ABB_id2059
in News Departments > Policy Watch
print the content item



On Aug. 8, the Internal Revenue Service (IRS) issued guidance to wind developers and investors further spelling out what it means for a wind project to have started "significant work of a physical nature," one of the key eligibility requirements to qualify for the production tax credit (PTC).

To be eligible for the PTC, wind developers must have incurred 5% of the project's cost by the end of last year. Developers must also demonstrate work of a significant nature and ensure the wind farm is under continuous construction. If the wind farm is completed by Dec. 31, 2015, then the so-called "continuous construction" requirement is assumed. Developers whose wind projects go into service after 2015 will be required to demonstrate continuous work.

In its latest ruling, the IRS provides new examples of what constitutes significant physical work, including “physical work on a customer-designed transformer that steps up the voltage” or the construction of access roads at a project site. Last year, the IRS cited several other examples, such as excavating a foundation, setting anchor bolts into the ground or pouring concrete pads to the foundation.

According to Keith Martin, a partner at law firm Chadbourne & Parke, a group of owners and operators and tax equity investors encouraged the IRS to provide several clear examples of what qualifies as significant physical work. He notes that some investors were concerned that excavating a handful of turbine foundations or putting in a few hundred feet of string roads at a project site would not be enough to meet the IRS definition for PTC eligibility.

The new guidance also helps to dispel a popular myth held by some wind farm owners and tax equity investors that the IRS required wind developers to have started work on 20% of a project’s turbine foundations by the end of last year.

“The IRS said it did not intend to suggest there is a 20 percent threshold or any fixed minimum amount of work required,” Martin notes.

While the guidance is expected to goose wind farm construction, David Burton, partner at law firm Akin Gump Strauss Hauer & Feld, maintains the IRS may have inadvertently introduced further complexity with respect to ownership transfers.

“I was surprised that the IRS did not permit a simple transfer of turbines or other grandfathered equipment to an unrelated party,” he says. As currently written, the rules stipulate that project transfers must be to a party that is at least 20% related or must include contracts, such as a power purchase or interconnection agreement, or land for the project.

Including this latest round of guidance, the IRS has clarified start-of-construction rules related to the PTC three times. Last year, the IRS issued similar notices on April 15 and Sept. 20.

The agency says it will not issue further guidance related to start of-construction requirements.

Hybrid Energy Innovations 2015

Trachte_id2056
Latest Top Stories

High Net-Worth Investors Claim ‘All Of The Above’ On Energy; Renewable And Otherwise

According to a recent Morgan Stanley poll, high-dollar investors favor investment in renewable energy technologies, such as wind and solar.


U.S. Wind Power Installations Surpassed 4.7 GW Last Year, Although China Still Leads

Bloomberg New Energy Finance reports that U.S. wind installations came back in a big way from a disappointing 2013.


IRS Specifies Performance, Quality Standards For Small Wind Turbines

The Internal Revenue Service (IRS) recently issued guidelines creating safety and performance standards for small wind turbines to be eligible for the 30% investment tax credit.


Hot Times North Of The Border: Canada Tops Previous Record For Installed Wind Capacity

For the second consecutive year, Canada's wind market has bested the country's previous mark for new installations.


Report: Policy Uncertainty Fuels Market Exodus As Firms Bolt North American Wind Industry

The global wind energy supply chain has yet to recover from the slump that began in 2013. In fact, many segments are undergoing a transformation, according to market research firm FTI Consulting.

Hybrid Energy Innovations 2015