The IRS on Aug. 15, 2025, released Notice 2025-42, which provides new guidance on how taxpayers can establish that they have begun construction of a wind or solar facility for purposes of determining whether such facility is subject to credit termination provisions added to Internal Revenue Code Sections 45Y and 48E under the One Big Beautiful Bill Act.
The new guidance clarifies how taxpayers can begin construction by performing on-site or off-site physical work on solar and wind facilities and specifies that a solar or wind facility will be deemed to meet a continuous construction requirement when it is placed in service within four calendar years of beginning construction.
Except for certain low-output solar facilities (less than 1.5 megawatt maximum net output), the new guidance no longer allows taxpayers to pay or incur 5 percent or more of the total cost of the energy project to establish that the facility has begun construction. When this version of the 5 percent safe harbor is available, the requirements set forth in Section 5 of Notice 2013-29 generally apply.
Notice 2025-42 is effective for solar and wind facilities, the construction of which begins prior to July 5, 2026, and on or after Sept. 2, 2025.
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