Today, the IRS released Notice 2015-25 to reflect the statutory extension of the renewable electricity project tax credit under Section 45 and the energy investment tax credit under Section 48. In the notice, the IRS extended the date by which construction of a qualified facility must begin from January 1, 2014 to January 1, 2015. Additionally, consistent with the one-year extension of the beginning of construction date, the notice extends the placed in service date from January 1, 2016 to January 1, 2017.
Notice 2015-25 updates guidance provided in Notice 2013-29, Notice 2013-60, and Notice 2014-46 consistent with the Tax Increase Prevention Act of 2014. The prior notices provided that a taxpayer may establish the beginning of construction by either: (i) starting work of a significant nature (Physical Work Test); or (ii) paying or incurring five percent or more of the total cost of the facility (Safe Harbor). Both methods require that a taxpayer make continuous progress towards completion once construction has begun (Continuous Construction Test and Continuous Efforts Test, respectively). If a taxpayer begins construction on a qualified facility (as described in Section 45(d)) prior to January 1, 2015 and places the facility in service before January 1, 2017, the facility will be considered to satisfy the Continuous Construction Test or the Continuous Efforts Test, regardless of the amount of physical work performed or the amount of costs paid or incurred with respect to the facility after December 31, 2014 and before January 1, 2017.