The American Taxpayer Relief Act of 2012, which was passed by Congress to avoid the “fiscal cliff,” extends certain federal income tax benefits for renewable energy projects, including:

• Extending the production tax credit (PTC) for wind projects by one year and changing from a “placed in service” to a “begun construction” deadline.  Now, to qualify for the PTC, the construction of qualifying wind facilities must begin before January 1, 2014.
• Changing the PTC deadline for other renewable energy projects – closed-loop biomass, open-loop biomass, geothermal, landfill gas, trash, qualified hydropower, and marine and hydrokinetic – from a “placed in service” to a “begun construction” deadline. Now, to qualify for the PTC, construction of qualifying facilities (or of qualifying modifications, improvements or additions to facilities) must begin before January 1, 2014.
• Extending the ability to elect the investment tax credit (ITC) in lieu of the PTC to include any qualified facility (wind, closed-loop biomass, open-loop biomass, geothermal, landfill gas, trash, qualified hydropower, or marine and hydrokinetic facility) the construction of which begins before January 1, 2014.
• Extending by one year the ability to claim 50% bonus depreciation for certain qualifying property that is placed in service before January 1, 2014.

The change from a “placed in service” deadline to a “begun construction” deadline for the PTC and ITC election are significant changes for all qualifying renewable energy projects.  It is not clear how the IRS will define “beginning of construction” for purposes of the PTC and ITC election or whether the IRS, like the Treasury Department did for the Section 1603 cash grant program, will adopt a safe harbor. We will alert you to further developments and additional guidance on these issues as they become available.