IRS Issues New Begin Construction Rules For Solar And Wind Projects

On August 15, 2025, the U.S. Department of the Treasury ("Treasury") issued Notice 2025-42 (the "New Notice"). The New Notice provides highly-anticipated guidance on the beginning of construction standard for purposes of qualifying solar and wind projects for the clean electricity production credit under Section 45Y (the "CEPC") and the clean electricity investment credit under Section 48E (the "CEIC").¹

The New Notice came as a relief to solar and wind developers. The changes to the beginning of construction standard in the New Notice are neither retroactive nor as restrictive as initially feared. Although the New Notice eliminates the Five Percent Safe Harbor—thereby removing a key planning tool for developers—this change applies only prospectively. The New Notice leaves the Physical Work Test largely intact and therefore allows developers to continue to use a familiar standard, which many have relied on successfully for years. Most importantly, solar and wind