Indian Country and the ITC

03/30/2011 18:42:00

Indian Country and the ITC

There are many commercial renewable companies pitching projects on Indian Reservations. Most of the proposed projects rely on the Investment Tax Credit (ITC) to lower the cost of the project and create the impression of faster payoff times as well as a better return on investment (ROI) claims. Many of these renewable companies are only interested in building the project and do not have their own money at risk.

The ITC is a valid and helpful incentive to help finance a commercial project. With that said, it still needs to be reviewed against Tribal objectives in each instance. Without taxable revenue the ITC has no value since it only offsets tax obligations to the federal government. Instead of relying on the ITC, Tribes who are thinking of building renewable projects need to find out whether the Treasury Cash Grant is available. The Cash Grant may be substituted for the ITC and is a direct payment of up to 30% of the capital investment. The primary difference is the time frame to bring the project on-line. The ITC is available for all projects that are placed in service prior to December 31, 2016, while the Treasury Tax Grant is currently only available through December 31, 2011.

Tribal entities reviewing projects and in talks with companies to build such projects are advised to review the time line carefully. The biggest questions that need to be asked are what happens if the project fails to meet the in-service deadlines and is there sufficient penalty by the contracted firm to cover the loss of the grant should they fail to meet the deadline.

Indian Country Energy Services

Bill Thibodeau

Founding Partner/Energy Economist

April 2011

New Blog Coming Soon

03/25/2011 11:01:00

My Blog

Indian Country and the ITC

New Blog Coming Soon