U.S. Geothermal Lobbyists Pushed PTC Language Change (North American Windpower)
Geothermal industry lobbyists who pushed for the change in language to “start construction” talked to the Senate tax committee staff about using the same approach that was used for Treasury cash grants.
President Barack Obama has officially signed H.R.8, the American Tax Payer Relief Act, into law. It extended for one year the wind energy production tax credit (PTC), as well as the investment tax credit (ITC).
Per the legislation, wind energy projects must begin construction by Jan. 1, 2014, in order to receive the $0.022/kWh incentive. Notably, the act amends the "in-service" date to a "begin construction" date, which allows for more lead time for developers than would a one-year extension alone.
Although the extension averts a total collapse this year, wind developers (and likely manufacturers) are still grappling with a host of issues. Chief among those concerns is the true definition of "begin construction."
According to Keith Martin, partner at Chadbourne & Parke, the Internal Revenue Service (IRS) needs to decipher for the industry what it means for a project to be under construction in order to qualify for the PTC or the ITC. The IRS issued a similar clarification on so-called "begin construction" language after the issuance of the U.S. Department of the Treasury's Section 1603 cash-grant program.
Martin says geothermal industry lobbyists who pushed for the change in language to “start construction” talked to the Senate tax committee staff about using the same approach that was used for Treasury cash grants.
"The grant program has an unusually generous definition of what it means to start construction," he says, noting that the issue for wind farms is that each turbine is considered a separate "facility" for tax purposes.
"Among the issues the IRS will have to decide is whether to give developers the option to treat an entire wind farm as a single facility for this purpose so that the start of construction of one turbine will be considered the start of work on the entire project,” Martin adds.
The IRS has typically taken up to one year to resolve discrepancies. However, given that the wind industry only has a one-year extension, the IRS could expedite a ruling within four to six months, Martin says.
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