Guidance also helps geothermal energy developers
The Internal Revenue Service (IRS) has issued Notice 2014-46, which clarifies the rules for a wind project to be deemed to have started construction in 2013 as is necessary to be eligible for production tax credits (PTC) or the investment tax credit (ITC).
The new guidance is generally consistent with the industry’s requests for clarifications; however, it adds unanticipated complexity with respect to the transfer of grandfathered projects. Also, it provides rules that the industry did not request with respect to projects that fall short of meeting the safe-harbor of spending 5 percent of their total cost in 2013.
The biggest policy development is a reduction in the level of investment taxpayers must have committed before the end of 2013 from five percent to three percent of total project costs for a qualifying facility to remain eligible for the PTC/ITC under the IRS "Safe Harbor" test.
The applicability of the guidance is not limited to wind projects. It also applies to geothermal, biomass, landfill gas and some hydroelectric and ocean energy projects. Solar projects are not subject to the guidance and qualify for a 30 percent investment tax credit, so long as they are “placed in service” by the end of 2016.
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