The Treasury Department continued its flurry of stimulus-related guidance yesterday, unveiling notices that allocate to states a total of $3.2 billion of qualified energy conservation bonds and that show governments and power providers how to apply for a total of $2.4 billion of clean renewable energy bonds.
These taxable, tax-credit bond programs were expanded by the new stimulus law, and the Treasury notices come on the heels of three other pieces of guidance released Friday.
One notice outlined the mechanics of the direct-pay option of an unlimited amount of Build America Bonds and $10 billion of Recovery Zone Economic Development Bonds. The other two notices contained the maximum allocations to states of $11 billion of qualified school construction bonds and $1.8 billion of qualified zone academy bonds that also were authorized by the stimulus law.
The Treasury allocates the QECBs directly to states and territories, which then are expected to distribute those allocations proportionally to large local governments - municipalities or counties with more than 100,000 people. The bonds must be used for "qualified conservation purposes," which the 12-page notice defines as capital expenditures incurred to reduce energy consumption in public buildings by at least 20%, green community programs, and rural electricity development from renewable resources.
QECBs also can be used to finance research into cellulosic ethanol or other nonfossil fuels; carbon capture technology; improving efficiency of current technologies that produce nonfossil fuels; ways to reduce fossil fuel consumption in transportation, including car-battery research; or technologies to reduce building energy use.
Mass commuting facilities, demonstration projects to promote the commercialization of renewable energy initiatives, and public education campaigns to promote energy efficiency also would be eligible for QECB financing, the notice stated.
The Treasury does not allocate CREB authority to states and localities, but rather reviews and approves applications of projects that can be financed with the tax-credit bonds.
As a result, the Treasury included a sample application in its 20-page CREBs notice. The $2.4 billion of new CREBs are to be allocated one-third each to governmental bodies, public power providers, and cooperative electric companies.
CREBs can be issued if 100% of the available project proceeds are used by qualified owners for one or more qualified renewable energy facilities. Qualified owners include not just governments, public power providers, and electric cooperatives, but also nonprofit electric utilities that have received loans or loan guarantees under the Rural Electrification Act, a 1936 federal law that provides funds for the development of power distribution systems to rural parts of the country.
Issuers that want to use CREBs must submit an application for them before Aug. 4, 2009. The application must include the following information: the issuer; a project description; the owner of the facility; a demonstration that the project is a "qualified renewable energy facility;" an independent certification from an engineer that the project meets that definition, is technically viable and will produce electricity; the project's location; a financing plan; and the amount of CREBs requested. Applicants also should mention if they have previously received CREB allocations on any related projects.
An issuer with an existing CREB-financed facility can still seek new CREB allocations if it wants to increase the capacity of the facility, the notice stated.
CREB allocations from the Treasury are valid for three years, after which any unused authority will revert back to the Treasury and be reallocated to other projects, according to the notice.
Timothy Jones with the Internal Revenue Service associate chief counsel's office oversaw both notices, along with colleagues David E. White and Zoran Stojanovic.