September 28, 2020

Volume X, Number 272

September 25, 2020

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New PTC and ITC Deadlines Expected for Renewable Energy Projects

Renewable energy project developers utilizing federal tax credits will likely get more time to complete work on projects. While more formal guidance is forthcoming, the renewables industry may see an extension of the safe harbor from four to five years for projects that began construction in 2016 or 2017.


In a letter sent on May 7, the Office of Legislative Affairs at the Department of the Treasury (Treasury) issued a letter to Charles Grassley, the chairman of the Senate Committee on Finance, stating that Treasury intends to issue relief to the wind and solar industries regarding certain production tax credit (PTC) and investment tax credit (ITC) deadlines.

The letter is in response to Grassley’s April 23, 2020, letter to Treasury requesting that the four-year safe harbor for the continuous construction and continuous efforts test for the PTC and ITC be extended to a five-year safe harbor period. The rule changes were requested due to the project disruptions caused by the COVID-19 pandemic.

According to Grassley, “Projects that have been waylaid by the economic disruptions of this pandemic can now proceed with more certainty. That means more certainty for American businesses and families at a time when stability is in short supply.” (See

Per the current IRS rules, taxpayers can claim the PTC for electricity produced or the ITC for qualifying energy property if either: (a) significant physical work is started on the project or (b) 5% or more of the total cost of the project is paid or incurred, and in the case of both (a) and (b), the project is placed in service within four years. If the project is not placed in service within four years, the taxpayer must instead demonstrate continuous progress on the project since the time (a) or (b) was satisfied – a standard many taxpayers are struggling with following unexpected manufacturing and other delays in 2020. The scope and timing of the Treasury relief is still unknown, but taxpayers are optimistic it will follow the suggestions in Grassley’s letter. The requested rule change would allow renewable energy projects that began construction in 2016 and 2017 to be completed in five years, rather than the four years allotted under current Treasury regulations. Ideally, the extension will be automatic for any project that otherwise began construction in 2016 or 2017, and not be tied to whether the delay is related to COVID-19. Otherwise, taxpayers will be left with the challenge of determining whether a project delay is related to COVID-19. While some delays (such as manufacturing and supply chain delays) can be clearly traced to COVID-19, other delays are more indirect. For instance, projects that completed physical work in 2016 or 2017 may have voluntarily stopped construction upon notice of a potential force majeure delay, even if the project might still have been placed in service in 2020 on the chance equipment is timely delivered in 2020. Given the complexity and questions surrounding each project’s particular facts, the safe harbor extension should apply to all projects.

Ultimately, the Treasury relief is welcomed by the renewable energy industry. This rule change could prove critical to the industry in light of the fact that many projects are facing significant delays and setbacks due to disrupted supply chains, construction delays, missed permitting timelines and other related delays.

© 2020 McDermott Will & EmeryNational Law Review, Volume X, Number 130


About this Author


Carl J. Fleming focuses his practice on mergers and acquisitions, project development and project finance, predominately in the renewable energy industry. He leads energy, infrastructure and PPP transactions throughout the US and in more than 40 countries worldwide. Carl represents private equity investors, Fortune 500 companies, foreign governments, and a broad range of leading renewable energy developers and sponsors.

Carl provides legal and commercial advice for the development, construction, operation, purchase and sale, and financing of projects and infrastructure, including...

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Edward Ed Zaelke Energy Lawyer McDermott Will

Edward (Ed) Zaelke is the head of the Firm’s Global Energy Project Finance group. He focuses his practice on project finance and private equity in renewable energy transactional matters. With more than 30 years of experience, he advises clients on all elements of alternative energy development and finance, including equity and debt financing, merger and acquisition transactions, equipment purchase and sale agreements, power purchase agreements, siting and other real property issues, governmental approvals, and engineering, procurement and construction (EPC) contracts.

Prior to joining McDermott, Ed was the former head of his firm’s project finance practice.

A prominent leader in his practice, Ed has served as lead counsel on many of the largest and most significant transactions in the renewable industry. He also authors and speaks prolifically about various topics in the renewable energy industry. Ed is the former president of the American Wind Energy Association (AWEA) and was a board member of AWEA for 12 consecutive years. He is also a founding board member of the Wind Solar Alliance.

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Philip Tingle Tax Attorney McDermott Will & Emery

Philip (Phil) Tingle represents energy companies such as utilities, independent power producers and financial institutions on a wide range of energy tax-related matters. He is the global head of the Firm's Energy Advisory Practice Group.

Phil provides advice regarding all aspects of renewable-energy projects, including tax equity structures, refinancings, acquisitions and dispositions, restructurings and workouts. He has extensive experience with the production tax credit and with the application of renewable credits to new technologies....

Heather Cooper, Energy Attorney, McDermott Will & Emery Law Firm

Heather Cooper is counsel in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Miami office.  She works on federal income tax matters, with a focus on energy tax issues. She represents clients in restructurings, mergers and acquisitions, and other transactional energy related matters. Her national practice includes advising on renewable energy transactions, such as solar and wind projects.