The continuity safe harbor placed-in-service date deadlines for the investment tax energy credit (Code Sec. 48) and the renewable electricity production credit (Code Sec. 45(a)) may be tolled if a construction delay is caused by national security concerns raised by the Department of Defense (DOD).
In general, the energy credit may only be claimed if construction on a qualified facility begins before January 1, 2022. In the case of the production credit, construction must begin before January 1, 2017 (January 1, 2020 for a wind facility). Once construction begins, taxpayers are required to make continuous progress toward completion under either a continuous construction test or a continuous efforts test. These tests are deemed satisfied under the continuity safe harbor if the facility is placed in service within four calendar years after the calendar year in which construction begins.
A construction deadline in the continuity safe harbor is tolled if all of the following requirements are satisfied:
- One or more necessary government permits or approvals for construction have been issued;
- Construction has begun;
- The DOD provides written notice that the construction plan should be modified in the interest of national security;
- The plan is modified in a way that is acceptable to the DOD to mitigate the national security concerns; and
- As a result of the plan modification, new or additional permits or licenses must be obtained which will delay the placed-in-service date of the facility or energy property.
The tolling period of the continuity safe harbor begins on the day the DOD provides written notice that the plan of construction requires modification to meet national security concerns.
The tolling period ends when one of the following events occurs:
- All new or additional permits or licenses are obtained;
- Written confirmation is received that all of the required new or additional permits or licenses will not be issued; or
- The relevant federal or state authorities are notified in writing that the modification to the plan will no longer be pursued.
The maximum length of the tolling period is four years.
The IRS will not issue private letter rulings or determination letters regarding the application of the tolling provision or the beginning of construction requirement.
Notice 2013-29, 2013-1 C.B. 1085, Notice 2013-60, 2013-2 C.B. 431, Notice 2014-46, 2014-2 C.B. 520, Notice 2015-25, 2015-13 I.R.B. 814, Notice 2016-31, 2016-23 I.R.B. 1025, Notice 2017-4, 2017-4 I.R.B. 541, and Notice 2018-59, 2018-28 I.R.B. 196, are modified.