On May 27, 2020, in response to the COVID-19 pandemic, the Internal Revenue Service (IRS) issued Notice 2020-41 to provide relief to taxpayers facing delays to their renewable energy projects.
Notice 2020-41 extends the four-year Continuity Safe Harbor for section 45 PTC and section 48 ITC renewable energy projects that began construction in either 2016 or 2017. Under Notice 2020-41, if a project is placed in service within five calendar years after the calendar year in which construction began, the Continuity Safe Harbor is satisfied, and a taxpayer need not demonstrate facts and circumstances indicating continuous construction efforts to establish the beginning of construction.
Additionally, Notice 2020-41 provides relief for taxpayers who sought to begin construction under the Five Percent Safe Harbor on or after September 16, 2019. The Five Percent Safe Harbor treats construction as beginning when a taxpayer pays or incurs five percent or more of total project costs. Generally, a taxpayer may treat costs as incurred upon payment if, at the time of payment, the taxpayer had a reasonable expectation that the ordered services or property will be provided within three-and-a-half months (the "Three and a Half Month Rule"). Notice 2020-41 extends the Three-and-a-Half Month Rule for services or property paid for by the taxpayer on or after September 16, 2019 by providing that a taxpayer will be deemed to have had a reasonable expectation that the services or property would be received within three-and-a-half months after the date of payment if such services or property are actually received by the taxpayer by October 15, 2020.