The Treasury Department and the Internal Revenue Service (IRS) have announced the provision of tax relief for American taxpayers that develop renewable energy projects generating electricity from wind turbines, solar panels, biomass, and a variety of other clean energy technologies.
Because COVID-19 has caused industry-wide delays in the supply chain for components needed to complete renewable energy projects otherwise eligible for important tax credits the IRS has issued Notice 2020-41 to provide tax relief to affected taxpayers.
For some projects that began construction in 2016 or 2017, Notice 2020-41 adds an extra year to the four year ‘Continuity Safe Harbour’ provided in existing guidance, such that if these projects are placed in service in five years construction will be deemed continuous.
Notice 2020-41 also provides a 3½ Month Safe Harbour for services or property paid for by the taxpayer on or after September 16, 2019 and received by October 15, 2020.
By extending the Continuity Safe Harbour and providing a 3½ Month Safe Harbour, the new guidance will provide flexibility for taxpayers to satisfy the beginning of construction requirements and limit the impact of COVID-19-related delays on the ability to claim tax credits.
“Treasury’s recently released guidance granting an additional year to meet safe harbour 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” said Gregory Wetstone, President and CEO of the American Council on Renewable Energy (ACORE). “We commend Secretary Mnuchin for his leadership on this initiative, and call on Congress to swiftly enact temporary refundability for renewable energy credits and 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.”