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Six Takeaways from Wind Turbine Vendor Update: A Conversation with GE Renewable Energy

McDermott hosted GE Renewable Energy North America Services Sales Leader Ben Stafford, Commercial Director of Onshore Wind for the North Region Rob Bienick and Commercial Director of Onshore Wind for the West Region Matt Lynch on July 30 for a discussion about COVID-19’s impact to turbine supply chain and construction, the effects of the Production Tax Credit (PTC) safe harbor extension, and how GE is preparing for 2021 and beyond. Below are key takeaways from this week’s webinar. 1. COVID-19 continues to impact both supply chain and construction - requiring more communication with customers, subcontractors, and within GE, but products continue to be manufactured, delivered, installed, and maintained. 2. The large wind project pipeline in the United States (even prior to the PTC extension) shows that there remains great optimism for the wind industry, despite the current PTC phase-out schedule. 3. The repowering market for wind is growing, providing many...

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IRS Extends Deadline for ITC and PTC Projects

The IRS yesterday released anticipated guidance extending the placed-in-service deadline for the Investment Tax Credit (ITC) and Production Tax Credit (PTC). Under Notice 2020-41, the “Continuity Safe Harbor” was extended to five years for any project that otherwise began construction in 2016 or 2017. As background, the applicable credit rate for the ITC and PTC turns on when a project begins construction. The IRS has issued a series of Notices providing guidance on when a project begins construction for these purposes. Under the guidance, taxpayers can either satisfy the “Five Percent Safe Harbor” or “Physical Work Test”. In addition to requiring certain activities in the year construction begins, both methods include a second prong, requiring certain continuous work until the project is placed in service. The IRS has previously provided the Continuity Safe Harbor, under which a project will be treated as having met the second prong so long as it is placed...

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What COVID-19 Means For Renewable Projects And Financing

The world is facing a situation unprecedented in modern times with the global spread and impact of COVID-19. Its rapid spread has brought severe disruption and uncertainty to everyone’s personal lives, as well as to the wind, solar and storage industry supply chains, the renewable project financing market, and global markets at large. While the speed and complexity of the virus make it impossible to know the full effects it will ultimately have on the world, what follows is what we know today about the impact of COVID-19 on the supply chains for solar, energy storage and wind developers, as well as the project finance market. Access the full article.

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IRS Releases Initial Section 45Q Carbon Sequestration Credit Guidance

Treasury and the IRS released initial guidance on the amended Section 45Q carbon oxide sequestration credit on February 19, 2020. Notice 2020-12 and Revenue Procedure 2020-12 provide guidance relating to the beginning of construction and tax equity partnership allocations. This is the first Section 45Q guidance since Treasury issued a request for comments in Notice 2019-32 last year. That Notice sought input on a number of issues raised by amendments to Section 45Q that expanded the scope and enhanced the amount of the Section 45Q credit pursuant to the Bipartisan Budget Act of 2018, P.L. 115-123. The new guidance in Notice 2020-12 and Revenue Procedure 2020-12 is effective March 9, 2020. Notice 2020-12 closely follows the beginning of construction guidance for the Investment Tax Credit (ITC) in Notice 2018-59 and the Production Tax Credit (PTC) in Notice 2013-29 (as clarified and modified by subsequent notices). Like the ITC and PTC guidance, taxpayers can...

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The Senate’s New Base Erosion Tax: Highlights for Renewable Energy

On December 2, 2017, the Senate approved its version of the Tax Cuts and Jobs Act. The Senate Bill includes the base erosion and anti-abuse tax, a new tax intended to apply to companies that significantly reduce their US tax liability by making cross-border payments to affiliates. Given its potential to disrupt the financing of renewable energy projects, taxpayers in the renewable energy sector have been paying close attention to its developments. Continue Reading.

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DOE Says Wind Power Creates Lots of Jobs!

According to the Department of Energy (DOE) renewable energy wind installations had explosive growth through 2016, and added approximately 32,000 jobs since 2015, to a total of 102,000! In the Wind Technologies Market Report, DOE says the Production Tax Credit (PTC) is directly responsible for the expansion. Congress, however, is phasing out the PTC, which DOE believes will lead to a slowing of the wind energy industry. The PTC is incrementally being phased out over a five year period, and ends completely in 2020. Read here for more information.

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Analysis of Energy and Tax Proposals in the 2018 Budget Proposal

President Trump released his budget proposal for the 2018 FY on May 23, 2017, expanding on the budget blueprint he released in March. The budget proposal and blueprint reiterate the President’s tax reform proposals to lower the business tax rate and to eliminate special interest tax breaks. They also provide for significant changes in energy policy including: restarting the Yucca Mountain nuclear waste repository, reinstating collection of the Nuclear Waste Fund fee and eliminating DOE research and development programs. Read the full article.

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Energy Tax Extenders in FAA Bill Unlikely

As discussed in our post on April 7, US Congress extended 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, but 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. Some congressional leaders had stated that the omission was an oversight that would be addressed in 2016. In March, President Barack Obama signed an extension of certain Federal Aviation Administration (FAA) programs and revenue provisions through July 15, 2016. This legislation was apparently crafted with an intentionally short timeframe to allow inclusion of the omitted PTC and ITC provisions in long-term FAA reauthorization legislation.  However, Senate Finance Committee members have indicated that...

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IRS Revises Recent Begin Construction Guidance

On May 18, 2016, the Internal Revenue Service (IRS) revised Notice 2016-31 (Notice), its recent guidance on meeting the beginning of construction requirements for wind and other qualified facilities (including biomass, geothermal, landfill gas, trash, hydropower, and marine and hydrokinetic facilities). For a discussion of the Notice, click here. The revisions clarify that the Continuity Safe Harbor is satisfied if a taxpayer places a facility into service by the later of (1) the calendar year that is no more than four calendar years after the calendar year during which construction of the facility began, or (2) December 31, 2016. The revisions also include additional language that the Notice applies to any project for which a taxpayer claims the Section 45 production tax credit (PTC) or the Section 48 investment tax credit (ITC) that is placed in service after January 2, 2013. The revised Notice also corrects mathematical errors in an example illustrating...

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IRS Issues Guidance on the Beginning of Construction Rules for Renewable Projects

The Internal Revenue Service recently issued Notice 2016-31, which provides much-needed guidance for wind and other qualified facilities on meeting the beginning of construction requirements in light of the 2015 statutory extension and modification of the production tax credit and the investment tax credit. The Notice also revises and adds to the list of excusable disruptions that will not be taken into account when determining whether the continuity requirement has been met, and provides additional examples demonstrating “physical work of a significant nature” for different types of qualified facilities. Read the full article.

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