On July 14, the Internal Revenue Service (IRS) published Notice 2015-51, which postpones the effective date of safety and performance standards mandated for certain types of small wind turbines by Notice 2015-4.
A small wind turbine is defined as one with a nameplate capacity of 100 kW or less.
The standards in Notice 2015-4 originally applied to small wind turbines acquired or placed in service after Feb. 2. Notice 2015-51 extends the effective date to Dec. 31 for small wind turbines with a rotor swept area of 200 meters squared.
For small wind turbines with a rotor swept area of less than 200 meters squared, the effective date remains Feb. 2.
The extension of the grace period was apparently triggered by certain small-wind manufacturers that communicated to the IRS that it was more time-consuming and costly to obtain the required certifications than the agency had anticipated.
Such manufacturers found themselves shut out of the U.S. market, since purchasers were reluctant after Feb. 2 to buy turbines that did not have the necessary certification. Owners of such turbines would not be eligible to claim the 30% investment tax credits (ITCs) available for the turbines if the required certification documentation did not appear on the manufacturer's website prior to the due date for the owner's tax return that claimed the ITC.
The first notice was reportedly triggered by certain industry participants highlighting that the engineering standards among small-wind turbine manufacturers varied noticeably. The first notice provides small-wind turbine manufacturers with a choice to comply with either an American Wind Energy Association standard or an International Electrotechnical Commission standard – and that is unchanged in the second notice.
Code Section 48(a)(3)(D) authorizes the IRS to prescribe safety and performance standards for any ITC-eligible technology (e.g., solar). It is not clear whether the IRS is just warming up to small wind and plans to publish standards in the future for other renewable energy technologies, or if it, in fact, observed a performance or safety issue in the small wind farms that merited the publication of the first notice.
The ITC for small wind expires for turbines placed in service after 2016. Unlike solar, it is a complete expiration and is not merely ratcheting down to a 10% ITC. The small-wind industry is optimistic that the expiration date for its tax credit will be extended by Congress. However, seeing as the credit does not expire until next year, it is not garnering the attention of legislators at the moment.
David K. Burton is a partner at Akin, Gump, Strauss, Hauer & Feld and author of the Tax Equity Telegraph blog. He can be reached at dburton@akingump.com.
