Such projects are eligible for Investment Tax Credits (ITCs) applicable to the construction costs of such facilities, or Production Tax Credits (PTCs) applicable to sales of the electricity produced. To qualify, renewables projects must be initiated and completed within a certain time window. But, as Senator Chuck Grassley (R-IA) and others have complained in a letter to Treasury Secretary Steve Mnuchin, COVID-19 has interfered with the ability to do this work.
As a result, the IRS is relaxing the deadlines. Now developers of projects initiated in 2016 or 2017 will get a fifth year, instead of four, to complete their projects and still qualify. In addition, new projects will get several more months to comply with the minimum requirements of having been commenced.
This IRS notice comes on the heels of the latest legislative extension, passed at the end of last year, which, among other things, added projects commenced in 2020. Now such projects will have added time to demonstrate that they meet the safe harbor provisions.
Beyond the IRS notice, advocates for renewable energy are demanding additional assistance in the next coronavirus relief package or another legislative vehicle. This includes the possibility of direct cash grants to renewable developers in lieu of tax credits. Such largesse was last used as a part of the 2009 Obama administration stimulus package.
Ironically, this announcement of additional assistance to renewable energy comes as the Energy Information Administration announced that, for the first time, renewables have surpassed coal as an electricity source in the U.S. This undercuts a key rationale for the renewable tax credits and other preferential treatment, like state renewable portfolio standards, which is that they are an infant industry that needs help taking on well-established power sources like coal.