US provides more clarity on PTC, ITC rules for renewables

Aug 11, 2014 - The US government said Friday renewable energy developers will be able to qualify for the production tax credit (PTC) and the investment tax credit (ITC) if they had incurred at least 3% of the total project cost before the start of 2014.

As per regulations from early in 2013, developers had to show that “physical work of a significant nature” had kicked off at the project site or prove that 5% of the project costs have been incurred before the end of 2013 in order to qualify for the incentives. Now with the relaxed rule, project developers may claim a reduced credit if they have spent at least 3% of the project's budget, the Treasury Department and the Internal Revenue Service (IRS) explained in a notice.

The statement also provided clarification on the type of construction activities that qualify as work of a "significant nature”. Such work may include foundation excavations, setting of anchor bolts into the ground and pouring concrete pads of the foundation.

Further under the revised rules, projects that have been fully or partly developed can be transferred to another owner without losing their qualification for the two federal incentive schemes. The only exception are transfers of tangible personal property between unrelated parties.

The ITC covers a certain percentage of the capital cost of renewable energy projects, while the PTC represents a credit per kWh produced. On January 1, the US President and Congress agreed to extend the PTC and the ITC for wind energy until the end of 2013.

Choose your newsletter by Renewables Now. Join for free!