Companies facing delays in putting their renewable energy projects into service will get another year of safe harbor time from the IRS.
In Notice 2020-41, 2020-25 IRB 1, released May 27, the IRS said that because some companies are facing supply chain delays related to the COVID-19 pandemic, it is adding an extra year to the four-year continuity safe harbor offered in existing guidance on the production tax credit for renewable energy facilities under section 45 and the investment tax credit for energy property under section 48.
Under the notice, if projects that were begun in 2016 or 2017 are placed in service within five years, construction will be deemed continuous.
The IRS is also providing assurance for taxpayers that already started construction by incurring 5 percent of project costs and that made payments for services or property and reasonably expected to receive the services or property within 3½ months. The notice provides that if the services or property are received by October 15, the taxpayer’s expectations at the time of the 2019 payment are deemed reasonable.
The guidance is useful to companies developing renewable energy projects and producing electricity from sources such as wind, biomass, geothermal, landfill gas, trash, and hydropower. The safe harbor is also available for taxpayers using technologies such as solar panels, fuel cells, microturbines, and combined heat and power systems, the IRS said.
The guidance comes after taxpayers expressed concern about the pandemic’s effect on their construction projects and ability to claim the tax credits.
Republican Sens. Susan M. Collins of Maine, Lisa Murkowski of Alaska, and Thom Tillis of North Carolina sent a letter to Treasury Secretary Steven Mnuchin on April 21 asking Treasury to extend the safe harbors. “At a time when the renewable energy industry is facing significant challenges, these steps will help protect American jobs and provide investor certainty as we work to rebuild our economy,” the senators wrote.