These sections now provide that wind and solar facilities that begin construction after July 4, 2026 must be placed in service before January 1, 2028 to qualify for the credits. The OBBBA also precludes “prohibited foreign entities” from claiming the credits and requires projects (not just wind and solar) that begin construction after December 31, 2025 to satisfy certain “material assistance rules” to qualify for the credits (together, these rules are colloquially named the “foreign entity of concern,” or “FEOC,” rules).2
On the heels of the OBBBA, President Trump signed Executive Order 14315 (the “Executive Order”) directing the Treasury to release updated beginning-of-construction guidance to sharpen the teeth of the OBBBA’s new sunset dates for the clean electricity production and investment tax credits for wind and solar projects. The Executive Order also directs the Treasury to release guidance to implement the FEOC rules within the same time frame.
On August 15, 2025, the Internal Revenue Service (the “IRS”) and the Treasury released Notice 2025-42 (the “Notice”), which provides the revised beginning-of-construction guidance envisaged by the Executive Order. The Notice applies solely for the purposes of the wind and solar beginning-of-construction deadline introduced by the OBBBA.3 The Notice:
- most importantly, eliminates the 5% spend safe harbor, except for low-output solar facilities (those with an output of 1.5MWac or less, determined on an integrated operations basis)
- is not retroactive and provides a small period of grace to wind and solar facilities for which construction has not begun before September 2, 2025
- applies solely for the purposes of the beginning-of-construction deadline for wind and solar facilities for which a credit under section 45Y or 48E would be claimed, and does not purport to affect beginning-of-construction guidance generally
- otherwise generally applies existing guidance relating to on- and off-site physical work of a significant nature, the continuity safe harbor, and the transfer rules.
The highlights of the Notice are described in more detail below.