en
Written by Jesse Broehl for Industrial Info Resources (Sugar Land, Texas)--Not content with cutting the wind and solar tax credits short by four years in the recently passed One Big Beautiful Bill Act (OBBBA), the Trump Administration's next move against wind and solar is exercising its power controlling the Internal Revenue Service (IRS) to make it harder for developers to use the last gasp of tax credits under the terms of the OBBBA.
The terms agreed to in the Senate version that passed in the House and signed into law on July 4, wind and solar have a short-term lifeline to build projects already in advanced stages of development. Developers have one year from the bill's signage into law to begin construction on a wind or solar project in order to eventually receive the production tax credit (PTC) or investment tax credit (ITC).
There is other legal language for projects in other stages of development but the major lifeline for wind and solar is the plan of officially starting construction within a year. Central to why this is a lifeline for renewable energy projects is that the legal threshold for starting construction is a relatively low bar to surmount and developers are likely to rapidly start construction of many projects. This will mean physical work of a significant nature or 5% cash paid in one or more purchase orders for the project.
Those methods would then achieve a so-called Safe Harbor for the projects where construction to commissioning can take place within four years at which point the tax credits become available to the project owner.
White House Targets the IRS Safe Harbor Provisions
Beltway press such as Politico and analysts covering the final negotiations revealed that conservatives in the House were upset with the provisions in the Senate version that allowed for the one year start construction scenario. They ultimately agreed to vote for the bill after an agreement with the White House that the Trump administration would do everything in its legal power to constrain or neutralize the start construction scenario and take other actions to halt renewables.
Fast-forward to Monday, when President Donald Trump issued an executive order explicitly aiming to do just that.
"Within 45 days following enactment of the One Big Beautiful Bill Act, the Secretary of the Treasury shall take all action as the Secretary of the Treasury deems necessary and appropriate to strictly enforce the termination of the clean electricity production and investment tax credits under sections 45Y and 48E of the Internal Revenue Code for wind and solar facilities," states the executive order. "This includes issuing new and revised guidance as the Secretary of the Treasury deems appropriate and consistent with applicable law to ensure that policies concerning the 'beginning of construction' are not circumvented, including by preventing the artificial acceleration or manipulation of eligibility and by restricting the use of broad safe harbors unless a substantial portion of a subject facility has been built."
Alarm Bells in an Already Shell-Shocked Wind and Solar Industry
There is other guidance in the executive order, but the target aimed at the start construction guidance is the major one setting off alarm bells by the wind and solar industries. These are industries that are still shell-shocked and picking up the pieces after seeing the tax credits nearly halted by the OBBBA.
The Internal Revenue Service (IRS) will still be constrained by the legal language of the OBBBA, but the Trump administration has a history of pushing the legal limits in many areas of its interests. The IRS plans to unveil new guidance within 45 days on what qualifies for safe harbor under the start construction scenario, and it will surely be a more stringent interpretation than the industries expected.
Possible changes by the IRS include raising the 5% spend threshold to a much higher proportion of project cost (51% is possible), or changing the physical construction terms to a very capital-intensive nature, such as major CAPEX packages delivered or constructed. The 4-year window from construction start to commissioning could be halved to 2 years, and terms for showing compliance could be made burdensome.
Guidance may also not be clear for months or years and may invite legal challenges that perpetuate further uncertainty.
Any number of challenging changes could be unveiled by the IRS. Whatever the specifics, between the OBBBA and how the Trump administration interprets it, the quarters when wind and solar make up over 85% of new power plants built are likely fast on the way out. For related information, see April 8, 2025, article - IIR Energy: New Power Plant Capacity Commissioned in Q1 2025.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).
The terms agreed to in the Senate version that passed in the House and signed into law on July 4, wind and solar have a short-term lifeline to build projects already in advanced stages of development. Developers have one year from the bill's signage into law to begin construction on a wind or solar project in order to eventually receive the production tax credit (PTC) or investment tax credit (ITC).
There is other legal language for projects in other stages of development but the major lifeline for wind and solar is the plan of officially starting construction within a year. Central to why this is a lifeline for renewable energy projects is that the legal threshold for starting construction is a relatively low bar to surmount and developers are likely to rapidly start construction of many projects. This will mean physical work of a significant nature or 5% cash paid in one or more purchase orders for the project.
Those methods would then achieve a so-called Safe Harbor for the projects where construction to commissioning can take place within four years at which point the tax credits become available to the project owner.
White House Targets the IRS Safe Harbor Provisions
Beltway press such as Politico and analysts covering the final negotiations revealed that conservatives in the House were upset with the provisions in the Senate version that allowed for the one year start construction scenario. They ultimately agreed to vote for the bill after an agreement with the White House that the Trump administration would do everything in its legal power to constrain or neutralize the start construction scenario and take other actions to halt renewables.
Fast-forward to Monday, when President Donald Trump issued an executive order explicitly aiming to do just that.
"Within 45 days following enactment of the One Big Beautiful Bill Act, the Secretary of the Treasury shall take all action as the Secretary of the Treasury deems necessary and appropriate to strictly enforce the termination of the clean electricity production and investment tax credits under sections 45Y and 48E of the Internal Revenue Code for wind and solar facilities," states the executive order. "This includes issuing new and revised guidance as the Secretary of the Treasury deems appropriate and consistent with applicable law to ensure that policies concerning the 'beginning of construction' are not circumvented, including by preventing the artificial acceleration or manipulation of eligibility and by restricting the use of broad safe harbors unless a substantial portion of a subject facility has been built."
Alarm Bells in an Already Shell-Shocked Wind and Solar Industry
There is other guidance in the executive order, but the target aimed at the start construction guidance is the major one setting off alarm bells by the wind and solar industries. These are industries that are still shell-shocked and picking up the pieces after seeing the tax credits nearly halted by the OBBBA.
The Internal Revenue Service (IRS) will still be constrained by the legal language of the OBBBA, but the Trump administration has a history of pushing the legal limits in many areas of its interests. The IRS plans to unveil new guidance within 45 days on what qualifies for safe harbor under the start construction scenario, and it will surely be a more stringent interpretation than the industries expected.
Possible changes by the IRS include raising the 5% spend threshold to a much higher proportion of project cost (51% is possible), or changing the physical construction terms to a very capital-intensive nature, such as major CAPEX packages delivered or constructed. The 4-year window from construction start to commissioning could be halved to 2 years, and terms for showing compliance could be made burdensome.
Guidance may also not be clear for months or years and may invite legal challenges that perpetuate further uncertainty.
Any number of challenging changes could be unveiled by the IRS. Whatever the specifics, between the OBBBA and how the Trump administration interprets it, the quarters when wind and solar make up over 85% of new power plants built are likely fast on the way out. For related information, see April 8, 2025, article - IIR Energy: New Power Plant Capacity Commissioned in Q1 2025.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).
