On August 15, 2025, IRS revised longstanding guidance, eliminating the 5% safe harbor for demonstrating the beginning of construction for wind and solar projects to establish eligibility for the section 45Y and 48E clean energy production and investment tax credits established by IRA sections 13701 and 13702. Wind and solar projects seeking these credits in the future must demonstrate physical work of a significant nature to meet the beginning of construction requirement, which under the OBBBA must occur before the expedited beginning of construction deadline of July 4, 2026. The revised guidance is effective for projects starting construction after September 2, 2025. Under the prior 5% safe harbor pathway, taxpayers were allowed to demonstrate the beginning of construction for their solar and wind projects by incurring at least 5% of the total facility cost, providing an alternative method to establish eligibility.
IRA section 13701 established the section 45Y Clean Electricity Production Credit for qualifying facilities generating clean energy, while section 13702 established the 48E Clean Electricity Investment Credit for investments in qualifying zero-emission electricity generating facilities and qualifying energy storage facilities. Prior to the OBBBA, the credits were to begin phasing out in 2032 or when greenhouse emissions from electricity production in the United States are equal to or less than 25 percent of 2022 emissions (whichever is later). Under the OBBBA, wind and solar developers must begin construction by July 4, 2026 and place projects in service by December 31, 2027 to be eligible for the credits.