U.S. District Court Vacates IRS Notice Eliminating Five Percent Safe Harbor for Certain Clean Energy Projects

The U.S. District Court for the District of Columbia held that IRS Notice 2025-42, which eliminated the Five Percent Safe Harbor method for establishing “beginning of construction” for wind and large-scale solar projects seeking clean energy tax credits under I.R.C. §45Y and §48E, was arbitrary and capricious under the Administrative Procedure Act. Plaintiffs, various environmental organizations, a tribal corporation, a consulting firm, and a city, challenged Notice 2025-42, which eliminated the Five Percent Safe Harbor for determining “beginning of construction” for wind and most solar projects seeking clean energy tax credits under IRC §45Y and §48E. The Notice required these ...