6/29/2021
Notice 2021-41: Beginning of Construction for Sections 45 and 48; Extension of Continuity Safe Harbor to Address Delays Related to COVID-19 and Clarification of the Continuity Requirement clarifies and modifies prior notices addressing the beginning of construction requirement for both the production tax credit for qualified facilities under § 45 and the investment tax credit for energy property under § 48; provides that the safe harbor in section 3.02 of Notice 2013-60 and section 6.05 of Notice 2018-59 and extended in prior IRS notices (Continuity Safe Harbor) is further extended for property the construction of which began in 2016 through 2020; and provides clarification of the methods that taxpayers may use to satisfy the Continuity Requirement provided in prior IRS notices and defined in section 2 of this notice to satisfy the beginning of construction requirements under §§ 45 and 48.
BACKGROUND
Section 38 of allows certain business credits. Among the credits allowed by § 38 are the renewable electricity production tax credit under § 45 and the investment tax credit determined under § 46 of the Code (which includes the energy credit under § 48). The credits under §§ 45 and 48 generally are referred to as the production tax credit (PTC) and the investment tax credit for energy property (ITC).
Notice 2020-41 provides that for projects that began construction in calendar year 2016 or 2017, the Continuity Safe Harbor is satisfied if a taxpayer places the qualified facility or energy property in service by the end of a calendar year that is no more than five calendar years after the calendar year during which construction with respect to that qualified facility or energy property began, and also gives a 3½ Month Safe Harbor for services or property paid for by the taxpayer on or after September 16, 2019 and received by October 15, 2020.
Notice 2020-41 provides relief for projects on which construction began in 2016 through 2020 by expanding the period that qualifies for the Continuity Safe Harbor and coordinates the methods for satisfying the Continuity Requirement under the Physical Work Test and Five Percent Safe Harbor.
Except as otherwise specified, guidance in prior notices continues to apply.
EXTENSION OF THE CONTINUITY SAFE HARBOR FOR SECTIONS 45 AND 48
The Continuity Safe Harbor for any qualified facility or energy property that began construction under the Physical Work Test or the Five Percent Safe Harbor in calendar year 2016, 2017, 2018, or 2019 is satisfied if a taxpayer places the qualified facility or energy property in service by the end of a calendar year that is no more than six calendar years after the calendar year during which construction with respect to that qualified facility or energy property began.
The Continuity Safe Harbor for any qualified facility or energy property that began construction under the Physical Work Test or the Five Percent Safe Harbor in calendar year 2020 is satisfied if a taxpayer places the qualified facility or energy property in service by the end of a calendar year that is no more than five calendar years after the calendar year during which construction with respect to that qualified facility or energy property began.
CLARIFICATION OF METHODS TO SATISFY THE CONTINUITY REQUIREMENT
The Continuity Requirement for any qualified facility or energy property to which the Continuity Safe Harbor does not apply is satisfied if the taxpayer demonstrates satisfaction of either the Continuous Construction Test or the Continuous Efforts Test, regardless of whether the Physical Work Test or the Five Percent Safe Harbor was used to establish the beginning of construction.
EFFECT ON OTHER DOCUMENTS - Notice 2013-29, Notice 2013-60, Notice 2014-46, Notice 2015-25, Notice 2016-31, Notice 2017-04, Notice 2018-59, Notice 2019-43, Notice 2020-41, and Notice 2021-5 are modified.
See IRB: 2021-29, 7/19/2021 for the full text.