Extension of Continuity Safe Harbor: Notice 2020-41 extends the 4-year “Continuity Safe Harbor” for projects that began construction in 2016 or 2017 by one year. Under the new guidance, a project placed in service by the end of the 5th calendar year after the year in which the project began construction will be deemed to have satisfied the continuous construction requirement.

Beginning of Construction Safe Harbor: Notice 2020-41 provides relief to taxpayers that relied on the “5% Safe Harbor” to begin construction of a renewable project in 2019. It provides that a taxpayer that made payments for services or property on or after September 16, 2019 will be deemed to have had a reasonable expectation that the property or services would be received within 3½ months of payment (and thus, can be considered to have been paid or accrued in 2019 for purposes of the 5% Safe Harbor) if the services or property are actually received by October 15, 2020. If the property or services are not received by October 15, 2020, the 3½ month rule may still be satisfied if the taxpayer can establish that it had a reasonable expectation that such services or property would be received within 3½ months when payment was made.

Key Takeaway: Notice 2020-41 should alleviate concerns that renewable energy projects would be placed in service too late to rely on the 4-year Continuity Safe Harbor or that prospective investors would not be comfortable relying on the facts and circumstances to demonstrate that the beginning of construction requirements had been satisfied. These modifications should help jumpstart completion of these projects.