IRS Updates Definition Of Binding Contract For Beginning Construction PTC Test

As discussed previously on the blog, the IRS released Notice 2013-29 on April 15 which provided guidance on determining when construction has begun on a qualified renewable energy facility for purposes of the production tax credit. The Notice provided that when determining whether construction has begun, work performed for the taxpayer by other persons under a binding written contract is taken into account. The Notice defined a written binding contract as qualifying if it is enforceable under local law against the taxpayer or a predecessor and does not limit damages to a specified amount, such as by use of a liquidated damages provision.  This was a slight departure from the 1603 grant rules which had a similar provision but the liquidated damages could qualify if the damages equaled or exceeded 5 percent of the total contract price. The IRS re-released the Notice on April 24^th and included in Section 4.03(1), "a contractual provision that limits damages to an