IRS may still challenge whether a project was entitled to the tax credits a company claimed.”
  • Beneficial to limited entities – “Most individuals, limited liability companies (LLCs) or partnerships cannot use tax credits or depreciation efficiently to reduce their tax liability because of special rules that do not allow investment-type tax credits to be used against tax liabilities on most types of income, like wages, interest and dividends. Large corporations are usually the best users of tax benefits because they have very few limitations on using tax credits.”
  • Credit’s staying power – “These tax benefits can be stored as an asset for up to 20 years, but it is an asset that does not increase in value or offer any return to its owner. In other words, it has the same value today as it will have in 10 or 20 years. For this reason, bartering the tax benefits to someone who can use them immediately is often an efficient way to raise capital.”

Additionally, the authors lay out the application timeline for companies looking to be considered for the tax credits—noting the concept paper deadline of April 9 and application deadline of July 23—as well as note two upcoming deadlines for any company awarded tax credits, saying, “The manufacturing project must be shovelready within one year of receiving the award, and it must then complete construction within three years.”