- Safe Harbor Extended to Four Years - Developers are allowed a "safe harbor" period of up to four years to place new projects in service, without having to demonstrate that construction has been “continuous.” Wind projects that begin construction in 2016 and therefore qualify for the full value of the PTC don’t have to be operational until the year 2020. Commencing “physical work” remains as another method to assert start of construction.
- New Excusable Disruptions – The guidance added new and modified excusable disruptions to the continuous efforts requirement:
- Delays in obtaining permits or licenses from federal, state, local, or Indian tribal governments.
- Interconnection-related delays, such as those relating to the completion of construction on a new transmission line or necessary transmission upgrades.
- Delays in the manufacture of custom components.
- Financing delays.
- Multiple Facilities Operated as a Single Project – Two clarifications are in the guidance:
- The time at which the determination of whether multiple facilities are operated as part of a single project, and therefore are treated as a single facility for beginning of construction purposes, is in the calendar year during which the last of such facilities is placed in service.
- Multiple facilities operated as part of a single project and treated as a single facility may be disaggregated and treated as multiple separate facilities for purposes of determining whether a particular facility satisfies the safe harbor continuous effort standard.
- Retrofitted Facilities – As an incentive to re-power wind farms, a facility may qualify as originally placed in service even though it contains some used property, provided the fair market value of the used property is not more than 20% of the facility’s total value. In the case of a single project comprised of multiple facilities, the limit of 20% of used property is applied to each individual facility comprising the single project. To satisfy beginning of construction, the 5% safe harbor is applied only to the cost of new property used to retrofit an existing facility.
- Physical Work Test Clarification – For projects that demonstrate continuous construction by physical work of a significant nature (vs. the safe harbor of incurring 5% of facility cost), the guidance provides a distinction between those activities of qualifying physical work of a significant nature and preliminary activities which do not qualify. Examples can be found in the guidance.
For further clarification and details please refer to the IRS guidance attached via the link above.
The IRS is expected to issue guidance related to the Investment Tax Credit in the near future.