Madhya Pradesh, India -- (SBWIRE) -- 02/23/2011 -- A bill that embodies the controversial tax-cut deal negotiated by President Obama’s administration and Republican congressional leaders includes an extension of a Treasury Department grant program for solar energy installations.

The federal government provides a 30 percent federal tax credit for the cost of renewable energy projects for both homeowners and businesses. However, because of the recession, some commercial project developers, large and small, have limited or no federal tax liabilities and are thus unable to take advantage of the tax credit.

In response, the Obama administration and Congress established in the American Recovery and Reinvestment Act what is known as the Treasury Department’s Section 1603 grant program, which allows the 30 percent credit to be distributed as a cash grant instead for commercial projects.

The grant program was set to expire at the end of 2010, creating concern among renewable energy developers. The Solar Energy Industries Association, a trade group, has urged its members to press their congressional representatives for an extension through 2012.

An extension through 2011 is included in the tax-cut measure introduced Dec. 9 by U.S. Sen. Harry Reid, D-Nev., and Sen. Mitch McConnell, R-Ky. The measure is called "The Reid-McConnell Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010."

The eleventh-hour inclusion of the extension of a powerful incentive for solar and wind energy projects is likely to put pressure on Democrats in Congress who otherwise might be inclined to oppose the measure because of its polarizing extension of tax cuts that would benefit upper-income as well as middle-income taxpayers. The bill also would extend unemployment payments, a provision many Republican senators and representatives might otherwise tend to oppose.

The Section 1603 program has provided grants that have assisted the funding of renewable energy projects in all but a handful of states.

“This bill is not perfect, but it provides the economic boost middle-class families and small businesses in Nevada and across America need,” Mr. Reid said in a message on his website. “Middle-class families and small businesses will see their taxes go down.

This measure contains additional jobcreating tax incentives for working families including the payroll tax cut, child tax credit and the Earned Income Tax Credit. It provides incentives to create clean-energy jobs, energy-efficient homes, and investments in renewable energy. And it will ensure that the millions of Americans still looking for work in this economy will continue to have the safety net they rely on to make ends meet.”

The tax-cut deal reached by the Obama administration and GOP leaders, however, has created a backlash among Democrats in Congress, and its potential for passage is uncertain.

The Treasury grant program has approved nearly 1,500 awards totaling more than $5.5 billion in payments, mostly for wind and solar electricity projects.

So far, the largest awards have been for wind projects, ranging up to about $218 million for a project in the state of Washington.

Solar electricity projects have received the highest number of awards, with almost 1,200. Solar electricity awards have ranged from a few thousand dollars to about $62 million for a Florida Power & Light Co. project.

The proposed Reid-McConnell measure also would enhance a law on depreciation provisions for investments in new business equipment.

Businesses under existing law are allowed to recover the costs of expenditures over time, according to a depreciation schedule.

Starting on Jan 1, 2008, and ending last year, Congress began allowing businesses to take an additional depreciation deduction allowance equal to 50 percent of the cost of depreciable property.

The Small Business Jobs Act of 2010 extended the increase in the depreciation deduction allowance through the end of 2010. The tax-cut bill would extend and temporarily increase the bonus depreciation for investments in new equipment by businesses.

For equipment placed in service after Sept. 8, 2010, and through Dec. 31, 2011, the bill would provide for a bonus depreciation of 100 percent. For investments placed in service after Dec. 31, 2011, and through the end of 2012, the bill would authorize a 50 percent bonus depreciation.

http://www.granttreasury.com