The Treasury Department has released additional guidance in the form of a list of questions and answers (the Q&A) regarding when construction begins for projects placed in service after 2010 by applicants applying for cash grants in lieu of renewable energy tax credits under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009.
As detailed below, the Q&A:
- Indicates that for applicants attempting to meet the physical work of a significant nature test, any physical work on the specified energy property will satisfy the begin construction requirement, subject to a new continuous construction standard;
- Cautions that work performed under a contract does not include work to produce components or parts normally held in inventory by a manufacturer for purposes of the physical work of a significant nature test;
- Clarifies that the economic performance test continues to apply to accrual method applicants; and
- Provides that 5% of actual (rather than projected) costs must be paid or incurred by the applicant to meet the 5% safe harbor test.