DC Tax Flash: IRS Extends Safe Harbor for Renewable Energy Projects

Tax Alert

In response to supply chain delays stemming from the coronavirus outbreak and requests from lawmakers, the Internal Revenue Service (IRS) today issued Notice 2020-41, which provides an extra year (from four years to five for projects started in 2016 or 2017) for completing certain renewable energy projects and electricity production from wind, biomass, geothermal, landfill gas, trash, and hydropower.

Key members of the Senate Finance Committee requested the relief in a letter to Treasury Sec. Mnuchin late last month.

The guidance issued today also "provides assurance for taxpayers who started construction by incurring five percent of project costs, and made payments for services or property and reasonably expected to receive such services or property within three-and-a-half months," the IRS explains. "These taxpayers are considered incurred under economic performance rules. The Notice provides that if such services or property are received by October 15, 2020, the taxpayer's expectations at the time of the 2019 payment are deemed reasonable."

The IRS notes that it will not issue private letter rulings or determination letters on Notice 2020-41 or its precursor guidance.

The nine-page text of Notice 2020-41 is posted here.

An IRS press release on the guidance is posted here.

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