Resolution of Tax Issue Clears Path for Smart-Grid Projects

While the smart grid is endowed with a grand vision and considerable promise, it’s been honored more with words than with deeds until now.

The problem? According to the National Association of Regulatory Utility Commissioners (NARUC), electric utilities put their respective smart-grid projects on hold because they were concerned about the tax status of their government grants under the American Recovery and Reinvestment Act (ARRA) of 2009.

Additionally, there were reports of a dispute between the U.S. Department of Energy (DoE) and the Treasury Department over whether the grants should be subject to taxation.

Apparently the dispute has been resolved. The Treasury Department announced yesterday that companies that receive smart-grid grants will not have those funds taxed by the federal government. Also yesterday, the DoE announced that the Treasury Department’s Internal Revenue Service (IRS) will provide a “safe harbor” for utilities that qualify for the government’s $3.4 billion in smart-grid stimulus spending.

The news means the Energy Department can proceed with grant agreements in the coming weeks, according to a joint statement from the Treasury and Energy departments.

Katherine Hamilton, president of industry group GridWise Alliance, said Wednesday that most of the contracts for the $3.4 billion stimulus package could be in utility’s hands by the end of this month.

Said Hamilton:

“We are thrilled that the IRS has made this decision and that our advocacy efforts played a positive role in their decision.”

“Now these smart-grid technologies can be deployed and begin doing what they are intended for — stimulating the economy. These projects will make our electric grid more reliable, flexible and efficient, while creating much needed jobs in utilities, manufacturing and across the energy value chain.”

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