The U.S. Court of Federal Claims recently rejected the government’s motion to dismiss a taxpayer’s lawsuit alleging that the government violated the mandate of ARRA Section 1603. Specifically, the taxpayer claimed that the government should have approved its application for $2.3 million in grants under ARRA Section 1603.
The government sought to dismiss the case arguing that the court lacked jurisdiction. The court concluded that it had jurisdiction because ARRA Section 1603 is a “money-mandating” law that did not provide the government with discretion over whether to pay grants where taxpayers submitted proper applications that demonstrated compliance with ARRA Section 1603’s requirements.
The taxpayer purchased twenty-five mobile solar power generating systems in 2009 and leased the systems to end-users. The taxpayer sought $2.3 million in grants under ARRA Section 1603 and filed twenty-five applications with the Department of Treasury (the “Treasury”), along with valuation reports from the systems’ manufacturer. In response to questions from the government, the taxpayer also obtained and submitted an independent fair market valuation report. Ultimately, the Treasury denied the application and cited insufficient documentation of the cost basis of the power systems.
A key issue in the case was whether the court had jurisdiction to hear the Taxpayer’s claim. The court concluded that it had jurisdiction based on the Tucker Act because ARRA Section 1603 is a “money-mandating source of law” (i.e., a law that can be fairly interpreted as “mandating compensation by the federal government for the damages sustained”). In other words, the court concluded that ARRA Section 1603 was a mandate to the Treasury to distribute funds when applicants submit proper applications that demonstrate compliance with the statute. The Treasury, therefore, has no discretion in deciding whether, in response to a proper application, to distribute funds. ARRA Section 1603 “compels the government to provide a grant to any person who places specified energy property into service, subject only to the express requirements set forth in the statute.”
Perhaps the most important aspect of the case was the court’s interpretation of ARRA Section 1603’s requirements. The court noted that a proper application demonstrates (1) that the property is “specified energy property;” (2) that the property was placed in service before the deadline; and (3) the cost basis of the property. The Treasury has no discretion over these elements, although it may assert that the applicant has miscalculated or misrepresented the cost basis of the property. Even if the government contends the correct basis is lower, however, “it has no discretion to reimburse an applicant for less than, or more than, thirty percent of the correct basis of the property.”
This case is the first reported case involving the requirements of ARRA Section 1603. Although the primary issue involved the court’s jurisdiction, the case illustrates the court’s view of ARRA Section 1603. It is very beneficial toward applicants who have submitted, or expect to submit, a valid application under Section 1603.