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Legal Update

IRS Provides Safe Harbor for Solar Contracts with Federal Agencies

26 January 2017
Mayer Brown Legal Update
On January 19, 2017, the US Internal Revenue Service (IRS) released Revenue Procedure 2017-19 providing a safe harbor for certain alternative energy sales contracts with federal agencies to be treated as service contracts under Section 7701(e)(3). The safe harbor is important because, if such a contract is treated as a lease to the federal agency, a solar project would constitute “tax-exempt use property” that is ineligible for the investment tax credit and accelerated depreciation (including bonus depreciation). This Legal Update discusses the safe harbor, its background and its implications for solar companies’ agreements with federal agencies.


  • David K. Burton
    T +1 212 506 2525
  • Jeffrey G. Davis
    T +1 202 263 3390
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