This is a financial incentive from the government, part of the product of the Energy Policy Act of 2005. This Act is available to municipal utilities intending to promote renewable energy use and development.
Since the availability of renewable energy projects, it has been financed by the Federal Production Tax credit. The mode of design of the federal production tax credit, on the other hand, was to benefit huge investors as well as tracking their capital into the renewable energy marketplace.
Government entities such as public power systems and municipal utilities and other electric cooperatives were not qualified for the production tax credit. In a bid to contest at the market, they facilitated the creation of CREB – a tax credit available to them alone. This program is like an incentive to encourage the refurbishment of public school buildings.
Detail of the Program
Clean Renewable Energy Bonds (CREB) is a tax credit bond with an interest-free finance rate. This means that the interest on the bond is paid in the form of a tax credit by the U.S. Treasury. From Jan 1, 2006, the secretary of the program has released $800 million through to Dec 31, 2007. Of that amount, $300 million was designated for rural electric cooperatives.
Ninety-five percent of the proceeds must be spent in five years. Daily, the tax credit rate is available at the U.S. Treasury Department.
The program's idea is to provide individual government bodies (states, localities, D.C., and some political subdivisions), electric and mutual corporate electric companies, an opportunity to get interested in free capital. This applies to some qualifying renewable energy facilities. These are bodies that qualify under the law.
According to Notice 2006-7, future regulations will consider political and state subdivisions like a tax-exempt bond. A few of the facilities that merit CREB financing are biomass, solar, geothermal, landfill gas, hydropower, and refined coal production.
Report from the Notice also reveals that for a project to qualify, the facility must be owned by a qualified borrower. The only fit body can issue CREBs. Examples are cooperative electric companies, clean, renewable energy lenders, governmental bodies. Lenders in this category are bodies that have outstanding loans to cooperatives.
Who can issue CREBs?
Local and state government
Native American tribal government
District of Columbia
U.S. territories
Native American tribal governments
National Rural Utilities Cooperative Finance Corporation
Who Qualifies for CREB Proceeds
A government body
A cooperative electric company
Allocation of Clean Renewable Energy Bonds
The U.S. treasury secretary gives issuing authority to all issuers of CREBs. There is a detailed guide inside Notice 2005-98 on the allocation process for the first round of $800 million. Notice 2007- 26, however, supersedes this. This same notice governs the allocation process for the extra allocation going by the Extenders Act and reallocation of the first $800 million.
One of the Extender Act's effects is that no qualified borrower (a government body) can get more than $750 million as allocation. In the application, there is some info required which was not part of the initial CREB application. An example is any amount that was once specified for the project CREBs.
Part of the requirement of the application is an engineer to give written certification that the project merits what was specified in Section 54(d)(2)(A).
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