Wind and solar projects face a narrower path to tax-credit eligibility after the Treasury Department issued a notice Friday that removes a “safe harbor” provision that applied to most projects.
Under the One Big Beautiful Bill Act (OBBBA), which was signed into law July 4, wind and solar projects have to begin construction by July 5, 2026, or be placed in service by 2028 to qualify for either the 45Y production tax credit or the 48E investment credit. Prior to OBBBA’s passage, projects had until 2034 to begin construction. There have been two ways to demonstrate that construction has begun: the start of significant physical work or a safe harbor provision that is reached when a developer pays 5% of the total cost of the facility along with continuous work on the project.
President Trump signed an order in July instructing Treasury to issue new guidance to ensure that the new law’s earlier deadlines are not circumvented. Under the guidance issued Friday, the safe harbor provision only applies to low solar output facilities, or those with a maximum net output of 1.5 MW.
“Accordingly, except as provided in Section 6 of this notice, the 5% Safe Harbor provided under the IRS notices is not available for purposes of determining whether an applicable wind or solar facility has met the beginning of construction deadline and, thus, is not subject to the credit termination date,” the notice said.
The American Clean Power Association criticized the new guidance.
"The Treasury Department's Decision to accelerate the phaseout of the clean energy tax credits undermines the integrity of our energy grid and our legislative procecss," ACPA President Jason Grumet said in a statement. "In the One Big Beautiful Bill Act, Congress explicity chose to provide energy companies with one year to phase out tax credits to keep energy prices low while meeting growing power demand."
