The Court of Federal Claims on October 28 entered judgment in favor of Alta Wind cash grant applicants awarding them collectively over $206 million for grants under Section 1603 of the American Recovery and Reinvestment Tax Act that the Treasury had declined to pay. The two page judgment is available at Alta Wind Judgment Oct 2016.
The judgment is clearly good news for the renewable energy industry and the many other cash grant applicants who Treasury awarded smaller cash grants than they applied for. Other project owners who were shorted by Treasury are likely to be inspired by this judgment to bring lawsuits in the Court of Federal Claims to recover the difference between what they applied for and what Treasury awarded.
There is a substantive judicial opinion that accompanies the judgment. That opinion is still under seal (i.e., is not publicly available), while the judge and the parties determine what text must be redacted from the public version in order to protect proprietary information.
Congress provided that the Section 1603 cash grant rules “mimic” the investment tax credit (ITC) rules in Section 48 of the Internal Revenue Code (the Code); therefore, the Court’s opinion is likely to provide the renewable energy industry and its tax advisers with clarification of how to determine the ITC eligible. In many renewable energy transactions, that basis results from a sale of the project at fair market value as confirmed by an independent appraisal. The opinion may provide some clarification as to the methodology and considerations to be used in such an appraisal.
The decision is likely to have more significance to the solar industry than wind projects, as wind projects typically claim the Code Section 45 production tax credit (PTC), which is 2.3 cents per Kilowatt hour of production during the first ten years of operation of the project; therefore, the amount of the PTC is not affected by the tax basis (or the fair market value of the project).
The Department of Justice can appeal the case to the Federal Circuit. Therefore, there may another chapter in this story that could potentially change the outcome. However, to the extent the Federal Circuit were to view the amount of the cash grant award as a question of fact then it will only overturn the decision of the Court of Federal Claims if the factual findings were clearly erroneous. Federal Rule of Civil Procedure 52(a)(6).