The One Big Beautiful Bill Act (which we discussed in a previous client alert) generally requires wind and solar facilities to begin construction before July 5, 2026, or be placed in service by December 31, 2027, to qualify for the Section 45Y clean electricity production credit or the Section 48E clean electricity investment credit. On August 15, 2025, the Treasury Department and the Internal Revenue Service (IRS) issued Notice 2025-42 on the beginning-of-construction requirements applicable to wind and solar facilities (the Notice). The following is a summary of the Notice.
- Starting September 2, 2025, the five-percent safe harbor under prior IRS guidance is no longer available for wind and solar facilities, except in the case of "low output solar facilities." A low output solar facility is a solar facility that has a maximum net output of not greater than 1.5 megawatts (measured by nameplate generating capacity in alternating current). Multiple solar facilities with integrated operations will be treated as a single facility.
- The physical work test under prior IRS guidance generally continues to apply to all wind and solar facilities.
- The continuity requirement and the continuity safe harbor under prior IRS guidance generally continue to apply to all wind and solar facilities.
- The Notice does not address the beginning-of-construction requirements relevant to certain "foreign entity of concern" (FEOC) rules. The Notice states that the Treasury Department and the IRS are currently drafting guidance related to the FEOC rules.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
