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IRS Extends Safe Harbor Deadlines for Renewable Energy Tax Credits

Published Date

Renewable energy developers received welcome news on Wednesday, May 27th.  The IRS issued Notice 2020-41, which gives developers who began construction on renewable energy projects in 2016 or 2017 an additional year to qualify for critical federal tax credits.

The issuance from the U.S. Treasury and IRS was announced to provide relief for taxpayers impacted by COVID-19 related industry disruptions. 

Prior to Notice 2020-41, applicable developers would have been required to commence operations on renewable energy projects by the end of 2020 (or within four years from the start of construction) in order to claim the maximum tax credits available. 

Effective immediately, renewable energy developers have an additional year (or five years total from the start of construction) to place their facilities in service and qualify for: 

  • The full Production Tax Credit (PTC) for wind projects that began construction in 2016
  • 80% of the full PTC rate for wind projects that began construction in 2017

"It is encouraging to see the IRS taking action to ensure that millions of dollars of renewable energy investment in the U.S. can move forward—even in the face of COVID-19 industry disruptions,” said John Powers, VP of Global Renewables and Cleantech at Schneider Electric. 

“By ensuring that renewable energy projects can both recover and remain eligible for critical tax credits, the IRS has reduced the execution risk for corporate buyers and enabled organizations to fulfill their clean energy commitments to their customers, employees, and shareholders." 

The Notice 2020-41 extension also applies to solar and fuel cell companies that purchased equipment at the end of 2019 yet did not receive the goods within the expected 3.5 month timeline due to COVID-19 disruptions. In these cases, project developers now have until October 15, 2020, to receive the goods and still meet the safe harboring criteria for commencing construction by the end of 2019. Biomass, geothermal, landfill gas, waste, qualified hydropower, and marine and hydrokinetic renewable energy facilities may also benefit from the extension. 

The official notice from the IRS and U.S. Treasury detailing the safe harbor deadline extension may be found here. 

If you have questions on how Notice 2020-41 may impact individual wind or solar projects, please reach out to our team.