New COVID-19 Relief Legislation Extends Renewable Energy and Green Technology Industry Tax Incentives

Morgan Lewis

Morgan LewisA new coronavirus (COVID-19) relief bill—the Consolidated Appropriations Act, 2021, which includes the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the Act)—was signed into law on December 27. The Act not only contains tax provisions to provide direct relief to individuals, but also includes tax benefits for various industries, including the “green” energy and technology industries.

Of importance to the renewable energy industry, the Act extends the sunset or phasedown periods of federal tax credits related to the development and operation of certain renewable energy electric generating facilities, and provides new tax credit extension rules specifically applying to offshore wind power electric generating facilities. The Act also provides eligibility extensions for tax benefits applying to other “green” technologies, including the carbon capture and sequestration tax credit.


The Act extends by one year (from January 1, 2021, to January 1, 2022) certain time-based eligibility requirements of the production tax credit (PTC) under Section 45 of the Internal Revenue Code of 1986, as amended (the Code), for wind and certain other qualifying renewable energy production technologies.[1] Of particular interest, the Act extends the 60%-of-maximum-credit PTC for eligible wind power facilities that are considered to “begin construction” after December 31, 2019, and prior to January 1, 2022 (extended from January 1, 2021).[2] The Act makes corresponding one-year eligibility extension changes to the investment tax credit (ITC) rules of Section 48 of the Code to permit wind power facilities beginning construction prior to January 1, 2022 (extended from January 1, 2021) to elect to apply the 60%-of-maximum-credit ITC (i.e., 18% of eligible tax basis) in lieu of the PTC.

In addition, the Act creates new extended eligibility rules for applying the ITC to offshore wind facilities. These rules provide that the full 30% ITC applies to a “qualified offshore wind facility” (an otherwise PTC/ITC eligible wind facility located in the inland navigable waters of the United States or in the coastal waters of the United States) that begins construction prior to January 1, 2026.


The Act separately provides a two-year extension of certain time-based requirements or amount limitations pertaining to the ITC for solar and certain other qualifying renewable energy production technologies[3] under Section 48 of the Code. For eligible solar energy facilities, the Act extends the ITC phasedown schedule by two years, such that the 26% ITC (applied to eligible tax basis) now applies to property that begins construction after December 31, 2019, and prior to January 1, 2023 (extended from January 1, 2021), and the 22% ITC now applies to property that begins construction after December 31, 2022, and prior to January 1, 2024 (extended from January 1, 2022). The placed-in-service-related deadline for otherwise increased ITC percentage amounts to be reduced to 10% is likewise extended two years from January 1, 2024, to January 1, 2026. The following table reflects ITC amounts applying to qualifying solar power facilities both before and after the passage of the Act.

Solar Power ITC

“Begin Construction” Year

Pre-Act ITC Phasedown

Post-Act ITC Phasedown


Full 30% ITC*

Full 30% ITC**


26% ITC*

26% ITC**


22% ITC*

26% ITC**


10% ITC

26% ITC**


10% ITC

22% ITC**

After 2023

10% ITC

10% ITC

Placed in Service Restriction

* Property must be placed in service for tax purposes prior to 2024. If not, 10% ITC applies.

** Property must be placed in service for tax purposes prior to 2026. If not, 10% ITC applies.


The Act provides extensions for tax benefits applying to a host of additional “green” technologies, including the energy efficient commercial buildings deduction, the alternative fuel refueling property credit, the energy efficient homes credit and the residential energy-efficient property credit. Notably, the Act extends the development-and-construction-related eligibility deadline for the Code Section 45Q carbon capture and sequestration tax credit by two years, so that the credit now generally applies to a qualified facility beginning construction before January 1, 2026 (extended from January 1, 2024).


The tax credit extension for wind and solar power facilities is a welcome development for the renewable energy industry. Although the industry had been hoping for such an extension, no such extension was assured and developers accordingly had been seeking to support that their in-development wind or solar power projects had “begun construction” for ITC/PTC purposes by the end of 2020. With perfect hindsight in light of the Act, these developers likely would not have initiated such activities, instead preferring to have “begun construction” in a later year to effectively extend the four-year “safe harbor” period for placing the applicable project into service in order to satisfy the continuity requirement of the “begun construction” test.[4] Given that the Act was passed so late in calendar year 2020, we expect that it may not be feasible or desirable to unwind these activities from a commercial standpoint (including from a vendor relationship perspective) in order to prevent them from being counted in a begin construction analysis. However, we expect that certain larger-scale developers that sought to support satisfying the begin construction test in 2020 through offsite work or expenditures may be able to mitigate the impact of these activities by allocating or assigning the property resulting from such work or expenditures to a project that otherwise had begun construction prior to 2021.

In addition, the Act’s new rules for offshore wind facilities have a retroactive application. Therefore, in addition to encouraging the development of new offshore wind projects, the Act provides a significant benefit to already in-development projects that may otherwise have been expecting to generate a reduced ITC or PTC amount under the generally applicable wind power facility rules.[5]

Finally, we expect that the carbon capture and storage industry should be relatively pleased with the extension of the eligibility for the Code Section 45Q carbon capture and sequestration tax credit. The industry had been seeking such an extension, particularly in light of the government’s significant delay in releasing proposed regulations concerning how the credit is to apply and the still unanswered technical issues not addressed by those proposed regulations.


[1] These other technologies consist of closed-loop biomass, geothermal, landfill gas, trash to energy, qualified hydropower and marine and hydrokinetic energy facilities.

[2] The Code does not provide any standard for determining when a qualifying wind or solar power facility has “begun construction” for PTC/ITC purposes. However, the IRS has provided standards for satisfying this requirement. See Notice 2013-29, 2013-20 I.R.B. 1085; Notice 2013-60, 2013-44 I.R.B. 431; Notice 2014-46, 2014-35 I.R.B. 520; Notice 2015-25, 2015-13 I.R.B. 814; Notice 2016-31, 2016-23 I.R.B. 1025; Notice 2017-4, 2017-4 I.R.B. 541; Notice 2018-59, 2018-28 I.R.B. 196; Notice 2019-43, 2019-31 I.R.B. 487; Notice 2020-41, 2020-25 I.R.B. 954.

[3] These other technologies consist of fiber optic solar, ground thermal, qualified fuel cell, qualified microturbine property, certain “combined heat and power,” and qualified “small wind” energy facilities.

[4] Consistent with its past practice reacting to extended PTC/ITC eligibility for wind and solar power facilities enacted by statute, we expect the IRS will release guidance extending the four-year “safe harbor” for satisfying the continuity requirement to apply to the extended eligibility dates under the Act.

[5] However, a remaining important issue for the offshore wind power industry is whether the IRS in forthcoming guidance will lengthen the four-year “safe harbor” period for placing the applicable project into service in order to satisfy the continuity requirement of the “begun construction” test to accommodate the much longer entitlement and construction schedules for offshore wind projects as compared to onshore wind projects.

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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.

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