IRS Updates Notice 2013-29 ("Begun Construction" Guidance)

30 April 2013 Renewable Energy Outlook Blog

On April 25, 2013, the IRS updated Notice 2013-29 to clarify the original guidance issued on April 15, 2013. Notice 2013-29 provides guidance regarding the eligibility requirements for the production tax credit (PTC) and investment tax credit (ITC) for certain renewable and alternative energy facilities. Click here to view Notice 2013-29 as revised. You can also take a look at my prior summary of Notice 2013-29 or our Client Alert, both of which remain relevant.

The IRS updated Notice 2013-29 in response to questions regarding whether the IRS had changed the meaning of what constitutes a “binding written contract” for purposes of applying the “beginning of construction” guidance. As originally drafted, the Notice stated that a manufacturing, construction or production contract is only binding if it is enforceable under local law against the taxpayer or predecessor and does not limit damages to a specified amount. As revised, the Notice makes clear that a contractual provision that limits damages to an amount equal to at least 5 percent of the total contract price will not be treated as limiting damages to a specified amount.

This change aligns Notice 2013-29 with guidance issued by the Department of Treasury under the popular 1603 cash grant program, as well as Treasury Regulations and prior releases by the IRS with respect to “bonus depreciation” and other tax credits.

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