Overview

• Notice 2025-42 defines when construction ‘begins’ for wind and solar projects under the new PTC (Sec. 45Y) and ITC (Sec. 48E) framework.
• Developers can still use the physical work test and the four-year continuity safe harbor to meet start-of-construction requirements.
• The long-standing 5% paid-or-incurred safe harbor is dropped for all but small solar projects up to 1.5 MW AC, with outputs combined across ‘integrated operations’ to prevent project segmentation.
• The notice applies non-retroactively to wind and solar projects beginning on or after September 2, 2025, while earlier starts and other technologies remain under prior guidance.
• Treasury and IRS announced forthcoming guidance on prohibited foreign-entity provisions, a step raising concerns about compliance burdens and potential project delays among industry groups and lawmakers.