Global Startup Blog : Startup Lawyer & Attorney : Reed Smith Law Firm : Corporate Law, Venture Capital

The U.S. Department of Energy recently announced two new solicitations for loan guarantees pursuant to its loan guarantee program under the Energy Policy Act of 2005.  Here are some quick facts:

• The solicitations relate to projects that either (i) employ "New or Significantly Improved Technology" related to a renewable energy system or a leading edge biofuels project or (ii) improve transmission infrastructure using commercial technology.
• Combined, the solicitations make available more than $12 billion in federally funded guarantees.
• Applications are accepted on a rolling basis, with those applicants who participate in earlier rounds receiving a "first mover's advantage." Two applications are required to be submitted, with a specific due date for the second application based on when the first application is submitted.
• Preliminary applications under the transmission infrastructure solicitation are due by Sept. 16, 2009.
• Eligible projects are required to commence construction no later than Sept. 30, 2011.

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I know.  This blog is rapidly becoming the home for all things Stimulus-related.  Hey, when it rains, it pours, and the current topic of interest for most emerging companies is how to obtain funding -- by any means necessary -- which should absolutely include a review of non-dilutive options such as Stimulus Package funds, other grants and/or tax/production credits (the latter is only realistic if you are an alternative energy company).  For those looking for more traditional emerging company topics, we've got one for you coming down the pipeline shortly.

In the meantime,let's jump into our fourth consecutive ARRA blog entry.  This one should be of particular interest to any company considering going down the government funding path because all such funding comes "with strings attached."

Those "strings" are the obligations to comply with a host of laws and regulations. Broadly, any recipient of stimulus monies, whether as a grant recipient, contractor, or sub-recipient or subcontractor, must be prepared to shoulder the burdens of tracking the use of such funds, ensuring that the funds are used only for proper purposes, and following the ancillary rules, such as environmental laws or equal employment opportunity requirements, that do not necessarily arise in the commercial transactions to which contractors and grant recipients may be accustomed.

The following summary discusses the steps that government agencies are taking to prevent fraud, abuse, and regulatory noncompliance with respect to stimulus monies; it sets forth the repercussions of failure to maintain compliance, and provides an overview of the steps companies can take to protect the value of their investments in competing for and obtaining stimulus monies.

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The American Recovery and Reinvestment Act of 2009 included a number of significant changes affecting businesses engaged in the renewable energy market. One of those changes allows a taxpayer to elect to receive a cash grant in lieu of the investment tax credit under Section 48 of the Internal Revenue Code, or the production tax credit under Section 45 of the Code on specified renewable energy property placed in service during 2009 or 2010, or by a later credit termination date if the property is not placed in service during 2009 or 2010 but construction has begun during 2009 or 2010.

Our Renewable Energy Group summarized the cash grants in lieu of investment or production tax credits in a recent Reed Smith client alert. 

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With the recent data on the economy showing little improvement since the enactment of the $787 billion American Recovery and Reinvestment Act of 2009, there has been talk in the Obama administration and in Congress about whether another stimulus program is needed. Our Policy & Infrastructure Practice has been monitoring these discussions and the key questions that would need to be addressed before any new stimulus-based legislation is introduced--or, more appropriately, enacted into law.  Chris Rissetto, who is a partner in our Washington DC office, offered some interesting insights into the matter.

Why am I blogging on this matter?  Simply put, I have multiple clients who are closely following these developments, since the increased odds for non-dilutive financing can have a major impact on the development of their respective technologies and corporate growth.  So, this is a topic that should be somewhere on the radar screen, at the very minimum, of companies of all sizes and across all industry verticals. 

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Many technology companies incorrectly believe that the American Recovery and Reinvestment Act of 2009 is focused on the commercialization of clean technology at the exclusion of all other industry verticals.  Nothing could be further from the truth.  To date, there have been multiple Funding Opportunity Announcements that have applied to technology companies at various stages of their corporate lifecycle across a wide range of industry verticals.  And I guarantee that when the 2010 Appropriations Bill becomes final, there will be more than a few earmarks for companies who fall outside that category.

One such example of a non-clean tech vertical eligible for stimulus money is broadband. 

Last week, the Commerce and Agriculture Departments released a joint Notice of Funding Availability (NOFA) announcing the application criteria and general policies that will apply to awarding the first $4 billion of the total $7.2 billion in federal broadband stimulus funds.  Rolling applications to access that $4 billion slug of stimulus money begin today!

The remaining funds, not dedicated to this award cycle or program administrative matters, will be made available under subsequent NOFAs. As both agencies learn from the application process, the terms of subsequent NOFAs are subject to change.

Read more about this excellent broadband funding opportunity in our Reed Smith client alert.  Our Advertising Technology & Media practice also blogged on this topic.  Anyone interested in reading about issues intersecting digital advertising, new media, ecommerce and the law should check out their blog.

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