US tax authorities define "construction start" for PTC

UNITED STATES: Federal tax authority the Internal Revenue Service (IRS) yesterday published its definition of what constitutes the start of construction for wind projects in order for them to be eligible for this year's production tax credit (PTC) subsidy.

The PTC subsidy has been extended to help finance wind projects that begin construction before 1 January 2014, but until yesterday it was unclear exactly what "begin construction" meant.

According to IRS Notice 2013-29, released on 15 April, to meet the "under construction" qualification, developers must either: show "physical work of a significant nature" has begun on their project, either at the site, or in a factory to which the developer has given a binding order for specially designed equipment; or show that at least 5% of the total project cost has been incurred.

For wind projects this will typically mean that work has either begun on tower foundations at the project site, or a manufacturer has started work on turbine components specifically ordered for the project. A contract for delivery of turbines that a manufacturer already has stockpiled will not qualify.