SECTION 7. CONTINUITY

REQUIREMENT

.01 Physical Work Test: Continuous Construction Test . A continuous program of construction involves continuing physical work of a significant nature (as described in section 5.02 of this notice). Whether a taxpayer maintains a continuous program of construction to satisfy the Continuity Requirement will be determined by the relevant facts and circumstances.

.02 Five Percent Safe Harbor: Con- tinuous Efforts Test . Whether a taxpayer makes continuous efforts to advance towards completion of a qualified facility or carbon capture equipment to satisfy the Continuity Requirement will be determined by the relevant facts and circumstances. Facts and circumstances indicating continuous efforts to advance towards completion of a qualified facility or carbon capture equipment include, but are not limited to:

(1) paying or incurring additional amounts included in the total cost of the qualified facility or carbon capture equipment;

(2) entering into binding written contracts for the manufacture, construction, or production of components of the qualified facility or components of the carbon capture equipment or for future work to construct the qualified facility or carbon capture equipment;

(3) obtaining necessary permits; and (4) performing physical work of a significant nature (as described in section 5.02 of this notice). .03 Excusable Disruptions to Continu- ous Construction and Continuous Efforts Tests . Certain disruptions in a taxpayer’s continuous construction or continuous efforts to complete a qualified facility or carbon capture equipment that are beyond the taxpayer’s control will not be considered as indicating that a taxpayer has failed to satisfy the Continuity Requirement. However, these disruptions will not extend the Continuity Safe Harbor Deadline as provided in section 7.05 of this notice. Following is a non-exclusive list of construction disruptions that will not be considered as indicating that a taxpayer has failed to satisfy the Continuity Requirement:

(1) delays due to severe weather conditions;

(2) delays due to natural disasters; (3) delays in obtaining permits or licenses from any federal, state, local, or Indian tribal government;

(4) delays at the written request of a federal, state, local, or Indian tribal government regarding matters of public safety, security, or similar concerns;

(5) interconnection-related delays, such as those relating to the completion of construction on a new carbon dioxide pipeline or necessary upgrades to resolve capacity or congestion issues that may be associated with a project’s planned interconnection;

(6) delays in the manufacture of custom components;

(7) delays due to labor stoppages; (8) delays due to the inability to obtain specialized equipment of limited availability;

(9) delays due to the presence of endangered species;

March 9, 2020 498 Bulletin No. 2020–11

(10) financing delays; and (11) delays due to supply shortages. .04 Timing of Excusable Disruption Determination . In the case of a single project comprised of a single qualified facility or carbon capture equipment, whether an excusable disruption has occurred for purposes of the satisfying the Continuity Requirement must be determined in the calendar year during which the qualified facility or carbon capture equipment is placed in service. In the case of a single project comprised of multiple qualified facilities or units of carbon capture equipment, whether an excusable disruption has occurred for purposes of the beginning of construction requirement of § 45Q must be determined in the calendar year during which the last of multiple qualified facilities or units of carbon capture equipment is placed in service.

.05 Continuity Safe Harbor: Deemed Satisfaction of Continuity Requirement . Except as provided in this section, if a taxpayer places a qualified facility or carbon capture equipment in service by the end of a calendar year that is no more than six calendar years after the calendar year during which construction of the qualified facility or carbon capture equipment began (Continuity Safe Harbor Deadline), the qualified facility or carbon capture equipment will be considered to satisfy the Continuity Safe Harbor. The excusable disruption rules in section 7.03 of this notice do not extend the Continuity Safe Harbor Deadline. If a qualified facility or carbon capture equipment is not placed in service before the end of the sixth calendar year after the calendar year during which construction of the qualified facility or carbon capture equipment began, whether the qualified facility or carbon capture equipment satisfies the Continuity Requirement under either the Physical Work Test or the Five Percent Safe Harbor will be determined based on the relevant facts and circumstances.

For example, if construction begins on a qualified facility or carbon capture equipment on January 15, 2021, and the qualified facility or carbon capture equipment is placed in service by December 31, 2027, the qualified facility or carbon capture equipment will be considered to satisfy the Continuity Safe Harbor. If the qualified facility or carbon capture

equipment is not placed in service before January 1, 2028, whether the Continuity Requirement was satisfied will be determined based on the relevant facts and circumstances.