G/SCM/Q2/USA/69  
 
31 October 2016  
(16-5943) Page: 1/3 
Committee on Subsidies and Countervailing Measures  Original: English  
 
SUBSIDIES  
REPLIES  TO QUESTIONS1 POSED BY THE RUSSIAN  FEDERATION REGARDING  
THE NEW AND FULL NOT IFICATION OF THE UNI TED STATES2 
The following communication, dated 27 October 2016, is being circulated at the request of the 
Delegation of the United States.  
 
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Publicly available information suggests that certain measures relating to support of the renewable 
energy sector in the U.S. and falling within the scope of the U.S. obligations regarding notification 
of subsidies under the SCM Agreement mi ght not be mentioned in the recent subsidy notifications 
submitted by the U.S. Thereby we kindly ask the U.S. to provide replies to the following questions.  
 
Question 1  
 
Please, explain why the following programs relating to support of the use of biomass 
and authorized by the "Farm Security and Rural Investment Act of 2002" of 13 May 2002 
(Public Law  107-171) amended by the "Agricultural Act of 2014" of 7 February 2014 
(Public Law 113 -79) were not notified in G/SCM/N/253/USA or provide information 
required under Article 25 of the SCM Agreement for each of these measures:  
 
 Rural Energy for America Program (REAP);  
 Biorefinery Assistance Program;  
 Energy Audit and Renewable Energy Development Assistance (EA/REDA);  
 Repowering Assistance Biorefinery Program.  
Reply : 
 
The Rural Business Cooperative Service (the Agency) administers both the REAP and EA/REDA 
programs.  REAP is designed to help agricultural producers and rural small businesses reduce 
energy costs and consumption and help meet the Nation 's critical energy  needs.  REAP has two 
types of funding assistance: (1) Renewable Energy Systems and Energy Efficiency Improvements 
Assistance, and (2) Energy Audit and Renewable Energy Development Assistance Grants. The 
Renewable Energy Systems and Energy Efficiency Improv ement Assistance provides grants and 
guaranteed loans to agricultural producers and rural small businesses to purchase and install 
renewable energy systems and make energy efficiency improvements to their operations.  Eligible 
renewable energy systems for R EAP provide energy from: wind, solar, renewable biomass 
(including anaerobic digesters), small hydro -electric, ocean, geothermal, or hydrogen derived from 
these renewable resources. The Energy Audit and Renewable Energy Development Assistance 
Grant is avai lable to a unit of State, Tribal, or local government; instrumentality of a State, Tribal, 
or local government; institution of higher education; rural electric cooperative; a public power 
entity; or a council, as defined in 16 U.S.C. 3451. The recipient of  grant funds, establishes a 
program to assist agricultural producers and rural small businesses with evaluating the energy 
efficiency and the potential to incorporate renewable energy technologies into their operations.  We 
consider these programs non -specific as they are available to the entirety of the agricultural 
sector, as well as rural small businesses.  
                                                
1 G/SCM/Q2/USA/64 (dated 12 February 2016).  
2 G/SCM/N/253/USA (dated 9 May 2014).  G/SCM/Q2/USA/69  
 
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  The Biorefinery Assistance Program offers loan guarantees for the development, construction, and 
retrofitting of commercial -scale biorefineries. Eligib le borrowers include individuals, entities, Indian 
tribes, state or local governments, corporations, farm cooperatives or farm cooperative 
organizations, associations of agricultural producers, National Laboratories, institutions of higher 
education, rural  electric cooperatives, public power entities, and consortium of any of these types 
of entities. Financed entities must provide at least 20% of the financing for eligible project costs, 
and applications for funding must include an independent feasibility s tudy and technical 
assessment.  Eligible project costs include the purchase and installation of equipment, construction 
or retrofitting costs, permit and licensing fees, working capital, land acquisition, and the costs of 
financing.  We will consider includi ng this program in our next notification.  
 
The Repowering Assistance Biorefinery Program provides payments to eligible biorefineries to 
replace fossil fuels used to produce heat or power to operate biorefineries with renewable biomass. 
Reimbursement paymen ts are provided to offset a portion of the costs associated with the 
conversion of existing fossil fuel systems to renewable biomass fuel systems. The reimbursement 
amounts vary and are determined by the availability of funds, the project scope, and the ab ility of 
the proposed project to meet all the eligibility scoring criteria. In particular, reimbursement 
amounts are calculated by the percentage reduction in fossil fuel used by the biorefinery, the 
quantity of fossil fuels replaced by a renewable biomass  system, and the cost effectiveness of the 
renewable biomass system. The program will provide reimbursement payments for eligible project 
costs of the renewable biomass system during the construction phase of the repowering project. 
Up to 90% of the funds can be utilized during project construction, with the remaining 10% made 
upon demonstration of successful completion of the project. A maximum of 50% of the total 
project costs can be reimbursed, as long as amount does not exceed the maximum award for the 
fiscal year.  We will consider including this program in out next notification.  
 
