This is a guest post by Rodman and Rodman. If you have any accounting questions related to renewable energy projects, the guys at Rodman and Rodman are awesome.
Rodman & Rodman has prepared numerous 1603 applications and, based on our experience with the application process, we have a come up with a top 10 list of helpful tips. Listed below are some application tips and additional documentation that we recommend you have on hand, even though the initial application does not require you to have them in the initial submission.
When the U.S. Treasury requests additional information on an application you have 21 days to respond. Therefore, it is very important to be organized and timely. Following the tips below, and having the suggested documents on hand, could assist you in responding to the Treasury in a timely and efficient manner.
1) Canceled Checks – Have available copies of all canceled checks, front and back, related to the project. We have found that the Treasury will sometimes question expenses and request copies of canceled checks. Since you only have 21 days to respond, we recommend keeping these checks on file as you pay vendors and receive bank statements. Requesting them from the bank can take weeks, so plan ahead.
2) “Expensive” Projects – If your project is on the “high-end” of the cost per watt scale, the Treasury will be asking about it. Consider having a narrative ready to go to explain why your costs are higher than the average. Examples could include geographic factors, weather, technology, etc. These explanations need to be factual and be backed up with documentation.
3) Management/Development Fees – Many, if not most of the projects we’ve seen include a management fee or development fee (often paid to some form of related party). Make sure you have means to justify this fee with backup, such as contracts, time records, and detailed explanations of actual work warranting such a fee.
4) Cost Breakdown – The more detail you can supply the better. Prepare a very-detailed schedule listing out all the costs. Do not lump related costs together. For example, if the invoice line says “installation and panels,” this needs to be broken out. In many cases you’ll need to work with your EPC contractor to get this sort of detail. This can take time so again, plan ahead. Examples of breakouts may include:
Panels – How many, what brand?
Inverters – How many?
5) Disqualified Costs – Be careful of costs that do not qualify. Examples include fencing and transmission lines. Some site work may not qualify depending on the nature. If you are unsure, email the Treasury and keep a copy of the Treasury’s response in your support file.