CDN NEWS | 
US NEWS 
July 2, 2018, by Jennifer Runyon
(Renewable Energy World)
At the end of June, the U.S internal revenue service (IRS) clarified the rules surrounding when solar developers are allowed to take the 30 percent Investment Tax Credit (ITC) for solar projects. The 30 percent tax credit is available until the end of 2019, at which time it will step down incrementally for 4 years, finally settling at 10 percent.
Under the new guidance, essentially as long as developers “start construction” on a solar project before December 31, 2019 and finish it by the end of 2023, the project will be eligible to take the full 30 percent investment tax credit. The rule clarifies what qualifies as “start construction.”
The IRS aligned the “start construction” rule for solar project development with its rule for the Production Tax Credit for wind, which allows for the five percent safe harbor rule or physical work test.
Under the five percent safe harbor rule, as long as developers have incurred five percent of the cost of the project by January 1, 2020, the project will qualify for the full ITC. Under the physical work test rule, developers must show that actual work has begun on the project and continued until the project concluded.
The five-percent safe harbor rule also includes a continuity requirement, but this can be met with “the payment of additional amounts included in the costs of the energy property, entering into binding written contracts for additional property or work, obtaining necessary permits and performing physical work of a significant nature,” according to a memo put out by Baker Botts.
The firm also said in the memo “that the Continuity Safe Harbor in particular will be beneficial for taxpayers seeking to maximize their ITC amount.”
While not explicitly stated, it seems entirely likely that a developer could incur costs and safe harbor all equipment for a solar project except the modules, many of which will have tariffs attached to them until 2021. By taking delivery of solar modules in 2022, a savvy solar developer could still enjoy the full 30 percent tax credit on a project built with tariff-free solar modules.
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