IRS Notice 2016-31: Beginning Construction Under The PATH Act

On May 5, 2016, the IRS released Notice 2016-31 (the "Notice"), which clarifies the circumstances under which a taxpayer will be treated as having begun construction for purposes of qualifying for the production tax credit ("PTC") under section 45 of the Internal Revenue Code (the "Code").

BACKGROUND

On December 18, 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 (the "PATH Act"),¹ which extended the PTC for certain eligible facilities the construction of which begins before January 1, 2017, and in the specific case of wind facilities, the construction of which begins before January 1, 2020. In the case of wind facilities the construction of which begins after December 31, 2016 and before January 1, 2020, the PTC will be phased out (i.e., the PTC will be reduced by 20% if construction begins in 2017, 40% if construction begins in 2018 and 60% if construction begins in 2019). The PATH Act also extended the investment tax