Skip to main content

Solar Developers Get a Breath of Certainty with New Commence Construction Guidance

Tuesday, Jun 26 2018

Share
By
Comms Team
utility scale solar project

Since its historic extension in late 2015, the solar Investment Tax Credit (ITC) has been a critical mechanism for the rapid growth of solar power in the United States. The only thing missing was clear rules for when solar projects in development begin to qualify for the credit. That clarity finally came last Friday when the IRS released crucial ‘commence construction’ guidance establishing rules for ITC qualification.

After years of uncertainty, this guidance definitively states that if a solar project meets one of two thresholds by an end-of-year deadline, it can still qualify for the credit current in that year.

Those two thresholds that a solar project can meet to qualify for the ITC include: (1) starting physical work of a significant nature or (2) meeting the ‘five percent safe harbor test’ (i.e., paying or incurring five percent or more of the total cost of the facility in the year that construction begins).

At the start of 2020, the 30 percent ITC reduces to 26 percent, ramping down to 22 percent in 2021 and finally to a flat 10 percent for commercial projects in 2022 and beyond. If a project meets one of the two qualifiers from the new IRS guidance by the end of 2019 or other end-of-year ramp down deadlines, it is eligible for that current ITC rate.

solar growth with ITC

That is the certainty that developers and financiers needed. Tax equity partners were growing cautious about project risk as the end of 2019 drew closer, but now, thanks to tireless advocacy from SEIA, our members and congressional supporters, that risk is mitigated.

The U.S. solar industry is one of the fastest-growing industries in the U.S., employing more than 250,000 Americans and accounting for about two percent of America’s electricity generation. This ‘commence construction’ guidance is essential to the development of current and future solar projects and can help continue the historic growth of the industry.

Do you have questions or want to learn more about the new guidance? SEIA is hosting a webinar to answer those questions and provide more detail this Thursday, June 28th at 2:00pm ET. The informative webinar will offer a review and expert analysis of the newly-published guidance and explain how it will impact the industry and your business. Click here to register now!

Article Type

Topics

Related News

Friday, Jan 06, 2023

Solar and Storage Industry Reacts to New Greenhouse Gas Guidance from White House Council on Environmental Quality

WASHINGTON, D.C. — Statement by SEIA president and CEO Abigail Ross Hopper on the action today by the White House Council on Environmental Quality to issue guidance for agencies assessing greenhouse gas impacts in National Environmental Policy Act reviews.

Read More
Wednesday, Dec 14, 2022

Solar Industry Statement on Select Committee on the Climate Crisis Report

WASHINGTON D.C. —Today the House Select Committee on the Climate Crisis issued a report outlining recent progress made toward addressing the climate crisis and opportunities for further policy action. Following is a statement from Erin Duncan, vice president of congressional affairs for the Solar Energy Industries Association (SEIA) on the report:

Read More
Tuesday, Dec 13, 2022

Trade and Supply Chain Barriers Delay Impact of Historic Clean Energy Law

WASHINGTON, D.C. and HOUSTON, TX — The U.S. added 4.6 gigawatts (GW) of new solar capacity in Q3 2022, a 17% decrease from the same quarter last year as trade barriers and ongoing supply chain constraints continue to slow America’s clean energy progress.

Read More