Ampersand Chowchilla Biomass, LLC, et al. v. United States

Congress has incentivized the use of renewable, alternative energy sources by providing tax benefits to taxpayers who produce electricity at or invest in qualifying energy property. Eligibility for these benefits often turns in part on the year the energy property is “placed in service,” which the Treasury Department has construed to include when the property is “placed in a condition or state of readiness and availability for a specifically assigned function.” In fact, the availability of over a dozen federal tax benefits is dictated by placed-in-service date, as are other tax consequences. Petitioners here own two biomass electrical generation facilities that qualify for tax incentive payments under Section 1603 of the American Recovery and Reinvestment Act of 2009 if they were “placed in service” between 2009 and 2011. The Government claims the facilities were “placed in service” in 2008 because they produced and sold some electricity that year. But in 2008, they undisputedly were producing far less electricity than their contracts set as capacity thresholds and were incapable of operating without very significant noncompliance with environmental laws. Yet the Federal Circuit held that such a facility could still be considered “placed in service” under federal law. The question presented is: Whether an energy facility is “placed in service” within the meaning of federal law whenever it can produce and sell some electricity without regard for the level of operation and compliance with laws, as held by the court below in joining the Fifth Circuit, or only after it can produce and sell electricity as intended on a fairly consistent basis, as held by the Eighth Circuit.