On Friday, Christopher Kelley of the Treasury Office of Tax Legislative Counsel announced that the IRS would be issuing additional guidance to determine whether projects started construction in 2013 as is necessary to be eligible for production tax credits. Kelley’s comments were made in at an American Bar Association Section of Taxation meeting in Washington, DC.1
The guidance is in response to requests from the wind industry for further clarification as to two issues. First, what level of physical work was required for projects, which did not opt to satisfy the 5% safe harbor, to be deemed to have started construction in 2013 as is necessary for production tax credit eligibility? Second, what level of legal stake must a developer have had in a project in 2013 to have purchased equipment pursuant to a master supply agreement with a manufacturer that is subsequently transferred to the project in order to enable the project to satisfy the 5% safe harbor?
Kelley did not provide a date on which the guidance would be released, but stated that the government would “like to move pretty quickly.”2 Prompt action would be helpful as the industry is concerned that if the guidance comes too late in the year that some projects may not be able to arranging financing to fund construction costs in order to meet the de facto deadline of being placed in service by the end of 2015 in order to avoid application of the “continuous construction” standard.3 Kelley suggested that the guidance may take the form of questions and answers.4
1 Matthew R. Madara, IRS to Release Additional Production Tax Credit Guidance, 2014 TNT 91-23 (May 12, 2014).
3 See Notice 2013-60, 2013-44 IRB 431.
4 Madara, supra note 1.