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Act Now to Preserve Your Section 1603 Grant

On October 31, 2016, the US Court of Federal Claims issued its opinion in Alta Wind I Owner v. United States, in which the court determined that the value of the property eligible for the grant included the value of the power purchase agreements (PPA) associated with the facilities, and awarded an additional $206 million to the applicant.

This case will likely have very important ramifications to taxpayers who have either: (1) applied for the Section 1603 grant and received less money than anticipated; or (2) did not seek the full amount of the grant based upon Treasury’s guidance. In either case, if you have applied for a Section 1603 grant, you should consider your options.

What Should You Do Now?

We do not know if the government will appeal its loss in Alta Wind. Moreover, the statute of limitations may be expiring on your ability to seek reimbursement under the reasoning in Alta Wind. Strategically, it may make sense to file suit immediately in the Court of Federal Claims to put your case in the most positive position for resolution. Or if you never claimed the full amount of the grant, you may need to amend your application to do so.

Alta Wind is a significant decision, and is welcomed guidance to the renewable energy industry affirming its long-held view that the appropriate measure of cost basis in the context of the Section 1603 grant includes the value of a related PPA.

© 2018 McDermott Will & Emery

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About this Author

Philip Tingle Tax Attorney McDermott Will & Emery
Partner

Philip (Phil) Tingle represents energy companies such as utilities, independent power producers and financial institutions on a wide range of energy tax-related matters. He is the global head of the Firm's Energy Advisory Practice Group.

Phil provides advice regarding all aspects of renewable-energy projects, including tax equity structures, refinancings, acquisitions and dispositions, restructurings and workouts. He has extensive experience with the production tax credit and with the application of renewable credits to new technologies....

305-347-6536
Kevin Spencer, McDermott Will & Emery LLP , Tax Litigation Attorney
Partner

Kevin Spencer is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Washington, D.C., office.  He focuses his practice on tax controversy and litigation issues. 

Kevin represents clients in complicated tax disputes in court and before the Internal Revenue Service (IRS) at the IRS Appeals and Examination divisions.

In addition to his tax controversy practice, Kevin has broad experience advising clients on various tax issues, including tax accounting, employment and reasonable compensation, civil and criminal tax penalties, IRS procedures, reportable transactions and tax shelters, renewable energy, state and local tax, and private client matters. After earning his Master of Tax degree, Kevin had the privilege to clerk for the Honorable Robert P. Ruwe on the US Tax Court.

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Martha Groves Pugh, Federal Income Tax Attorney, McDermott Will Emery Law Firm
Counsel

Martha Groves Pugh is counsel in the law firm of McDermott Will & Emery LLP and is based in its Washington, D.C., office.  She focuses her practice on federal income tax issues with a particular emphasis on the nuclear and energy industries.  Marty has helped clients seek and receive many private letter rulings and has extensive experience in drafting legislative language for tax proposals. Her practice also includes tax planning for proposed transactions and advising clients on audits, appeals and litigation issues...

202-756-8368