Treasury guidance

Last updated: August 18, 2025

Last Friday, the Treasury Department released updated guidance on what counts as beginning construction for solar and wind. To expand upon our analysis of the final, enacted version of the ‘OBBBA,’ we’re sharing key takeaways and responses to critical questions below.

Key Takeaways

1. The IRS issued updated Beginning of Construction (BoC) guidance (Notice 2025-42) related to wind and solar projects effective September 2, 2025. While the updated guidance is not retroactive, it limits the available BoC options for wind and solar projects. Storage projects are unaffected and can still utilize the BoC options (including the 5% Safe Harbor) provided in previous IRS guidance (IRS Notice 2018-59).
2. Physical work is the only BoC option for solar and wind projects starting September 2, 2025, with the 5% Safe Harbor no longer available after this date. An exception remains for solar projects ≤1.5 MW AC solar, but there are limitations on aggregation, ownership, and interconnection, among others.
   1. Unaffected by the guidance but worth reiterating: to be eligible for the ITC, solar and wind projects must begin construction prior to July 4, 2026, or be placed in service by December 31, 2027.
3. Limited remaining window for 5% Safe Harbor: Projects can still utilize the 5% Safe Harbor before the effective date (September 2, 2025) but will need to quickly execute purchase orders and expect to take delivery of equipment within 3.5 months of purchase.
4. Relocation & transfer: If the same taxpayer relocates qualifying components to a new site, the original BoC date is maintained. A bare equipment sale to an unrelated buyer does not transfer BoC. To preserve BoC in M&A, transfer the project/SPV, not equipment.

What didn’t change in this notice?

A quick recap of items that remain the same under the new guidance.

• Storage treatment: Stand-alone storage projects are not impacted by this notice and can still utilize the previous IRS BoC guidance (IRS Notice 2018-59); for hybrid projects, solar and storage are considered separate projects for BoC and must be treated separate projects financially, legally and operationally, including separate contracts and legal entities.
• Credit expiration: Irrespective of BoC strategy, to maintain eligibility for the ITC solar and wind projects must either begin construction by July 4, 2026, and be placed in services within 4 years or be placed in service by December 31, 2027.
• Qualifying activities for Physical Work: There is no change to what counts towards BoC; examples provided in the guidance include on-site: piles/anchors, racking/trackers, wind foundations, and setting <69 kV transformers; off-site: customized and non-inventory manufacturing under a binding contract. Preliminary activities (planning, permitting, site clearing, etc) still don’t count.
• Continuity framework: The requirement to maintain a continuous program of construction is unchanged, including the 4-year continuity safe harbor and the familiar list of excusable delays (IC upgrades, permits, supply, labor, weather, financing). If you miss the safe harbor, continuity is facts-and-circumstances.

What if I’ve already begun construction via Physical Work or 5% Safe Harbor?

• The updated IRS BoC guidance is not retroactive, so any actions taken prior to issuance are covered by the prior guidance.
• Proceed with Physical Work and 5% Safe Harbor activities including continuity requirements.
• Consider advancing timelines for BoC verification and legal review to ensure that all documentation is in order prior to September 2, 2025 deadline.

What do I need to do before September 2, 2025, to utilize the 5% Safe Harbor?