On 6 June 2026, the United States Federal District Court for the District of Columbia, in the Oregon Environment Commission v. IRS case, found that the change in the scope of application of the IRS Note 2025-42, issued in August 2025, in relation to the Five-Year Safe Port of Wind and Large Solar Project (Five Percent Safe Harbor), was arbitrary and capricious, and that the notice was systematically revoked and remanded. This restored the safe harbour rules that had previously been cancelled, allowing wind and large solar developers to reopen the financing path before the construction deadline of 4 July 2026. Meanwhile, Public Law 119-21, which was passed by Congress, and Section 70509, are redefining the depreciation of energy property and the tax credit threshold, with two time lines intertwined, requiring project developers, consortium participants and tax declarationers to make different arrangements between the start of construction, the date of shipment and the date of release scale update.
The court decision and the IRS notification's history.
IRS Notice 2025-42 was published in August 2025 and most wind and solar projects were required to confirm the commencement of construction through the “Physical Work Test”. The notification retains the previously applicable five-year safe harbour, but only for solar energy facilities with a maximum net output not exceeding 1.5 MW. Solar energy facilities at the industrial and utility levels usually range from several to hundreds of MW, so most such projects, like wind and electricity projects, are excluded from safe harbours. Five years of safe harbours would have allowed developers to conclude that construction had commenced by spending no more than 5 per cent of the total cost of the project, thereby locking down eligibility under the old tax rules. In its judgment of 6 June 2026, the Court stated that IRS had singled out wind and solar power and that Congress had intended the relevant tax credits to be technologically neutral and that IRS had no valid reason to treat only the two technologies differently and had not fully taken into account the significant dependency interests developed by developers over the past decade. The decision resulted in the full revocation of the notice and the return of the IRS retrial and the restoration of the safe harbour path that the wind and large-scale solar projects had begun to identify.
Following the court ruling, the contractor ' s arrangement before the deadline for the commencement of construction on 4 July 2026 was again the focus. Public Law 119-21, which entered into force on 4 July 2025, provides a 12-month window for wind power and solar energy projects to enable the project to begin work under the old credit rules. According to many reports and studies, if the wind and solar projects begin after 4 July 2026, they will normally have to be shipped before 31 December 2027 before being eligible to declare a clean power production tax credit or a clean electricity investment tax credit. 4 July was critical because it marked the closure of the window for the commencement of construction under the old rules, and if the project party was to follow the old credit eligibility, it would have to complete the commencement of construction by that date.
Changes in depreciation rules and determining date of commencement of construction
In addition to the construction start window of the tax credit, Section 70509 of Public Law 119-21 also changed the depreciation classification of solar and wind and wind properties. Section 70509, entitled “Termination of energy property cost recovery”, operates by amending section 168(e)(3)(B)(vi) of the Internal Revenue Code by deleting one of its subsections and renumbering the remaining two subsections. The text itself does not contain the words “solar energy” or “wind power”, but instead deletes the corresponding text by subsection number. IRS, in the “What new content” section of the Form 4562 Note, in 2025, made it clear that Section 70509 removed solar or wind energy property from the five-year property category defined in section 168(e)(3)(B)(vi) and applied to solar or wind energy property that began construction after 31 December 2024.
This change has two key details. First, the trigger condition is the start of construction, not delivery. Secondly, there are no transitional rules, no grandfather clauses and no contractual exceptions. That is, the old five-year classification would not be affected if construction started on or before 31 December 2024; if construction began after that date, the old five-year classification would no longer apply. For solar projects, changes in depreciation years are directly related to the size of the first year deduction: removal of barriers may mean full deduction in the year, while failure to remove may result in deductions being shared over decades. The study also noted that IRS had not yet published the recovery period applicable to the stranted project (i.e., items that could not be used for the original classification because of a change in rules), which left the depreciation treatment of some items uncertain.
The affected subjects and the easy pits
The direct impact of the rule change on court decisions is first and foremost for the developers of wind and solar projects, especially those that are scheduling the start of construction and are seeking to lock in old tax credits before 4 July 2026. For industrial solar developers, the export cap of 1.5 MW meant that most utility-level projects would not be able to use a five-year safe harbour under IRS Note 2025-42, and the court decided to restore the safe harbour as a reusable financing and qualification route for them. The wind power developer also faced uncertainty as to the commencement of construction, which had been excluded from the safe harbour, and the exclusion had been revoked after the judgement, but the specific outcome of the retrial and subsequent IRS guidance still needed to be observed.
Second, the consortium in the field of wind and electricity is also within the affected range. In wind power project development, the consortium is often used to share risks and provide large-scale capital, and cooperative arrangements between financiers and operators allow for the integration of capital inputs with technology delivery experience. As tax rules and construction begin to identify criteria, arrangements within the consortium for the timing of capital financing, risk allocation, milestone recognition and attribution of tax interests may need to be calibrated. The study mentioned that IEA expects global wind capacity to double to more than 2000 gigawatts by 2030, and that growth in this industry is expected to make the cumulative effect of union disputes and regulatory uncertainty even more noteworthy.
