How do you prove that construction has begun in 2011 for a 1603 cash grant?

We are working on a solar installation for a commercial project and are applying for a 1603 cash grant in lieu of tax credits under the ARRA Act of 2009. How do I prove that that construction has begun on a project even if it is not going to be commissioned before the end of 2011 to qualify for the cash grant instead of the tax credit?

Comments

This is another very good question about the 1603 cash grant. (See past forum question: Does the Buy American provision apply to the 1603 Solar cash grant application?)

The answer is that there are two ways to show that construction has begun. One is to begin physical work of a significant nature. The other is to meet a 5% safe harbor.

That is the technical answer, which brings up two big questoins:

What does it mean to begin physical work of a significant nature?
Answer: This means that physical work on the specified energy property has started. Physical work of a significant nature includes any physical work on the specified energy property at the site. Physical work of a significant nature also includes physical work that has taken place under a binding written contract for the manufacture, construction, or production of specified energy property for use by the applicant’s facility provided the contract is entered into prior to the work taking place.
What if the actual costs run over budget and you only purchased 5% of the equipment?
Answer: If the project does go over budget and you only purchase 5% of the equipment you will not qualify when you go to receive funds for your cash grant. Therefore, it is safer to purchase 8% of the equipment to allow for project overages.

In addition I attached to this posting two FAQ that further explain the Safe Harbor rules as it relates to the 1603 cash grant in lieu of the incentive tax credit funded by ARRA.