IRS Issues New Guidance for Small Wind Turbines to Qualify for 30% Tax Credit

The U.S. Internal Revenue Service (IRS) has issued Notice 2015-4 providing new performance and quality standards that require certification of small wind turbines – defined as having a nameplate capacity of up to 100 kW – in order to qualify for the 30% federal Investment Tax Credit (ITC).

“Certification helps consumers distinguish between the good, the bad, and the untested wind turbines on the market and helps consumers accurately compare the wide variety of products available,” explained SWCC Executive Director Larry Sherwood. Certification requirements are helping government agencies ensure that public funds spent on distributed wind installations are spent on safe, quality systems, a means of consumer protection against untested technologies, unverified claims about turbine performance, and equipment failures.

Effective for small wind turbines acquired or placed in service after January 26, 2015, the guidance requires that qualifying small wind manufacturers provide certification to either: (1) American Wind Energy Association Small Wind Turbine Performance and Safety Standard 9.1-2009 (AWEA); or (2) International Electrotechnical Commission 61400-1, 61400-12, and 61400-11 (IEC). The certification must be issued by an eligible certifier, defined as a third party that is accredited by the American Association for Laboratory Accreditation or other similar accreditation body. Documentation establishing that the turbine meets the new requirements must be provided to taxpayers in order to claim the credit. SWCC certifications help manufacturers meet these new requirements.

The addition of performance and quality assurance requirements at the Federal level indicates that certification is now a trusted and useful tool in protecting consumers and helping to ensure the successful implementation of distributed wind projects in the U.S. This step is a positive move that fits into the overall strategy the distributed wind industry as a whole has been pursuing for many years to strengthen the sector’s credibility and reliability.

An April 2014 memorandum from José Zayas, Director of the U.S. Department of Energy’s Wind and Water Power Technologies Office, also encourages that the use of public funds be provided only for wind turbines that have been tested and certified for safety, function, performance, and durability.

Many suppliers of distributed wind turbines have been actively pursuing certification since 2010. More than a dozen models have completed the process and several others are actively under way. These companies are well positioned to comply with the new IRS requirements. The Interstate Renewable Energy Council (IREC) maintains a list of ratings of fully certified turbines for the U.S. market.

Notice 2015-4 is posted at: http://www.irs.gov/pub/irs-drop/n-15-04.pdf. The notice reminds manufacturers that an erroneous certification may result in penalties: (a) Under section 7206 for fraud and making false statements; and (b) Under section 6701 for aiding and abetting an understatement of tax liability ($1,000 per return on which a credit is claimed in reliance on the certification). To help manufacturers and taxpayers understand the new IRS requirements, SWCC will develop and publish a set of FAQs on its website.

About SWCC: SWCC certifies wind turbine models that meet or exceed the requirements of specified Standards as an independent confirmation that wind turbine designs are tested and evaluated according to industry standards for performance and safety. Designed to promote consumer confidence and mainstream acceptance of small and medium wind technology, SWCC certification standardizes North American reporting turbine energy and sound performance. Certificates, ratings, and summary reports for SWCC certified turbine models, including tabulated power curves, acoustic data, and tower design requirements, along with a complete list of SWCC pending applicant turbine models, are available at www.smallwindcertification.org/for-consumer. SWCC updates its certified turbines tables and application status table on its website as milestones are reached.

SWCC maintains an image gallery of certified models: http://smallwindcertification.org/image-gallery/