BOC Requirements for Solar and Wind Under the OBBB

The One Big Beautiful Bill (OBBB) generally preserves various energy tax credits, including Production Tax Credits (PTCs) under Section 45Y and Investment Tax Credits (ITCs) under Section 48E. However, the OBBB accelerated the phaseout and termination of these incentives. Specifically, for solar and wind facilities that begin construction after July 4, 2026, the credits terminate for qualified facilities placed in service after December 31, 2027. Thus, the beginning of construction date is critical in determining if the new termination date applies to a particular facility.

On July 7, 2025, President Trump issued Executive Order 14315 directing the Treasury to “strictly enforce” the termination of the PTC and ITC for solar and wind facilities. The Treasury has since issued IRS Notice 2025-45 (the Notice), outlining new requirements for determining beginning of construction for solar and wind facilities for purposes of the Section 45Y and 48E credits.

The Notice is effective for solar and wind facilities that begin construction (under the previous BOC notices) after September 1, 2025.

Beginning of Construction for Solar and Wind under Notice 2025-45

The Notice provides new BOC requirements for solar or wind facilities which begin construction by July 5, 2026. With an exception for low-output solar, the sole method for determining a BOC date is the Physical Work Test.

Physical Work Test

The Physical Work Test focuses on the nature of the work performed, not the amount or the cost. Both off-site and on-site work may be considered.

Off-site physical work may include the manufacture of:

• Components
• Mounting equipment
• Support structures such as racks and rails
• Inverters
• Transformers and other power conditioning equipment

The Notice provides some non-exhaustive examples of what on-site physical work of a significant nature might look like for solar and wind facilities.

• Solar:
• Site installation of racks or structures to affix:
• Photovoltaic panels
• Collectors
• Solar cells
• Wind:
• Excavation for the foundation
• Setting of anchor bolts into the ground
• Pouring of the concrete pads of the foundation

However, physical work of a significant nature does not include preliminary activities, even if the cost of those preliminary activities is properly included in the depreciable basis. Preliminary activities for applicable wind or solar facilities include:

• Planning or designing
• Securing financing
• Exploring
• Researching
• Conducting mapping and modeling to assess a resource
• Obtaining permits and licenses
• Conducting geophysical, gravity, magnetic, seismic, and resistivity surveys
• Conducting environmental and engineering studies
• Clearing a site
• Conducting test drilling to determine soil condition (including to test the strength of a foundation)
• Excavating to change the contour of the land (as distinguished from excavation for a foundation)
• Removing existing foundations, turbines, towers, solar panels, or any components that will no longer be part of the applicable wind or solar facility (including those on or attached to building structures)

Further, the Physical Work Test does not include work to produce a component or part of solar or wind facility that is either in existing inventory or is normally held in inventory by one selling the part.

Continuity Requirement

To meet the Continuity Requirement, a taxpayer must also ensure that projects are genuinely advancing toward becoming operational. There are two ways this requirement can be met, either through a facts and circumstances test or by satisfying the Continuity Safe Harbor.

Excusable disruptions must be documented should they impact the construction timeline. These exceptions are for factors beyond the taxpayer’s control, such as delays due to weather, labor shortages, obtaining permits.

Continuity Safe Harbor

The Notice provides a Continuity Safe Harbor which allows solar and wind facilities that begin construction prior to July 4, 2026, to qualify for a tax credit if they are placed in service within four calendar years after construction commences. The excusable disruptions exception does not apply for purposes of the Continuity Safe Harbor. If construction of the facility is not completed within four calendar years, then the Continuity Requirement is assessed under the relevant facts and circumstances.

Five Percent Safe Harbor for Low Output Solar Facilities

The Notice provides a safe harbor for beginning of construction for low output solar facilities. In the case of a solar facility with a maximum net output 1.5 megawatt (MW) and under, a taxpayer may establish BOC by applying the Five Percent Safe Harbor rules in Section 5 of Notice 2013-29 (and Notice 2022-61).

For the purposes of determining the 1.5 MW maximum, a solar facility is treated as having integrated operations with one or more other solar facilities of the same technology type if the facilities are:

• Owned by the same or related taxpayers
• Placed in service in the same taxable year
• Transmit electricity through the same point of interconnection or support the same end user

Impact on Energy Investments

The BOC requirements are critical for developers and investors in the renewable energy sector to secure valuable tax credits that significantly enhance the financial viability of clean energy projects.

Understanding and adhering to BOC requirements is essential for anyone involved in the development of renewable energy projects. As you consider clean energy projects or updates to your facilities, be sure to work alongside a trusted energy services provider.