Feds throw 1-year lifeline to renewables

Source: By Jeremy Dillon, E&E News reporter • Posted: Thursday, May 28, 2020

IRS headquarters in Washington. Francis Chung/E&E News

The IRS yesterday offered a pandemic-related extension to key requirements needed for renewable projects to qualify for a lucrative tax credit.

Issued as new guidance, the IRS extended by a year the so-called safe harbor requirements that outline how projects can qualify for the production and investment tax credits.

The action from the Treasury Department follows a lobbying campaign from renewable trade groups and a trio of Senate Republicans, including Energy and Natural Resources Chairwoman Lisa Murkowski (R-Alaska) and Sens. Susan Collins (R-Maine) and Thom Tillis (R-N.C.) (E&E Daily, May 22).

“The IRS recognizes that COVID-19 has caused industry-wide delays in the supply chain for components needed to complete renewable energy projects otherwise eligible for important tax credits,” the agency said in a news release announcing the change.

The extension offered by the IRS would cover two provisions under the safe harbor requirements.

Certain projects that began construction in 2016 or 2017 would now have up to five years to begin production to meet the guidelines for “continuous construction.” The previous guidance allowed for a four-year time frame.

“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 American Wind Energy Association CEO Tom Kiernan.

In addition, developers have an additional 3 ½ months, until Oct. 15, 2020, for supplies to be delivered under the 5% safe harbor threshold.

That requirement enables projects to claim the credit if they have spent 5% of the total cost of construction before the credit expiration date. But supplies purchased under that provision must be delivered within approximately 100 days.

Renewable developers have expressed concerns that supplies purchased at the end of 2019 may not be delivered in time to claim the credit. Some materials have been caught in global supply chain disruptions due to the coronavirus pandemic.

For the renewable industry, the IRS extension comes at a critical juncture for projects already racing against diminishing tax credits for wind and solar projects — both of which were set to sunset in coming years.

The public health crisis has also hit the industry hard, with related job losses estimated at over 600,000 employees.

“Today’s action shows that solar energy is an economic driver with bipartisan appeal,” Erin Duncan, vice president of congressional affairs for the Solar Energy Industries Association. “This action is among a number of steps policymakers can take to add jobs, inject tens of billions of dollars into the economy and help this country recover from this awful crisis in red states and blue states alike.”