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Commence Construction Modification


The Commence Construction Modification is a vital part of the solar industry’s legislative agenda.  SEIA has been advocating for legislation to make this change to allow the industry to make full and effective use of the Investment Tax Credit (ITC).

Quick facts

  • Commence Construction Modification is an adjustment to allow projects covered under Section 48 to qualify for the ITC if construction on the project begins prior to the statutory expiration of the 30% ITC (Dec. 31, 2016).
  • The tax extenders package included in the American Taxpayer Relief Act of 2012 included a commence construction modification for technology covered under Section 45, which does not include any solar technology.
  • Because renewable energy projects require a multi-year timeframe, new projects may be ineligible for the 30% ITC due to the placed in service requirement.
  • Providing Section 48 technologies with a commence construction modification will drive new project development and job creation.

What is the Commence Construction Modification?

The American Taxpayer Relief Act of 2012 (“ATRA”) signed into law in January 2013  extended and modified the Section 45 renewable electricity Production Tax Credit (“PTC”) and the Section 48 Investment Tax Credit (“ITC”) in lieu of the PTC for one year through December 31, 2013. It also replaced the traditional “placed in service” requirement for all Section 45 renewable energy facilities with a rule that allows all facilities that begin construction before January 1, 2014, to qualify for the PTC (or ITC in lieu of the PTC). 

Notably, the ATRA did not encompass solar energy property in this policy change. Thus, under current law, renewable energy facilities eligible for the Section 48 ITC (solar, microturbines, fuel cells, small wind, thermal and combined heat and power) must be placed in service (i.e., the facility must be complete and capable of generating power substantially equal to its nameplate capacity) before the statutory expiration of the incentive.

The commence construction modification provided for in the ATRA should apply to all Section 45 and 48 clean energy incentives, regardless of technology.  This revision will provide consistent tax policy treatment across clean energy technologies and, in the case of solar, drive the installation of an additional 4,000 megawatts (MW) of capacity.

Why is the Commence Construction Modification Important?

Clean energy projects often require multi-year development timelines. This is especially true for utility-scale solar projects, which must navigate significant and time-consuming financing, siting and permitting issues and take three to five years to complete.  Compared to a rigid placed-in-service date, a commence construction standard provides added certainty and flexibility that will allow more clean energy projects to move forward during the statutory duration of 30% Solar Investment Tax Credit.  This modification also furthers the underlying objective of the incentives – the deployment of clean energy projects and the expanded use of renewable energy.