On December 31, 2020, the IRS released Notice 2021-05 (the “Notice”) on its website, in advance of its official publication. As discussed in our earlier blog post, the Notice provides favorable guidance for offshore renewable energy projects (“Offshore Projects”) and renewable projects constructed on federal land (“Federal Land Projects”) and generally allows these projects to be placed into service 10 calendar years after the calendar year during which construction began (the “10-Year Continuity Safe Harbor”) without potentially jeopardizing the amount of the PTC (in the case of a wind farm) or the ITC (in the case of wind farm that elects the ITC or a solar project). Under the originally released Notice, only Offshore Projects and Federal Land Projects that require the construction of high-voltage transmission lines to connect the project to the U.S. electrical grid system are eligible for the for the 10-Year Continuity Safe Harbor.
On January 19, 2021, the Notice was officially published in the Federal Register. As one would expect, the published Notice is virtually identical to the released version, with one key difference. The officially published version of the Notice does not require an Offshore Project to include the construction of high-voltage transmission lines to connect the project to the U.S electrical grid system. The requirement, however, remains for a Federal Land Project. Interestingly, the Notice still explains that one of the justifications for the extended 10-Year Continuity Safe Harbor for Offshore Projects and Federal Land Projects is the longer development period due to the need to construct new transmission lines to connect the project to the grid, but apparently this justification is no longer a requirement in the case of an Offshore Project. Some industry participants were concerned about that requirement in the case of an Offshore Project, so perhaps the deletion of it in the officially published version was in response to these concerns.