Irc 41 license#
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. The safe harbor for the 3½ Month Rule applies only for purposes of the beginning of construction requirements for the PTC and the ITC. In the case of payments made on or after September 16, 2020, the taxpayer will be deemed to have had a reasonable expectation that the services or property would be provided within 3½ months after the date of payment if the services or property are actually provided to a taxpayer by October 15, 2020.Īlthough the safe harbor for the 3½ Month Rule will not apply to any services or property received by a taxpayer after October 15, 2020, the 3½ Month Rule may still be satisfied based on a taxpayer’s particular facts and circumstance. In order to provide more certainty and assurance to renewable energy developers that are experiencing construction and procurement delays, Notice 2020-41 provides a new safe harbor under the 3½ Month Rule. Whether a particular taxpayer has a reasonable expectation at the time of payment that the property or services will be provided in 3½ months can be a subjective determination. If permissible under the taxpayer’s method of accounting, a taxpayer may treat services or property as provided to the taxpayer as the taxpayer makes payment to the person providing the services or property if the taxpayer can reasonably expect the person to provide the services or property within 3½ months after the date of payment-hence, the “3½ Month Rule”. In general, property is provided when title passes, or delivery is made or accepted, depending on the taxpayer’s method of accounting. For accrual method taxpayers, amounts are accrued as services or property are provided to the taxpayer. The Five Percent Safe Harbor is satisfied if the taxpayer pays or incurs at least 5% of total ITC-eligible (or integral) project costs by the “begin construction” deadline. Notably, the IRS has provided a safe harbor for the Continuity Requirement (the “Continuity Safe Harbor”) that allows a facility to be deemed to have satisfied the Continuity Requirement if a taxpayer places a facility in service by the later of: (1) a 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, 2018. Whether the Continuity Requirement is satisfied depends on the relevant facts and circumstances. These tests are often referred to collectively as the “Continuity Requirement.” Taxpayers that rely on the Five Percent Safe Harbor must pursue continuous efforts toward completion of construction once construction has begun. Taxpayers that rely on the Physical Work Test must pursue a continuous program of construction once construction has begun. In Notice 2013-29 and subsequent IRS notices, the IRS prescribed two methods for beginning construction: Alternatively, the taxpayer may elect to claim the ITC in lieu of the PTC in connection with a facility that otherwise qualifies under section 45(d).Įach of the ITC and the PTC has a “beginning of construction” requirement. To qualify for the PTC, electricity must be produced by the taxpayer at a qualified facility defined in section 45(d). Renewable energy incentives include the investment tax credit (ITC) under section 48 and the renewable electricity production tax credit under section 45 (PTC).
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