Daily Tax Update - May 5, 2016: IRS Updates Beginning of Construction Guidance for Renewable Energy Credits

IRS Updates Beginning of Construction Guidance for Renewable Energy Credits:  Notice 2016-31 updates prior guidance concerning the renewable electricity production tax credit (PTC) under section 45 and the energy investment tax credit (ITC) in lieu of the PTC under section 48.  The notice reflects the extensions, under the Protecting Americans from Tax Hikes Act of 2015, of deadlines for beginning of construction for the PTC and ITC with respect to certain renewable energy facilities.  In addition, the notice further extends and modifies the continuity safe harbor, provided in earlier guidance, and provides additional guidance regarding the application of the continuity safe harbor and the physical work test.

IRS Releases Money Market Fund Guidance:  Revenue Procedure 2016-31 provides temporary relief for certain money market funds (MMFs) that receive contributions from their advisers as the MMFs transition to comply with Securities and Exchange Commission (SEC) rules that, among other things, change how certain MMF shares are priced. Further, as a result of changes in SEC rules, the Treasury Department and the IRS expect that some existing MMFs will convert to government MMFs that invest 99.5% or more of their total assets in cash, government securities, and/or repurchase agreements collateralized fully by cash items or government securities.  Treasury and the IRS expect that the resulting increased demand for government securities may exacerbate MMFs’ difficulty in acquiring the assets necessary both to qualify as a government MMF and to satisfy the diversification requirements under section 817(h).  As a result, Notice 2016-32 provides an alternative diversification test under section 817(h) for a segregated asset account that is, or invests in, a government MMF.

List of Automatic Accounting Changes Released:  Revenue Procedure 2016-29 provides an updated list of changes in methods of accounting to which the automatic change procedures in Rev. Proc. 2015-13 (as modified by Rev. Proc. 2015-33 and Rev. Proc. 2016-1) apply.