Posted on January 7, 2021
The Internal Revenue Service and the Treasury Department released guidance that offers an extension of a safe harbor for developers of renewable energy projects located either offshore or on federal land.
In Notice 2021-5, issued last week, the IRS and the Treasury said they will extend the safe harbor period for up to 10 calendar years after the year in which construction of a project began.
Renewable energy projects that are built offshore or on federal land are typically subject to significant delays and that can lead to project completion times of up to twice as long as other renewable energy projects. Those kinds of delays can threaten a renewable energy developer’s ability to satisfy the necessary requirements for claiming the production tax credit and the investment tax credit.
By extending the safe harbor for such projects, the new guidance will give developers more flexibility when they build renewable energy projects offshore or on federal land to satisfy the start of construction requirements, no matter what delays threaten their ability to claim the tax credits.
The new coronavirus relief bill passed by Congress last month also extends a number of tax credits related to renewable energy, including the 45q tax credit for carbon capture projects. It also offers tax incentives for offshore wind, heat to power property and biomass stoves, makes permanent the deduction for certain energy efficient property and extends several other initiatives, including credits for energy efficient and renewable energy property for homeowners, new energy efficient homes, EV charging and fuel cell refueling stations, and certain zero-emissions vehicles.