A solar project will be considered in service for tax purposes even though the utility with which the project is interconnected has not finished the intertie to connect the project to the grid as long as the project has a temporary means to get electricity to the grid, the IRS said.
The IRS made the statement in a private letter ruling released in March. The ruling is Private Letter Ruling 201611011.
The ruling is in keeping with other rulings the IRS has issued to wind and at least one other solar developer.
In the other rulings, the developers were able to deliver at least 20% of their electricity to the grid through a temporary route. The percentage in this case is redacted.
A power project is not in service until it can deliver its electricity to the grid.
Some solar developers were concerned, before Congress extended the 30% investment tax credit for solar facilities last December, that utilities might take longer than expected to complete interties needed for interconnection, thereby preventing projects from making it into service by a December 2016 deadline to qualify for tax credits. When Congress extended the tax credit, it moved the deadline back to December 2019 and converted it into a deadline merely start construction rather than to complete projects. (There still is an outside deadline to complete solar projects by December 2023 to qualify for an elevated tax credit.)
The ruling involves two utility-scale solar photovoltaic projects. The intertie for one of the two projects may not be ready in time.
The developer planned to run electricity from both projects through the same intertie, requiring both projects to operate at reduced capacity until the permanent intertie for the second project is ready. This arrangement would remain in place for an indefinite period. The developer said the arrays at both projects will be rotated on one-week intervals to make sure each array is operating a reasonably consistent number of hours overall.