IRS SOON TO DEFINE ‘IN CONSTRUCTION’ FOR WIND

Insider: Clarity On PTC 'Begin Construction' Language Expected Soon

Mark Del Franco, 5 March 2013 (Nrth American Windpower)

“…[The Internal Revenue Service (IRS)] has imposed an internal deadline of March 31 to clarify what it means for a wind project to be considered under construction, per the ‘begin construction’ language included in the [version of the production tax credit (PTC) signed into law in January]…[T]he IRS [repotedly] recognizes the urgency…to resolve the issues and release the guidance to wind energy developers.

“Historically, the IRS has taken up to a year - or even longer - to resolve such discrepancies. However, the wind industry does not have the luxury of time…The PTC extension included a change in language that requires projects to begin construction before Jan. 14, 2014, in order to qualify for the PTC, rather than the ‘placed in service’ deadline included in previous versions of the PTC.”

“Without further guidance, developers, suppliers and financiers are more hesitant to move forward with projects…[O]ne of the biggest challenges for the IRS will be to establish a rule that is fair to all the technologies mentioned in Section 45 of the Internal Revenue Code, which includes electricity produced from certain renewable resources,’ such as wind, solar, geothermal, municipal solid waste and qualifying hydropower…

“…The IRS released a similar ‘begin construction’ clarification in July 2010, after the issuance of the U.S. Department of the Treasury’s Section 1603 cash-grant program. The American Wind Energy Association has been encouraging the IRS and the Treasury to consider similar rules for the PTC, as the industry is already familiar with that guidance…[Less likely] is that rules pertaining to bonus depreciation - which also includes a ‘begin construction’ component - could be applied to PTC. However, bonus depreciation applies broadly to all businesses…”

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