The Internal Revenue Service (IRS) released guidance establishing when construction starts for solar projects under tax law, allowing developers to invest with confidence in new solar projects.
“The IRS has taken an important step forward with this guidance and provided certainty that will help solar project sponsors finance and build more solar,” Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association (SEIA). “Our members have been working hard to secure financing for projects and keep them on track to meet critical development and construction milestones. This guidance provides them with a strong timeline for keeping up momentum for new projects.”
The guidance, Notice 2018-59, provides two methods to establish when construction of a solar facility starts to qualify for the solar investment tax credit (ITC):
(1) starting physical work of a significant nature or
(2) meeting the ‘five percent safe harbor test’ (i.e., paying or incurring five percent or more of the total cost of the facility in the year that construction begins).
“In the absence of this commence construction guidance, tax equity partners were growing cautious about project risk,” Hopper continued. “Solar projects are helping modernize and secure our energy infrastructure, creating jobs and bringing clean energy to communities around the United States. We look forward to working with the IRS to ensure the guidance is implemented in a way that keeps this solar economic engine moving forward.”
— Solar Builder magazine