The solar construction-start rules

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Publication February 20, 2018

The solar construction-start rules are “actively being worked on,” according to Hannah Hawkins, the lawyer for energy tax issues in the office of tax policy at the US Treasury.

Hawkins made the statement at an American Bar Association tax section meeting in San Diego in early February. The topic remains on a revised priority guidance plan that the Internal Revenue Service released in the wake of the new tax law showing guidance that the agency hopes to release by June 30. 

Some tax counsel are advising solar companies to have construction of remaining solar projects as far along as possible by the end of 2019 because of uncertainty about what must done on such projects to be considered under construction in time to qualify for a 30% investment tax credit. A 30% tax credit can be claimed on any solar project that was under construction by the end of 2019. The credit amount drops to 26% for projects that start construction in 2020 and to 22% in 2021.

However, most counsel expect the government to apply the same principles to solar that apply to wind farms, with some variations to address issues that are unique to solar. Wind farms are considered under construction for tax purposes once the developer has incurred at least 5% of the total project cost or started physical work of a significant nature at the project site or at a factory on equipment for the project.


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