Today, Majority Leader Harry Reid and Senate Finance Committee Chair Max Baucus released their proposal for a middle class tax cut.  Although far from the final product, the bill gives us some insight into thinking on the Senate side.

From a renewable energy standpoint, the most important proposal is a one-year extension of the ITC grant.  Thus, the deadline for beginning construction would shift to December 31, 2011.  The proposal is not a pure extension of section 1603, however.  Instead, the proposal would convert section 1603 to a refundable tax credit.  This proposal originated on the House side in HR 4599, introduced by Rep. Earl Blumenauer (D-OR).  Here is a link to our previous blog on the Blumenauer proposal.

The essential takeaway is that the program would shift to IRS from Treasury.  Taxpayers would "apply" for their money by filing a tax return for the year in which the facility was placed in service, claiming that they had made a payment against taxes equal to 30% (10% in certain cases) of the qualified cost of the facility.  They would then get a refund for that amount.  This new deadline means that taxpayers will have to wait a minimum of 3 1/2 months (and perhaps as long as 15 months) to receive their refund.

There is some good news buried within the proposal.  The outright ban on ownership by governmental entities and tax-exempts would be lifted.  Instead, governments could receive the "credit" as could tax exempts (so long as they treated income from the facility as UBTI).

We will provide additional updates as the process moves forward.