August 12, 2014
Blogs, U.S.

IRS relaxes renewable energy project tax credit rule

by Jason Bramwell on Aug 11 2014 | AccountingWEB |

Ted Mann of the Wall Street Journal reported on Friday that the IRS lowered a threshold for renewable energy projects to qualify for federal tax credits, potentially providing a boon to developers and investors in the wind-power industry who had been uncertain how heavily they could rely on them for financing.

In Notice 2014-46, which was released on August 8, the IRS and the US Treasury Department said renewable energy projects could qualify for a pair of tax credits if they had incurred at least 3 percent of the total project cost before the beginning of 2014, down from the previous threshold of 5 percent. Credits would be proportionally reduced in value below the 5 percent threshold, the IRS said.

The guidance also clarified what sort of construction qualified as work of a “significant nature,” another test by which project developers – and their investor partners – can be assured that they have qualified for the credits, which provide the financial backbone of most major wind-farm projects, Mann wrote.

This marked the third attempt by the federal government to clarify how projects could qualify for the tax credit program, which expired at the end of 2013 but is still open to developers, provided they began installation in that year.

Regarding the “significant nature” of a wind project, the IRS cited examples of construction that would help qualify wind-power developers for credits, including having begun excavating foundations for wind towers, installing the anchor bolts that hold towers in place, and pouring the enormous concrete pads on which the towers sit.

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