In August 2025, the Dept. of the Treasury and the Inner Income Service (IRS) released new guidelines associated to secure harboring photo voltaic initiatives for the funding tax credit score (ITC). Safe harboring permits firms to show a good-faith effort at beginning a photo voltaic undertaking to safe the relevant tax credit in place that yr.
Credit score: McCarthy Constructing Corporations
Whereas utility-scale photo voltaic initiatives might as soon as use the “5% secure harbor” rule that solely required the undertaking developer to incur 5% of the undertaking prices earlier than a sure date, the federal authorities modified it to a “bodily work check.” Initiatives bigger than 1.5 MW should a minimum of have racks put in on a website by July 4, 2026, to be able to apply for the ITC.
The bodily work requirement doesn’t embrace “preliminary actions” like grading the land, conducting research or clearing a website. The IRS additionally requires initiatives utilizing the bodily work check to “keep a steady program of building,” the place the “bodily work carried out is of a major nature.”
Initiatives smaller than 1.5 MW can nonetheless use the 5% secure harbor. All initiatives nonetheless have 4 years to be positioned in service beneath the continuity secure harbor.
This was an abrupt rule change, said U.S. Democrat Sens. Catherine Cortez Masto (Nevada), Chuck Schumer (New York) and Ron Wyden (Oregon). The trio launched a decision beneath the Congressional Evaluation Act this month to overturn the IRS’s bodily work check rule, because it “makes it tougher for wind and photo voltaic vitality firms to say important tax credit” and “provides to the price of constructing America’s clear vitality infrastructure, hurting america’ means to fulfill elevated demand for electrical energy and resulting in larger vitality costs for working households.”
“This eleventh-hour change to IRS steerage is nothing however a blatant try to disqualify initiatives wanted to construct out our nation’s clear vitality infrastructure,” Cortez Masto stated. “For years now, wind and photo voltaic firms have been planning their investments into our nation’s vitality grid, prepared to fulfill our rising demand for vitality, create good-paying jobs and put money into our future. The Republican tax regulation and this last-minute steerage from the administration will increase vitality costs and chill funding, and Congress should step in.”
Senate Joint Resolution 107 has been learn twice and referred to the Committee on Finance.
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