A group of Senate Democrats introduced a resolution to disapprove of IRS guidance that changes the requirements for wind and solar energy companies to claim clean energy tax credits.
In August 2025, the IRS issuedNotice 2025-42, which addresses beginning-of-construction requirements applicable to wind and solar facilities for the IRC § 45Y Clean Electricity Production Credit and IRC § 48E Clean Electricity Investment Credit. S.J.Res. 107, introduced by Senator Catherine Cortez Masto (D-NV), Senate Minority Leader Chuck Schumer (D-NY), and Senate Finance Committee Ranking Member Ron Wyden (D-OR), would overturn this August guidance.
New IRS Guidance for Solar, Wind Facilities
Notice 2025-42 provides guidance on when construction of an applicable wind or solar facility is considered to have begun for purposes of determining eligibility for the Clean Electricity Production Credit under IRC § 45Y and the Clean Electricity Investment Credit under IRC § 48E. The notice implements provisions of the One Big Beautiful Bill Act (OBBB), which terminates these credits for facilities placed in service after December 31, 2027, unless construction began before July 5, 2026.
Under prior IRS guidance, taxpayers could establish the beginning of construction using either the physical work test or the 5% safe harbor. Notice 2025-42 revokes the 5% safe harbor for most projects. It provides that only physical work of a significant nature will qualify a project as having begun construction before the deadline.
The notice also clarifies that preliminary activities, such as planning, permitting, or site clearing, do not count as physical work of a significant nature. The 5% safe harbor remains available only for low output solar facilities (maximum net output of 1.5 megawatts or less).
Opposition to IRS Stance
S.J.Res. 107 provides for congressional disapproval of the IRS rule submitted as Notice 2025-42, stating that the rule “shall have no force or effect.”
The bill sponsors argue the IRS guidance threatens the viability of wind and solar projects that have been planned based on previous guidance. By eliminating the 5% safe harbor for most facilities, the IRS has narrowed the criteria for what qualifies as “beginning of construction,” according to the senators. They say the rule could disqualify projects that have already made significant investments.
More broadly, the sponsors say this rule could raise costs and delay the transition to clean energy. They contend it increases the cost of building clean energy infrastructure, discourages investment, and could lead to higher energy prices for American families. They also warn it could undermine efforts to meet rising electricity demand, create jobs, and lower energy prices.
Cortez Masto called the IRS rule “a blatant attempt to disqualify projects needed to build out our nation’s clean energy infrastructure.” Schumer, likewise, criticized the rule as a barrier to expanding affordable energy. Wyden emphasized the need to reverse the rule to protect jobs and support the clean energy transition.
The resolution follows a lawsuit filed by advocacy groups Oregon Environmental Council, Natural Resources Defense Council, and Public Citizen, along with clean energy developers, the city of San Francisco, and the Maryland Office of People’s Counsel. The plaintiffs argue that the IRS has not provided any explanation or shown why the change in Notice 2025-42 was needed.
They contend the OBBB “did not direct IRS to change its longstanding ‘beginning of construction’ methodology.” They also argue that wind and larger solar facilities have been singled out. Other types of energy technologies and small solar facilities can still use the 5% safe harbor, the plaintiffs note.
S.J.Res. 107 must pass both chambers of Congress and be signed by the President to overturn the IRS rule.
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