Treasury, IRS Provide Safe Harbor for Taxpayers Developing Renewable Energy Projects
The Treasury Department and IRS recently announced they are providing relief for taxpayers developing renewable energy projects and producing electricity from sources such as wind, biomass, geothermal, landfill gas, trash, and hydropower. Safe harbor is also available for taxpayers using technologies such as solar panels, fuel cells, microturbines, and combined heat and power systems.
The IRS stated that it recognizes 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 and has issued Notice 2020-41 to provide tax relief.
For certain projects that began construction in 2016 or 2017, Notice 2020-41 adds an extra year to the four-year “Continuity Safe Harbor” provided in existing guidance. If these projects are placed in service in five years construction will be deemed continuous.
Notice 2020-41 also provides assurance for taxpayers who started construction by incurring 5 percent of project costs and made payments for services or property and reasonably expected to receive such services or property within 3 ½ months. These taxpayers are considered incurred under economic performance rules. The Notice provides that if such services or property are received by Oct. 15, 2020, the taxpayer’s expectations at the time of the 2019 payment are deemed reasonable.