Third, the person responsible for the tax declaration and depreciation arrangements needs to pay particular attention to the risk of mismatch between the recognition of the date of commencement of construction and the depreciation classification. The application of Section 70509 is divided between 31 December 2024 and 31 December 2024, and if the start date of construction of the project happens to be close to the boundary, the projector needs to confirm whether it is within the scope of the old classification or has entered the new classification. At the same time, initial activities, such as planning, licensing, financing, security research and general site preparation, are not in themselves sufficient to conclude that construction has commenced, either under substantive engineering tests or under safe harbour arrangements. Relying solely on these initial activities, the projector may fail in its determination at the start of the construction, thereby affecting the interface between tax credit eligibility and depreciation classification.
In addition, there are independent but related updates on the Clean Fuel Production Tax Credit (Sect. 45Z). The IRS issued Note 2026-53 on 8 September 2026, providing a table of emissions for calendar year 2026 to calculate tax credits for cleaner transport fuel production. The credit applies to domestic cleaner transport fuel produced after 31 December 2024 and sold or used before 31 December 2029, calculated by multiplying the applicable amount per gallon (or gallon equivalent) by the emission factor, which measures the performance of greenhouse gas emission reductions in the fuel life cycle relative to the 50 kg CO2e/mmBTU baseline. While 45Z is in the field of transport fuel, the pace of updating its emission scale and the overall change in clean energy tax rules over the same period, the overlap of time lines increases the complexity of scheduling and declaration arrangements for project participants involved in both energy and fuel.
What's next?
For wind and solar developers, the most critical operational node at this time is the confirmation and documentation of the commencement date of construction. If the project wishes to remain eligible for the old tax credit, it will need to complete the determination of commencement by 4 July 2026; if the project has commenced on or before 31 December 2024, the depreciation of Section 70509 will not apply. For projects that have not yet been identified at the start of construction or are in the planning and licensing phase, a distinction needs to be made between the initial activities and the substantive work, so as to avoid the assumption that construction has commenced on the basis of planning, financing or site preparation alone. The Court ruled that, although the exclusion of safe harbours for wind and large solar energy had been withdrawn from IRS Note 2025-42, IRS had not yet published final post-retrial guidance, and that the developers should therefore follow up on the issuance of new notifications or explanations when relying on safe port arrangements.
For the consortium participants, it was suggested that in the capital financing arrangements, milestone recognition and tax benefit allocation provisions, it should be made clear how changes in the criteria for starting construction would affect the rights and obligations of the parties. Since the tax eligibility and depreciation classification for wind and solar projects is based on the date of commencement of construction as the key trigger point, the consortium internal documentation should reflect the different meaning of this point before and after the change in rules and, where possible, preserve the chain of evidence for the date of commencement of construction.
For those responsible for the tax declaration and depreciation arrangements, it is necessary to confirm whether the project falls within the scope of the exception of the commencement of work prior to 31 December 2024 or is subsequently affected by Section 70509. If the project has been affected and the recovery period for the stranted project has not yet been published, a record of uncertainty about depreciation should be kept in the declaration preparation and concern should be expressed whether further guidance on the recovery period will be provided after IRS. At the same time, the Form 4562 fill-in statement clearly reflects the removal of the five-year classification and should therefore be based in the preparation of the declaration on the statement issued by IRS rather than on the old classification assumption.
For the project participants involved in the production of clean fuels, the 2026 emission scale provided by Notice 2026-53 is the basis for calculating the 45Z credits and the applicable period covers fuel produced after 31 December 2024 and sold or used before 31 December 2029. The project participants should confirm whether the life-cycle emission calculation of fuels is consistent with the emission scale and note the role of the baseline value of 50 kg CO2e/mmBTU in crediting. If the project involves both the electricity and fuel sectors, it will also need to track the updating of the construction start window for the electricity tax credit and the fuel emissions table, respectively, to avoid mixing the time lines under different rules.
From a longer time line, several observation points are of concern. First, whether IRS would reissue guidance on the initial determination of wind power and solar energy construction after the Court ' s decision to remand, and in particular whether the five-year safe harbour would return to its original level. Second, whether the connection between the construction start window under Public Law 119-21 and the shipping deadline would in practice give rise to a qualification dispute, in particular for projects that were tight in time around 4 July 2026. Third, whether the depreciation classification changes triggered by section 70509 will subsequently result in specific treatment rules for the stranted project, in particular the determination of the recovery period. Fourth, the 45Z credits in the area of clean fuels will be further refined in the calculation calculator in the declared practice after the emission scale is updated. These nodes jointly determine the tax eligibility, depreciation arrangements and financing tempo of wind, solar and clean fuel projects, so that the projector and the tax holder should update the time line according to the date of commencement of construction, the date of shipment and the emission scale, listing the items and materials to be identified separately and, where the rules are not fully stable, keep a written record of the date and the basis of the determination.