In a letter dated May 8, 2018, Senator Rand Paul (R-Ky.), in support of his state's coal industry, urges the U.S. Department of Treasury ("Treasury") to make significant changes to the existing "beginning of construction" guidance issued by the Internal Revenue Service ("IRS") in a series of notices ("IRS Notices"). The IRS Notices include industry-friendly safe harbors that provide wind developers with more certainty in determining the beginning-of-construction date of a project, which is relevant for determining the amount of the tax credit for wind production ("PTC") for which a project may be eligible. The changes advocated for by Sen. Paul are intended, in his words, to be a "step toward a more competitive energy market" and reverse the "expansion of the [PTC] far beyond the text and intent of what Congress passed."
The proposed changes include:
- Requiring a project to be placed in service within two years from the beginning of construction, rather than within the four-year window under the current guidance.
- Prohibiting a project from establishing an earlier beginning-of-construction date through the use of "safe harbor" turbines that were relocated or transferred to the project.
- Requiring continuous construction from the beginning-of-construction date until the project is placed in service.
- Requiring physical work to establish the beginning of construction that is "significantly beyond" beginning excavation for a foundation, setting anchor bolts into the ground, pouring concrete pads into the foundation or building onsite roads.
- Update the list of acceptable delays to the continuous construction requirement, perhaps by requiring an explicit waiver from Treasury.
- Prohibit wind energy from qualifying for the PTC if the energy is sold into the market at a negative value.
- Although we have no reason to think that any of these proposals will gain traction with Treasury, it is worth noting that at least one member of Congress has the PTC in his crosshairs.
Originally published July 5, 2018
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