Bioenergy, Geothermal, Hydropower, News, Solar, Wind Power

Extension granted! US Treasury extends safe harbor timeframe for renewable tax credits

On Wednesday, May 27, the U.S. treasury department issued Notice 2020-41 related to the safe harbor deadline for renewable energy projects that began construction in 2016 or 2017. Under the old rule those projects would have needed to become operational by the end of 2020 in order to claim the full 30 percent Investment Tax Credit (ITC) for solar projects or the full 2.5 cents per kWh Production Tax Credit (PTC) for wind projects. Yesterday’s announcement gives them one more year, until the end of 2021, to begin generating power.

Related: US Treasury says it may modify tax credit rules for wind and solar energy

The announcement was made in recognition that the COVID-19 pandemic has caused major supply chain disruptions, bottlenecks and work stoppages.

Gregory Wetstone, President and CEO of the American Council on Renewable Energy (ACORE) praised the move in a statement. “Treasury’s recently released guidance granting an additional year to meet safe harbor qualifications for renewable tax credits is a welcome and important step to help the renewable sector and its workers in the face of the delays, disruptions and other challenges associated with COVID-19,” he said.

In addition, Wetstone called for Congress to temporarily make the tax credits refundable and to take “other commonsense measures so the renewable sector can be an economic driver for the nation through this downturn, and an effective climate solution over the long haul.”

According to a notice issued by Keith Martin of law firm Norton Rose Fullbright, the extension will relieve “a traffic jam that had been expected as wind developers rush to finish some 15,000 megawatts of projects facing an end-of-2020 deadline.”

In addition to wind and solar project, the extension applies to geothermal, biomass, landfill gas, waste-to-energy, incremental hydroelectric and hydrokinetic projects that started construction in 2016 or 2017, the firm said.

The IRS notice also gave an extension to solar and fuel cell project developers who paid for equipment at the end of 2019 expecting to take delivery within 3.5 months but experienced supply chain disruptions. Kevin Peason, a partner at law firm Stoel Rives commented in a statement:

“The additional clarity regarding the 3½ month rule also provides welcome certainty to solar developers who paid for modules or other energy property near the end of 2019 but, due to COVID-19 related delays, did not receive the property within the applicable 3½ month timeframe.  Although those developers may have qualified without regard to the added clarity, it should make financing transactions easier for impacted projects.”

Read the entire IRS notice here.