1603 Program Would See Cuts Under Congressional Sequestration Plan

Posted by SI Staff on September 19, 2012 No Comments
Categories : New & Noteworthy

The U.S. Department of Treasury's section 1603 program, known as the cash-grant program, would be subject to sequestration, according to a news alert from law firm Akin Gump.

The popular 1603 program, which expired at the end of last year, provided a 30% grant in lieu of tax credits for commercial solar projects. Akin Gump recently analyzed a document from the Office of Management and Budget (OMB) and found that 1603 would, in fact, be scaled down if sequestration is enacted.

2011 legislation requires Congress to agree to a plan to reduce the U.S. deficit by $1.2 trillion. If lawmakers cannot do so, automatic budget cuts – sequestration – would occur.

‘Congress has yet to enact such a plan, and given the current political climate, it is not entirely clear whether such a plan will be enacted in time to avoid the mandatory budget cuts,’ Akin Gump explains in its news alert. ‘Facing the prospect that sequestration may become a reality, Congress enacted the Sequestration Transparency Act of 2012, which requires the OMB to submit a plan to Congress outlining the across-the-board cuts.’

Because the 1603 program is classified as a ‘nondefense function’ in the OMB's report, it would receive the mandatory 7.6% cut. Thus, each grant would be resized to 27.72%, rather than the previous 30%.

Akin Gump calls this discovery a ‘significant surprise for the renewable energy industry.’ Before the OMB report was released, earlier indications from Treasury appeared to signal that the 1603 program would not be subject to sequestration.

The firm adds that the OMB report leaves several important questions unanswered, and the specific timing and methodology of the government's sequestration plans have yet to be determined.

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