New Beginning Construction Guidance Notice 2013-60

by Orrick, Herrington & Sutcliffe LLP

Earlier this year, the Internal Revenue Service (the “IRS”) published Notice 2013-29, providing guidance on what it means to “begin construction” for purposes of the recent extension of the 2.3 cent-per-kilowatt-hour production tax credit (the “PTC”) and the 30% investment tax credit (the “ITC”) for qualifying wind and certain other renewable energy facilities (excluding solar) the construction of which begins before January 1, 2014.

Under Notice 2013-29, there are two alternative methods by which a taxpayer can demonstrate that construction has begun before January 1, 2014: (1) by beginning physical work of a significant nature before January 1, 2014 (the “physical work test”) or (2) by paying or incurring at least 5% of the total cost of the facility before January 1, 2014 (the “5% safe harbor”).  Among other requirements, the physical work test requires that the taxpayer maintain a continuous program of construction and the 5% safe harbor requires that the taxpayer maintain continuous efforts to advance towards completion of the project.  Only limited guidance was provided regarding these continuity requirements.

Notice 2013-29 was also ambiguous regarding how the new rules would apply to transferees (i.e., whether or under what circumstances a transferee could “piggyback” on the transferor’s satisfaction of the Notice 2013-29 requirements. Further, although Notice 2013-29 provided that, for purposes of the physical work test, work performed by a vendor/manufacturer prior to January 1, 2014 under a master contract can be taken into account by an affiliate of the original purchaser who receives an assignment after December 31, 2013 of the rights to receive any of the components under the master contract, no such statement was made with respect to the 5% safe harbor.

On September 20, 2013 the IRS published Notice 2013-60 (the “Notice”) clarifying certain aspects of the guidance provided in Notice 2013-29.  Specifically, the Notice addresses: (1) the “continuous efforts” and “continuous construction” requirements; (2) the master contract described in Notice 2013-29 and (3) the transfer of a facility after construction has begun under the Act.


Under the Notice, a taxpayer is deemed to satisfy the relevant continuity requirement if the project is placed in service before January 1, 2016.  A facts and circumstances analysis will be applied to projects placed in service after this deadline and no further clarifying guidance beyond what was provided in Notice 2013-29 was provided.


Pursuant to the Notice, the master contract provision, as described in Notice 2013-29, applies to the 5% safe harbor as well as the physical work test.


In the Notice, the IRS noted that the statutory language requires only that construction of a facility begin before January 1, 2014; it does not require the construction to be begun by the taxpayer claiming the PTC or ITC.  The Notice provides an example in which a disregarded entity begins construction of a wind energy facility prior to January 1, 2014 and 95% of the equity interests in the disregarded entity subsequently are transferred by the “developer” in a transaction treated as a transfer of a 95% undivided interest in the assets under Revenue Ruling 99-5.13 In the Notice the IRS concludes that the entity, now an entity taxable as a partnership owned 5% by the developer, will continue to be treated as having satisfied the begun construction requirement.

Although the example in the Notice addresses only the transfer of 95% of the equity interests in a disregarded entity that is developing a project, the rationale expressed in the Notice should apply equally to transfers of all of a project entity’s assets and to transfers of 100% of the equity interests in a project entity to a third party.

What remains unclear is what constitutes a facility, e.g., to what extent can a developer who acquires turbines in 2013 under a master turbine supply agreement transfer some of those turbines to an affiliate (so that the affiliate then satisfies the begun construction requirement under the rules in the Notice and Notice 2013-29 applicable to master contracts) and then sell all or a portion of the interests in that affiliate to a third party when the project is completed prior to 2016.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Orrick, Herrington & Sutcliffe LLP | Attorney Advertising

Written by:

Orrick, Herrington & Sutcliffe LLP

Orrick, Herrington & Sutcliffe LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.