Avoiding the Haircut: Potential Ways to Enhance the Value of the USDA's Section 9006 ProgramDate: 7/1/2006(PDF 269 KB) Download Adobe Reader.
Section 9006 of Title IX of the 2002 Farm Bill established the Renewable Energy Systems and Energy Efficiency Improvements Program (the "Section 9006 program"). Administered by the United States Department of Agriculture (USDA), the Section 9006 program provides grants and loan guarantees for assistance with purchasing renewable energy systems and making energy efficiency improvements.
In the first three rounds of grant funding under this program, large (defined as > 100 kW) wind projects have been awarded nearly $26 million, or roughly 40% of all grant dollars awarded to date. Such projects are also typically eligible for the Federal Production Tax Credit (PTC) codified in Section 45 of the US tax code. Because the PTC provides a significant amount of value to a wind project, most "large wind" applicants to the Section 9006 program have also tried to take advantage of the PTC.
Through what are known as "anti-double-dipping" or, more colloquially, "haircut" provisions, however, the size of the PTC is reduced if a project receives certain other forms of governmental support. The legislative and regulatory history surrounding the PTC's haircut provisions suggests that grants and direct loans (but not loan guarantees) provided under the Section 9006 program will cause a PTC haircut.
Focusing exclusively on wind projects, this report explores the anti-double-dipping issue and suggests some ways that the program could possibly avoid a PTC haircut. Its purpose is two-fold: (1) to inform recipients of Section 9006 grants, as well as applicants and potential applicants to the program, of the implications of the PTC's anti-double-dipping provisions; and (2) to help the USDA and related stakeholders understand the negative financial impact of such provisions, and possibly re-design the program to avoid that impact. This information was last updated on 7/17/2006
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