Wind projects qualify for section 45 tax credits in the US. This is a tax credit of 1.7¢ a kilowatt hour for electricity generated. The credits run for 10 years after a project is placed in service.

However, the credits are subject to a “haircut” in amount if the project also benefits from government grants, tax-exempt financing, other tax credits or subsidized energy financing.

The IRS said in a private ruling made public in mid-January that there was no haircut in a case where a wind developer received a grant from a nonprofit entity set up and funded by an investor-owned utility. The utility set up the organization to encourage renewable energy projects. It was part of a deal with state regulators in exchange for permission to let the utility restructure. The IRS said the fact that the organization was set up as part of a deal with state regulators did not transform it into a government program.

The ruling is PLR 200202048. It follows on the heels of another ruling late last year in which the IRS said the fact that a state awarded generators using renewable energy negotiable “credits” that could be sold to utilities for cash also did not require a haircut.