Beginning of construction for the Renewable Energy Production Tax Credit

Special report: Digging into the PTC and ITC in lieu of PTC

The authors share the history and operation of the ‘‘begin construction’’ requirement for the production tax credit under section 45 and the energy investment tax credit under section 48, using examples of common energy project fact patterns.

Renewable energy production tax credit

Nearly every year since 2011, some taxpayers have rushed to begin constructing renewable energy projects that use wind, biomass, geothermal, hydropower, and waste resources to generate electricity in order to remain eligible for federal incentives that phase down or expire after the end of the year. Each go-around, taxpayers learn important lessons from their unique experiences that have resulted in various leading practices and critical considerations for the beginning of construction. As the government continues to issue new rules defining how to begin construction and as these transitional rules for eligibility for tax benefits are extended to more technologies such as solar energy property, understanding the intricacies of these guidelines becomes even more important.

On December 18, 2015, President Obama signed into law the Protecting Americans From Tax Hikes (PATH) Act of 2015 and the Consolidated Appropriations Act of 2015 (together, the tax extenders).1 Among the extended provisions were the production tax credit (PTC) for wind and other qualifying renewable energy technologies under section 45 and the energy investment tax credit under section 48 (also known as the ITC in lieu of the PTC).2

The legislation extended the PTC for two years for some facilities (for example, biomass, geothermal, hydropower, and waste-to-energy facilities), whose construction must have begun before 2017, and it further extended for five years the PTC for wind facilities, whose construction must begin before 2020.

The tax extenders also modified the PTC for wind facilities by providing that the credit will phase out between 2017 and 2020. Under current law, a taxpayer may claim 100 percent of the value of PTCs or the ITC on a new qualified wind facility only if its construction began before 2017. As of January 1, 2017, the value of the credits phases down 20 percent each year until the credits phase out completely for any new facilities that begin construction after 2019.

Tax professionals, taxpayers, and industry stakeholders should carefully consider several planning issues as they begin construction before a year-end deadline. This report summarizes PTC and ITC eligibility requirements for beginning construction by the statutory deadline, including the rules in the most recent government guidance. It reviews examples of common fact patterns for beginning construction and addresses related concerns, and it explains some leading practices to facilitate compliance with applicable obligations to satisfy the ‘‘begin construction’’ requirement and preserve projects’ eligibility for tax credits until facilities are placed in service.


This article was originally published in Tax Notes, March 20, 2017.


1 P.L. 114-113 (2015).

2 P.L. 114-113, Division Q, sections 301 and 302.


If you have any questions or comments, please contact your Deloitte Tax client service team or one of our WNT FTA: Methods, Periods, & Credits specialists:

Gary Hecimovich, Tax partner, Deloitte Tax LLP, +1 202 879 4936

Brian Americus, Tax senior manager, Deloitte Tax LLP, +1 202 220 2022

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