Overview
- A federal district court ruled on June 6, 2026 that IRS Notice 2025-42 was arbitrary and capricious and vacated the notice nationwide, removing the agency’s targeted ban on the 5% Safe Harbor for wind and large-scale solar projects.
- The judge found the IRS offered only a cursory justification, failed to explain why wind and big solar were singled out compared with other technologies, and ignored serious reliance interests and narrower alternatives proposed by commenters.
- As a practical matter the ruling restores the pre-Notice framework that lets developers establish a project’s “beginning of construction” by incurring at least 5% of project costs, reviving an expenditure-based path used since 2013.
- Legal advisers warn the decision is not final because the case was remanded to the IRS and an appeal or emergency stay is widely expected, so developers are advised to preserve physical-work progress, document any 5% expenditures, and avoid relying solely on the opinion.
- The dispute reflects a larger policy clash over how to implement post-OBBB deadlines for clean-energy tax credits and could affect project schedules, investor confidence, and electricity costs if the appellate process or new IRS guidance changes qualification rules.