Senators Pen Letter Seeking to Extend Safe Harbor


Six U.S. Senators have written a letter addressed to Secretary of the Treasury Steven Mnuchin seeking to extend the safe harbor provisions provided under existing Treasury Department guidance for both the production tax credit (PTC) and energy investment tax credit (ITC) from four years to five years for projects that started construction in 2016 or 2017. 

“This change certainly would help, especially for wind projects, which have a longer lead time and are closer to the ends of their continuity safe harbor. The continuity safe harbor is completely within the control of Treasury and Internal Revenue Service (IRS), since it arises out of their guidance. Therefore, they have the ability to change it immediately, which they should,” says Stoel Rives’ Gregory Jenner, former head of the U.S. Department of Treasury’s Office of Tax Policy.

“An important thing to note is the bipartisan nature of the signatories. This sends a strong signal that it is not a blue state/red state issue. That should help, to the extent the change would otherwise be perceived as fitting one side’s agenda over another’s,” he adds.  

The Senators’ letter reads as follows: 

“Secretary Mnuchin,

As the ongoing COVID-19 crisis continues to claim lives and cause economic disruption and uncertainty, it is vital that the government take whatever reasonable steps possible to allay unforeseen burdens on American families and businesses. In that spirit, we urge you to extend the continuity safe harbor, provided under existing Treasury Department guidance, for both the production tax credit (PTC) and energy investment tax credit (ITC), from four years to five years for projects that started construction in 2016 or 2017. This modest adjustment to the PTC and ITC guidance would help preserve tens of thousands of jobs and billions of dollars in investments and provide some certainty in these challenging times.

Under current law, taxpayers seeking to claim a PTC for electricity produced from qualifying facilities or an ITC for qualifying energy property must generally begin construction of the qualifying facility or property by specified dates. Under current IRS guidance, a taxpayer is treated as having begun construction by starting physical work of a significant nature or, alternatively, by satisfying safe harbor requirements by incurring 5% or more of the total cost of the facility or property. The taxpayer must then demonstrate continuous efforts to complete construction and can be deemed to satisfy this requirement if the facility or property is placed in service within four years (“continuity safe harbor”). These safe harbors provide certainty and flexibility to taxpayers, and prevent costly and unnecessary disputes over the various facts and circumstances related to the financing, permitting and construction of energy facilities.

In addition to its severe toll on human lives, the COVID-19 crisis has disrupted supply chains, construction operations, and permitting timelines, delaying projects otherwise on track to be in operation by the end of 2020. While existing IRS guidance provides certain exceptions for specified setbacks in construction, these exceptions do not anticipate nor fully capture the wide-ranging interruptions now faced by developers. Providing a temporary extension of the continuity safe harbor of five years, in lieu of the current four, would address the unforeseen interruptions developers are experiencing due to COVID-19 and provide the certainty businesses need to move forward with existing projects.

As Congress and the Administration continue to work to provide relief and assistance to Americans grappling with the fallout of COVID-19, this simple modification would provide significant benefits to an important and growing sector of the American economy.

We appreciate your time and attention to this important matter and look forward to your prompt response.”

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