The IRS recently released Notice 2014-46 (the Notice) which provides welcome guidance to tax equity investors and developers on the construction of wind, geothermal, biomass, landfill gas and certain hydropower and marine hydrokinetic energy projects for purposes of qualifying for the section 45 renewable electricity production tax credit (PTC), or the section 48 investment tax credit (ITC) in lieu of the PTC.
For these types of projects, in order to take advantage of the PTC or ITC, construction of the facility must have begun prior to January 1, 2014. As provided in earlier guidance released by the IRS (Notice 2013-29), taxpayers may demonstrate that they started construction timely either by beginning physical construction of a significant nature (the Physical Work Test) or incurring at least 5% of the total costs of the eligible property (the 5% Safe Harbor). In all cases, taxpayers must make continuous progress toward completion of the facility once construction has begun, or otherwise place the facility in service before January 1, 2016 (in which case continuous progress will be considered satisfied, pursuant to clarifications to Notice 2013-29 that were provided by the IRS in Notice 2013-60). Continue reading this entry