OBBBA's July 4 Deadline Closes Key Tax Credit Window for Wind and Solar

WASHINGTON, A federal statutory deadline written into the One Big Beautiful Bill Act passed Saturday, ending a one-year window during which wind and solar developers could lock in eligibility for federal clean electricity tax credits by demonstrating they had broken ground.

Under the law, signed July 4, 2025, wind and solar projects that did not begin construction by the anniversary date must now be placed in service by Dec. 31, 2027, to claim credits under Sections 45Y and 48E of the Internal Revenue Code. Projects that did begin construction by the deadline retain a four-year completion runway, according to a client alert published by McGuireWoods.

The stakes are substantial. According to reporting by the Minnesota Star Tribune, the credits at issue can cover anywhere from 30 to 70 percent of project costs for qualifying facilities.

The final weeks before the deadline were complicated by a federal court ruling. On June 6, the U.S. District Court for the District of Columbia vacated IRS Notice 2025-42 in full, in the case Oregon Environmental Council v. Internal Revenue Service, and remanded the matter to the agency for further administrative proceedings, according to the McGuireWoods alert. The notice, issued in August 2025, had eliminated the so-called 5% Safe Harbor, a method that let developers establish a construction start by paying or incurring at least 5% of total project costs. The court found Treasury and the IRS had failed to adequately justify the departure from long-standing guidance and had not accounted for industry reliance interests built over more than a decade, according to an analysis by accounting firm CLA.

The ruling restored the 5% pathway in principle, but legal advisers cautioned developers not to rely on it. The McGuireWoods alert noted that the government would almost certainly seek a stay of the vacatur pending appeal, and that the court itself acknowledged the appellate timeline would extend past the July 4 deadline. A reversal could have retroactive effect, the firm said.

The construction rush preceding the deadline reshaped project activity nationwide. According to the E2 clean energy tracker's first-quarter 2026 analysis, developers announced 54 new utility-scale clean energy projects in the first three months of 2026, nearly double the total announced in all of 2025, as firms moved to start construction on solar and wind projects ahead of expiring federal tax credits. Solar and hybrid projects dominated new announcements, particularly in Texas, California, and the Midwest, E2 reported.

Cancellations accelerated at the same time. E2 recorded 38 project cancellations in the first quarter alone, compared with 85 for all of 2025. Those scrapped projects would have generated nearly 8 gigawatts of capacity and roughly $13 billion in local investment, the group said.

Financing stress surfaced at regional lenders. Greg Hohlen, senior vice president of Minnwest Bank, told the Star Tribune that other banks had declined to participate in solar loans. "I went to every bank that I know, and the ones not in the solar industry just basically said, 'We just don't have any confidence in this industry right now,'" Hohlen said, according to the paper.

Canary Media reported that better-capitalized developers were best positioned to secure equipment ahead of the deadline. "A lot of the less well-capitalized developers may have good projects," one developer said in that report. "But if they can't grandfather those projects, either by starting construction or by procuring equipment, there's not much of a value proposition there."

For projects that cleared the deadline, challenges remain. According to Latitude Media, the main hurdles going forward are permitting timelines, tariffs on imported components, and compliance with the law's foreign entity of concern restrictions, which limit the use of equipment sourced from companies with ties to China and other designated adversarial nations.

The IRS has not yet said whether it will appeal the district court ruling or issue revised beginning-of-construction guidance.

Sources cited:
- McGuireWoods client alert, Oregon Environmental Council v. IRS (https://www.mcguirewoods.com/client-resources/alerts/2026/6/federal-court-vacates-irs-notice-2025-42-restores-5-safe-harbor-for-wind-and-solar-projects/)
- E2 Clean Economy Works Q1 2026 (https://e2.org/reports/clean-economy-works-q1-2026/)
- Minnesota Star Tribune, Solar developers rush to start projects (https://www.startribune.com/solar-developers-rush-to-start-projects-before-federal-tax-credits-expire/601637774)
- Canary Media, Wind and solar developers face a year of hard calls (https://www.canarymedia.com/articles/clean-energy/wind-solar-construction-trump-tax-credits)
- Latitude Media, One year post-OBBB, what's holding projects back (https://www.latitudemedia.com/news/one-year-post-obbb-whats-holding-projects-back/)
- CLA, Energy Tax Credit Guidance Shifts for Wind and Solar Projects (https://www.claconnect.com/en/resources/articles/25/rules-on-wind-and-solar-projects)