The US Department of the Treasury issued a letter on May 7 stating that it plans to modify the continuity safe harbor for both the production tax credit (PTC) and the energy investment tax credit (ITC). Under the current law, taxpayers seeking to claim a PTC for electricity produced from qualifying facilities or an ITC for qualifying energy property must generally begin construction on the qualifying facility or property by specified dates.

To be considered to have begun construction, the taxpayer must start physical work of a significant nature, or must satisfy the safe harbor requirements by incurring 5% or more of the total cost of the facility or property. The taxpayer must then demonstrate continuous efforts to complete construction, and must place the facility or property in service within four years to meet the requirements for a continuity safe harbor.

The Treasury Department’s letter was sent in response to a request by several senators for a temporary extension of the continuity safe harbor of five years, in lieu of the current four years. The senators explained that a temporary extension of the continuity safe harbor would address unforeseen interruptions that developers are experiencing due to the coronavirus (COVID-19) pandemic and would provide the certainty businesses need to move forward with existing projects. If the continuity safe harbor is extended, it would help address supply chain, construction, and permitting issues created by the COVID-19 pandemic.