The Trump administration’s revised subsidy rules, effective 2 September, narrowed the “under construction” definition for solar and wind projects to qualify for a 30% federal tax credit, requiring substantial physical work while maintaining a 4-year subsidy claim window. 

The Trump administration issued more lenient subsidy rules for clean energy projects than anticipated, leading to a rise in shares of US solar energy companies.

On 15 August 2025, the Treasury Department narrowed the definition of “under construction” for solar and wind projects to qualify for a 30% federal tax credit.

Under new rules, effective 2 September, utility-scale projects must demonstrate substantial and continuous physical work to qualify for credits, while retaining a four-year window to claim subsidies. Concerns about requiring high upfront costs or a shorter timeline were alleviated, as the Treasury Department kept the four-year window unchanged for projects starting before the credits expire.

Small projects under 1.5 megawatts can still use the 5% “safe harbour” provision, benefiting the residential solar industry.

The One Big Beautiful Bill Act requires projects to commence construction by July next year or become operational by the end of 2027 to qualify for 30% tax credits and potential bonuses. Previously, these credits were available until 2032. Industry groups criticised the rules, claiming they harm businesses and contradict legislative intentions.

President Donald Trump signed the “One Big Beautiful Bill” into law on 4 July 2025, which made his 2017 tax cuts permanent and introduced new tax breaks promised during his 2024 campaign.

IRS clarifies construction rules for ending clean energy tax credits (45Y, 48E)

On 15 August 2025, the US Internal Revenue Service (IRS) issued Notice 2025-42, clarifying the beginning of construction rules for wind and solar projects in connection with the phaseout of clean electricity production (45Y) and investment (48E) tax credits under the One, Big, Beautiful Bill Act (OBBBA).

Issue Number: Notice 2025-42

Notice 2025-42 provides guidance, consistent with Executive Order 14315, 90 FR 30821 (7 July 2025), regarding when construction of an applicable wind facility or applicable solar facility (each as defined in section 2.02 of this notice) has begun for purposes of determining whether such facility is subject to credit termination provisions added to §§ 45Y and 48E of the Internal Revenue Code (Code) by §§ 70512 and 70513 of Public Law 119-21, 139 Stat. 72 (4 July 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA). Section 70512(a) and (l)(4) of the OBBBA terminates the clean electricity production credit determined under § 45Y (§ 45Y credit), and § 70513(a) and (g)(5) of the OBBBA a terminates the clean electricity investment credit determined under § 48E (§ 48E credit), in the case of an applicable wind facility or applicable solar facility that is placed in service after 31 December 2027 (credit termination date).

The credit termination date applies to applicable wind and solar facilities, the construction of which begins after 4 July 2026 (beginning of construction deadline), the date that is 12 months after the date of enactment of the OBBBA.

Notice 2025-42 will be in IRB: 2025-36, dated 2 September 2025.