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Placed in Service
Practical Law Glossary Item w-004-0123 (Approx. 3 pages)
Glossary
Placed in Service
Tax term for the moment a qualifying clean energy property becomes eligible for federal tax benefits, such as the production tax credit, the investment tax credit, or depreciation. Under applicable tax regulations, a property is placed in service the earlier of the taxable year in which:
- Under a taxpayer's depreciation practice, the period for depreciation with respect to that property begins; or
- It is placed in a condition or state of readiness and availability for a specifically assigned function, whether in a trade or business, in the production of income, in a tax-exempt activity, or in a personal activity.
To determine when an energy property is placed in service, the IRS considers the following five factors, none of which are controlling:
- The receipt of required licenses and permits.
- The passage of control of the facility to the ultimate taxpayer.
- The completion of critical tests.
- The commencement of regular operations.
- The synchronization of the facility into a power grid for generating electricity to produce income.
For more information, see Practice Note, Sources of Available Project Financing: Tax Equity.