On May 5, 2016, the Internal Revenue Service (IRS) issued Notice 2016-31, providing guidance on meeting the beginning of construction requirements for wind and other qualified facilities (including biomass, geothermal, landfill gas, trash, hydropower, and marine and hydrokinetic facilities). The Notice extends the “Safe Harbor” placed in service date by which a facility can meet the beginning of construction tests to correspond with the extension and modification of the Section 45 production tax credit (PTC) passed by Congress at the end of 2015. Specifically, the Notice states that if a facility is placed in service no more than four calendar years after the calendar year in which construction of the facility began, the facility will be considered to satisfy the Continuity Requirement.

The Notice also provides examples of the application of the Physical Work Test to different types of renewable energy facilities, as well as examples of preliminary activities not qualifying as physical work. The Notice revises and adds to the non-exclusive list of excusable disruptions with respect to the Continuity Requirement. Finally, the Notice clarifies the application of the Safe Harbor to retrofitted facilities. According to the Notice, the IRS will issue separate guidance addressing the extension of the investment tax credit (ITC) for solar facilities under Section 48.