The US reversed course and increased tax credits for new wind projects that start construction in 2020 compared to 2019.

Some developers then slammed on the brakes and spent the last 10 days of 2019 rescinding or cancelling arrangements they made to start construction in 2019.

A tax extenders bill that cleared Congress on December 20 gave wind developers another year through the end of 2020 to start construction of new projects to qualify for federal tax credits. Wind projects that start construction in 2020 will qualify for tax credits at 60% of the full rate compared to only 40% if construction started in 2019.

Under a rescission doctrine in US tax law, a contract is ignored if it is unwound in the same tax year it was signed in a manner that restores the parties to their original economic positions as if no contract was signed. Whether cancelling contracts in the next year works to undo 2019 efforts depends on how construction started. It is hard to see how costs can have been incurred in 2019 if the money was refunded or the equipment was never delivered. It is harder to undo physical work at a project site. However, physical work at a factory may be possible to undo, depending on the facts, if the contract is cancelled, the work stopped, damages paid and the work is kept by the manufacturer.

The same tax extenders bill retroactively extended super-accelerated depreciation for projects on Indian reservations. Such projects qualify if put in service by the end of 2020. The deadline had been 2017. Equipment that is normally depreciated over five years on a 200% declining-balance method would be depreciated over three years instead.

Geothermal, biomass, landfill gas, trash, incremental hydroelectric and run-of-the-river and ocean energy power projects have been given more time to start construction to qualify for federal tax credits. They will qualify if they are under construction for tax purposes by the end of this year.