Author: jporte

IRS Issues New Guidance on Rules for ITC Qualification

The Investment Tax Credit for Solar Power (the “ITC”) is a tax credit offered to individuals and businesses based on the amount they invest in eligible solar energy conversion facilities.  The benefits of the ITC have been extensive enough to warrant the extension of the program on multiple occasions. The latest expansion, adopted in 2015, is expected to spur as much as $140 billion in the economy and double U.S. solar power employment by 2020. Such expansion will assist states in meeting their ever-increasing renewable portfolio standards and replacing fossil fuel generation. The deduction percentage that taxpayers receive through the ITC program depends on when they begin the construction of their energy projects. Commercial and utility projects that “commenced construction” through 2019 are eligible to receive a 30% ITC credit. The percentage then drops down to 26% for projects that begin construction in 2020, and, then, to 22% for projects that begin construction in 2021. The definition of “commencement of construction” has been a source of significant uncertainty for solar developers. To reduce this uncertainty, the IRS released new guidance in Notice 2018-59, available here. The IRS created two methods for taxpayers to establish the commencement of construction: (1) the “physical work” test and (2) the “five percent safe harbor” test. Taxpayers will be deemed to have “commenced construction” on the day that either of these tests is satisfied....

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On January 22, 2018, President Trump announced his intention to impose a tariff-rate quota on imported crystalline silicon photovoltaic solar cells and modules under Section 202 of the Trade Act of 1974 (19 U.S.C. § 2252), as recommended by the International Trade Commission (the “ITC”) in the Suniva Inc. and SolarWorld Americas, Inc. trade matter, Investigation No. 201-075. See Proclamation 9693, To Facilitate Positive Adjustment to Competition from Imports of Certain Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled into Other Products) and for Other Purposes, 83 Fed. Reg. 3541 (Jan. 23, 2018).  The President ordered the implementation of a declining four-year tariff-rate quota with the following terms:   Year 1 Year 2 Year 3 Year 4 Safeguard Tariff on Modules and Cells 30% 25% 20% 15% Cells Exempted from Tariff 2.5 gigawatts 2.5 gigawatts 2.5 gigawatts 2.5 gigawatts   Each year, the applicable tariff will be assessed on solar cell imports in excess of the 2.5 gigawatt quota.  See 83 Fed. Reg. 3549. The tariff-quota is scheduled to take effect at 12:01 a.m. eastern standard time on February 7, 2018. See id. at 3543. Domestic solar cell and module manufacturers that are able to increase production without significant capital outlays will likely benefit from the new tariff. However, most observers agree that the four-year remedy period may be too short to generate significant capital investment in new...

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The DW Energy Blog is published by Dickinson Wright PLLC to inform the public of important developments within the firm and practice areas. The content is informational only and does not constitute legal or professional advice. We encourage you to consult a Dickinson Wright attorney if you have specific questions or concerns relating to any of the topics covered in this blog.