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IRS Issues Guidance on Investment Tax Credit For Alternative Energy Projects

July 2, 2018

On Friday, June 22, 2018, the Internal Revenue Service issued guidance to update the federal tax treatment of certain alternative energy property eligible for the Investment Tax Credit (ITC) allowed under 25 U.S.C. § 48. 

The new guidance is important because, under the original enabling statute, there was uncertainty regarding what actions constituted ‘beginning construction’ on a project. The new guidance also extends the deadline by which construction of eligible energy property must begin. Under the new guidance, for instance, if a solar energy project developer invests at least 5 percent of the total expected installation cost of solar property by the end of 2019, the property can qualify for a 30 percent federal ITC. The IRS’s new guidance also outlines requirements relevant to several types of alternative energy projects, including deadlines and qualifications for fiber-optic solar, qualified fuel cell, qualified microturbine, combined heat and power system (CHP), qualified small wind and geothermal heat pump property.

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