Question 2  
 
Please, explain why the following measures relating to support of the renewable energy 
sector and authorized by Title 26 "Internal Revenue Code" of the U.S. Code (h ereinafter 
referred to as Title  26) were not notified in  G/SCM/N/253/USA or provide information 
required under Article 25 of the SCM Agreement for each of these measures:  
 Credit to holders of clean renewable energy bonds (authorized by Section 54 of 
Title 26); 
 Qualifying advanced energy project credit (authorized by Section 48C of Title 
26); 
 Energy credit (authorized by Section 48 of Title 26);  
 Renewable electricity production credit (authorized by Section 45 of Title 26).  
Reply : 
 
The "Qualifying advanced e nergy project credit (authorized by Section 48C of Title 26) " has been 
notified by the United States under the title "Advanced Energy Property Credit ". A brief description 
of the remaining programs is set out below for transparency purposes.  Each of these programs 
presents unique and difficult questions under the Agreement on Subsidies and Countervailing 
Measures (Subsidies Agreement), as to the nature of the benefit, if any, and the extent to which 
they may provide indirect benefits to the renewable energy  sector in the United States.  
Nonetheless, we will consider notifying these programs in our next notification.  
 
Credit to holders of clean renewable energy bonds : The Tax Code provides for the issuance 
of Clean Renewable Energy Bonds (CREBs) which are a ty pe of tax credit bond that offers the 
holder a Federal tax credit for all or part of the interest paid on the bond.  CREBs are issued either 
by a governmental body or certain cooperative electric companies or cooperative lenders to 
finance a variety of rene wable energy facilities.  Under the program, the bond holder receives a tax 
credit equal to 70% of the coupon interest payments on the bonds. Treasury determines the rate 
(https://w ww.treasurydirect.gov/GA -SL/SLGS/selectQTCDate.htm ). This means that the bond 
holder receives "interest" that is a combination of cash and tax credits that are taxable.  The issuer 
pays a lower interest rate since th e bond holder gets tax credits.  
 
The Hir ing Incentives to Restore Employment (HIRE) Act signed on March 18, 2010 allowed CREBs 
to be issued as direct payment bonds.  This means that the issuer pays taxable interest to the bond G/SCM/Q2/USA/69  
 
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  holder but receives  subsidy payments for 70%  of the interest cost from  the Federal government.  
In this case, the bond holder receives interest that is all cash that is taxable.  The issuer pays all 
cash to the bond holder.  However, the issuer also receives cash from the Federal government in 
the form of a direct payment.  
 
Energy Investment Credit (Section 48) : This credit is up to 30%  for certain investments made 
before the end of 2016.  The provision provides credits against income taxes for investments in 
solar and geothermal energy property, qualified fuel cell power plants,  stationary microturbine 
power plants, geothermal heat pumps, small wind property, and combined heat and power 
property. The provision expires for investments mad e after 2016, except for the 10%  credit for 
solar and geothermal property w hich is available i ndefinitely.  
 
Energy Production Credit (Section 45) : The provision provides a credit against income taxes 
for certain electricity produced from wind energy, biomass, geothermal energy, solar energy, small 
irrigation power, municipal solid waste, or qualifi ed hydropower and sold to an unrelated party.  
 
Question 3  
 
Please, explain why the Program "Grants for Specified Energy Property in Lieu of Tax 
Credits" authorized by Section 1603 of the "American Recovery and Reinvestment Tax 
Act of 2009" of 17  February 2009 (Public Law 111 -5) was not notified in  
G/SCM/N/253/USA or provide information required under Article 25 of the SCM 
Agreement.  
Reply : 
 
Section 1603 of the American Recovery and Reinvestment Act of 2009 authorized Treasury to 
make payments to eligible p ersons who place in service specified energy property during 2009, 
2010, or 2011, or after 2011 if construction began on the property during 2009 -2011 and the 
property is placed in service by the credit termination date.  The program was intended to 
encoura ge the growth of clean energy projects during and after the 2008 economic downturn 
when investment capital for these projects was not as readily available.  As with the programs 
discussed above, this program poses difficult questions under the Subsidies Agr eement.  
Nonetheless, we will consider notifying this pr ogram in our next notification.  
 
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