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Kevin Spencer focuses his practice on tax controversy issues. Kevin represents clients in complicated tax disputes in court and before the Internal Revenue Service (IRS) at the IRS Appeals and Examination divisions. In addition to his tax controversy practice, Kevin has broad experience advising clients on various tax issues, including tax accounting, employment and reasonable compensation, civil and criminal tax penalties, IRS procedures, reportable transactions and tax shelters, renewable energy, state and local tax, and private client matters. After earning his Master of Tax degree, Kevin had the privilege to clerk for the Honorable Robert P. Ruwe on the US Tax Court. Read Kevin Spencer's full bio.

As discussed in our post on March 16, the Congressional extension of the Production Tax Credit (PTC) under Internal Revenue Code (IRC) Section 45 and the Investment Tax Credit (ITC) under IRC Section 48 in December 2015 failed to include extensions for certain types of renewable energy property, including fuel cell power plants, stationary microturbine power plants, small wind energy property, combined heat and power system property, and geothermal heat pump property. Congressional leaders have stated that the omission was an oversight that would be addressed in 2016.

On March 30, 2016, President Barack Obama signed into law the Airway and Airport Extension Act of 2016 (H.R. 4721) (the Act), which extends certain Federal Aviation Administration (FAA) programs and revenue provisions only through July 15, 2016. Expiring in less than four months, the FAA extension was apparently crafted with an intentionally short timeframe to allow inclusion of the omitted PTC and ITC provisions in long-term FAA reauthorization legislation that will likely follow this summer.  Accordingly, while the Act does not directly address the energy tax provisions omitted from last year’s extenders package, experts hope that it paves the way to addressing the omission in a few months.

Senator Ron Wyden (D-WY) has said that he hopes to introduce a long-term FAA bill addressing the omitted energy tax credit extenders after the Senate returns this week. House Ways and Means Committee Chair Kevin Brady (R-TX) has expressed opposition to attaching energy credit tax extenders to the FAA reauthorization legislation. As developments occur, we will update this blog.

Renewable Energy Industry Seeks Additional Energy Credit Clarifications

On December 18, 2015, President Barack Obama signed into law the Consolidated Appropriations Act, 2016 (H.R. 2029) (the Act). The Act includes multi-year extensions of the Production Tax Credit (the PTC) under Internal Revenue Code (IRC) Section 45 and the Investment Tax Credit (the ITC) under IRC Section 48 for wind and solar projects—both of which are gradually phased out. The Act, however, did not extend the ITC for other types of renewable energy property, including fuel cell power plants, stationary microturbine power plants, small wind energy property, combined heat and power system property, and geothermal heat pump property. Read further discussion of the Act’s extension of renewable energy tax incentives. Continue Reading President Obama Signs Consolidated Appropriations Act

With the recent extension of the federal income tax credits available for renewable energy projects, practitioners and industry participants have raised questions as to how the “begun construction” rules will apply under these new regimes.  The new regimes refer to the dates on which construction on projects began for purposes of determining qualification for the credits and also provide for a phaseout or reduction in the available credits over time. (For more information on these extensions, see our previous article on the extensions.)

Industry participants expect that the Internal Revenue Service will soon issue guidance detailing when a project will be determined to have “begun construction” and when continuous construction efforts are required.  It is expected that this guidance will be similar to the beginning of construction guidance summarized here for wind projects.  However, in light of the different considerations for different technologies and the reduction in the credit amount over time, which differs from the prior credit for wind that expired in its entirety, a number of questions have been raised by industry participants.  It is hoped that some of these questions will be answered by any guidance that is issued with respect to the credit extensions.  Some of these questions include:

  • Will the beginning of construction tests be the same as they currently are for wind (e., a physical work of a significant nature test and a 5 percent safe harbor test)?
  • Will continuous construction efforts be required under the new regimes?
  • What is the consequence of failing to maintain a program of continuous construction? Will the project still be eligible for a reduced credit, and how will that credit amount be determined?
  • Will there be a placed in service safe harbor? The wind guidance had provided that continuous construction efforts would be considered maintained so long as projects were placed in service prior to a specific date.  That date was two years after the end of the year in which the project was required to be placed in service.  Most industry participants believe this safe harbor will be extended to apply to wind projects beginning construction through 2016.
  • If there is a placed in service “safe harbor,” will it apply to all technologies in the same manner? That is, will the safe harbor period be the same for all renewable technologies?
  • Will the guidance address and provide examples of “physical work of a significant nature” for solar projects?
  • How would the physical work and safe harbor tests apply in the context of residential or commercial and industrial solar projects?
  • In the solar context, what will be considered a single “facility” for purposes of the beginning of construction tests?

We will provide additional updates as we get more information, so please stay tuned.

On December 18, 2015, President Barack Obama signed into law the Consolidated Appropriations Act, 2016 (H.R. 2029) (the Act), which included welcomed extensions to a number of energy tax incentives. The legislation includes multi-year extensions of the Section 45 Production Tax Credit (the PTC) and the Section 48 Investment Tax Credit (the ITC) for wind and solar projects tempered by a gradual phase out of the total credit available.

Read the full article.