US provides additional safe harbour for renewables in post-COVID-19 world

US renewable energy projects hit by supply chain delays caused by the COVID-19 crisis have been granted an extra year to meet safe harbour requirements and qualify for federal tax credits.

The Internal Revenue Service (IRS) on Wednesday published a notice that offers tax relief to affected taxpayers developing renewable energy projects and producing electricity from renewable energy sources. Developers of landfill gas, trash facilities, fuel cells, microturbines and combined heat and power system projects will also benefit from the post-coronavirus relief that gives one additional year to projects that have entered construction in 2016 or 2017 to qualify for the investment tax credit (ITC) and the renewable electricity production tax credit (PTC). The measure extends the four-year “Continuity Safe Harbor” and if projects are commissioned in five years, their construction will be deemed continuous.

Notice 2020-41 also provides a three-and-a-half month safe harbour for services or property paid for by taxpayers on or after September 16, 2019, and received by October 15, 2020. This rule applies only for purposes of the beginning of construction requirement for the federal credits.

The IRS explained that the measures aim to give taxpayers the flexibility to meet the requirements related to the construction start of their projects and limit the impact of supply chain delays due to the coronavirus pandemic. Both the ITC and PTC have a beginning of construction requirement.

The American Wind Energy Association (AWEA) welcomed the measures and said they have a “critical” role in moving forward the development of onshore wind projects.

“One additional year of safe harbor for 2016 and 2017 projects provides the flexibility the industry needs to prevent the immediate harms from COVID-19 disruptions, without costing the Federal government any additional money,” said AWEA’s CEO Tom Kiernan.

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