Late last week, the U.S. Treasury released its guidance in rolling back Inflation Reduction Act tax credits for wind and solar projects.
The IRA rollbacks were passed into law in the One Big Beautiful Bill Act, with Congress declining to permanently end the IRA subsidies and instead requiring that new solar and wind projects be “placed in service” by 2027. However, projects that start “construction” by July 2026 can be placed in service up until 2030 and still be eligible.
The Treasury guidance aims to clearly define what “construction” means for wind and solar projects scrambling to get started this year in the hopes of farming tax credits later. The guidance was requested under an executive order that calls for the Treasury to act as “necessary and appropriate to strictly enforce the termination of the clean electricity production and investment tax credits under sections 45Y and 48E… for wind and solar facilities” and that policies “concerning the ‘beginning of construction’ are not circumvented, including by preventing the artificial acceleration or manipulation of eligibility.”
Prior to the Treasury’s guidance last week, developers needed only to prove that five percent or more of the total cost of the project has been paid by the July 2026 deadline.
The new guidance requires that projects see “physical work of a significant nature be performed,” either on-site or off-site for developers to be eligible, with “no fixed minimum amount of work or monetary or percentage threshold required to satisfy” the requirement, so long as the work is significant. Solar projects with less than 1.5 megawatt of capacity still qualifies for the five percent cost threshold.
For wind projects, “physical work of a significant nature” can entail the excavation of a foundation, pouring concrete foundation pads, or setting anchor bolts. Work may also happen off-site if a manufacturer is in a binding written contract and components aren’t held in a manufacturer’s inventory. Solar projects must include the installation of PV panel racks, collectors, or solar cells. The definition specifically excludes “preliminary activities” like planning or designing, securing financing, researching, obtaining permits, clearing a site, or conducting test drilling.
The Treasury seems to harken back to pre-IRA and pre-Obama requirements for tax credit eligibility with its guidance. Some advocates of wind and solar projects are expressing relief that “Treasury guidance for wind and solar tax credits could have been so much worse.” However, these definitions almost certainly align much closer to the public’s perception of when “construction” truly starts and will pose a more reasonable test for projects hoping to capitalize on subsidies for years to come.
