SECTION 1. PURPOSE

On December 18, 2015, the Consolidated Appropriations Act, 2016, Pub. L. No. 114–113, Div. P, Title III, § 303, 129 Stat. 2242, extended and modified the investment tax credit (ITC) under § 48 of the Internal Revenue Code (Code). As modified, § 48 phases down the ITC for solar energy property the construction of which begins after December 31, 2019, and before January 1, 2022, and further limits the amount of the § 48 credit available for solar energy property that is not placed in service before January 1, 2024.

On February 9, 2018, the Bipartisan Budget Act of 2018, Pub. L. 115–123, Div. D, Title I, § 40411, 132 Stat. 150 (BBA 2018), modified the ITC under § 48 by replacing the requirement to place energy property in service by a certain date with a requirement to begin construction by a certain later date. Prior to the modification, energy property was required to be placed in service by a certain date (before January 1, 2016, or January 1, 2017, depending on the type of energy property). As modified, construction of energy property must begin before January 1, 2022. This modification has the effect of retroactively extending by five years the ITC for fiber-optic solar, qualified fuel cell, qualified microturbine, combined heat and power system (CHP), qualified small wind, and geothermal heat pump property the construction of which begins before January 1, 2022. The amendments also phase out the ITC for fiber-optic solar, qualified fuel cell, and qualified small wind energy property over five years. For these energy properties, regardless of when construction begins, the projects must be placed in service before January 1, 2024.

This notice provides guidance to determine when construction has begun on energy property that is eligible for the § 48

credit. It provides two methods for taxpayers to establish the beginning of construction (Physical Work Test and Five Percent Safe Harbor), a Continuity Requirement for both methods, rules for transferring energy property, and additional rules applicable to the beginning of construction requirement of § 48.

The Internal Revenue Service (Service) will not issue private letter rulings or determination letters to taxpayers regarding the application of this notice or the beginning of construction requirement of § 48.