US Solar ITC Safe Harbor May Get Extended

• US solar ITC policy may get a relook from the government as Treasury Department says it plans to modify relevant rules in the near future
• Department responded to a demand made by 6 bipartisan senators to extend safe harbor provisions under the ITC and under PTC for wind power developers
• Senators pointed to problems posed by COVID-19 for the renewable energy industry in terms of supply chain disruptions, permitting deadlines and construction related delays for project completion
• An extension of the solar ITC will provide some relief to projects that are near completion and at risk of losing their tax credit eligibility

The Treasury Department of the US government has responded positively to a request from a group of senators that asked for deadlines for federal Investment Tax Credit (ITC) and Production Tax Credit (PTC) for solar and wind power developers, respectively. A short letter from the department stated, "The Department of the Treasury appreciates your concern and plans to modify the relevant rules in the near future."

The department was responding to a letter written by a group of senators wherein they urged to extend the safe harbor provisions under the ITC and PTC to accommodate significant development slowdowns due to COVID-19 public health crisis. The senators are Charles Grassley, Ron Wyden, John Thune, Maria Cantwell, Lisa Murkowski and Joe Manchin III.

"As the ongoing COVID-19 crisis continues to claim lives and cause economic disruption and uncertainty, it is vital that the government take whatever reasonable steps possible to allay unforeseen burdens on American families and businesses," the senators wrote in their letter. "This will provide relief to projects that are near completion, but due to unavoidable setbacks related to the ongoing pandemic are at risk of losing their tax credit eligibility."

In the letter written by senators in April 2020, they sought an extension of the continuity safe harbor from currently 4 years to 5 years for renewable energy projects for solar and wind power projects that began construction in 2016 or 2017 under both tax credits to allow certainty and flexibility to taxpayers for financing, permitting and construction of energy facilities.

The 6-senators strong bipartisan coalition points out to the disruptions in supply chains, construction operations and permitting timelines due to COVID-19 crisis that have delayed projects that were otherwise on track to come online by the end of 2020.

"Providing a temporary extension of the continuity safe harbor of five years, in lieu of the current four, would address the unforeseen interruptions developers are experiencing due to COVID-19 and provide the certainty businesses need to move forward with existing projects," the letter further reads. "As Congress and the Administration continue to work to provide relief and assistance to Americans grappling with fallout of COVID-19, this simple modification would provide significant benefits to an important and growing sector of the American economy."

The American Council on Renewable Energy (ACORE) feels 'encouraged' by the Treasury Department's letter and its President and CEO Gregory Wetstone said now details are awaited on this critical issue.

Introduced in 2006, solar ITC was providing 30% relief in tax for installation of solar systems. It dropped down to 26% in 2020 for residential and commercial systems (including utility scale plants) after the government refused to extend the 30% limit. It is set to drop down to 22% in 2021. In 2022, it will drop to 10% for commercial and utility scale projects and to 0% for residential segment.