Global Trade Alert

On June 24, 2011 the U.S. Treasury awarded $30,395,129 in subsidies to Pacific Energy Capital 1, LLC for a solar electricity project in the state of California. This payment was authorized under section 1603 of the American Recovery and Reinvestment Tax Act of 2009 (and subsequent extensions of that authority), which directed the Treasury to make payments for specified energy properties. The aim of the program is to promote the adoption of alternative energy sources, and to reimburse eligible applicants for a portion of the expense of such property. The energy properties themselves (e.g., solar panels, wind turbines, etc.) are not subject to Buy American rules, but the law specifies that property that is used predominantly outside the United States does not qualify for a payment under this program. These subsidies are considered by GTA to be discriminatory insofar as they confer a financial advantage on recipients that are conditioned upon engagement in a commercial activity, and differentiate between U.S. and foreign firms. The rules governing the section 1603 program explicitly provide that applicants may not be foreign persons, except in the case of foreign person or entity that qualifies for an exception under section 168(h)(2)(B) of the Internal Revenue Code. That exception generally covers the property of a foreign person when more than 50 percent of the gross income for the taxable year derived by the foreign person or entity from the use of such property is either (i) subject to tax or (ii) included under in the gross income of a U.S. shareholder.