Overview

• The IRS on Aug. 15 issued Notice 2025-42, which applies prospectively to projects that had not begun construction under prior guidance by Sept. 2, 2025.
• The 5% spend safe harbor remains only for solar facilities up to 1.5 MW AC, with larger solar and all wind required to establish begin-construction through physical work performed on-site or via custom off-site manufacturing.
• The four-calendar-year continuity safe harbor is preserved, and planning, permitting, financing, and standard inventory activities do not count as qualifying physical work.
• The Notice refines definitions by making the inventory test specific to the seller and by setting timing rules for excusable disruptions and single-project determinations based on the year the last facility is placed in service.
• Under OBBBA, Sections 45Y and 48E credits end for projects that begin construction on or after July 4, 2026 or are placed in service after Dec. 31, 2027, and FEOC content restrictions will be implemented through forthcoming IRS tables that industry says add financing uncertainty.