Business Without Borders – International Business and Tax Planning Blog

Posts Tagged ‘cash basis’

The effects of the federal government “sequester” will take many months to figure out completely, but it is becoming increasingly clear that the results will be far-reaching and not necessarily fully anticipated.  For example, Chinese and European manufacturers of solar equipment intended for sale in the United States may be surprised to find out that federal government support for solar projects has taken an unexpected hit.

We have previously written about Section 1603 of the American Recovery and Reinvestment Act (ARRA), which offered certain owners of renewable energy projects, including photovoltaic solar, the opportunity to receive a cash grant in lieu of the usual 30% investment tax credit for such projects. The grant has been a very attractive option for taxpayers that have no or limited taxable income, and that accordingly could not use or would need many years to use up the full amount of the credit.

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Combined incentives from the United States federal government and the State of New Jersey have made New Jersey an extremely attractive market for European and Asian manufacturers of solar panels.  Published reports consistently rank New Jersey as number one or number two in terms of solar installations, neck and neck with the much larger (and somewhat sunnier) State of California.

However, the looming expiration of a key federal program has helped stimulate a feverish acceleration of developments that in turn has had an impact on the value of New Jersey’s Solar Renewable Energy Certificates, or SRECs.  Section 1603 of the American Recovery and Reinvestment Act (ARRA) offered certain owners of renewable energy projects, including photovoltaic solar, the opportunity to receive a cash grant in lieu of the usual 30% investment tax credit for such projects.  While taxpayers with large amounts of taxable income might regard a cash grant and tax credit as equivalent, the grant is a very attractive option for taxpayers that have limited taxable income and that accordingly would need many years to use up the full amount of the credit.

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