Wind and Solar Tax Credits Pass Their July 4 Deadline With 200 GW Safe-Harboured After a Court Restored the 5% Test

The 2025 reconciliation law, Public Law 119-21, gave wind and solar projects until 4 July 2026 to begin construction and keep the federal clean electricity tax credits. That deadline has passed. What’s left is a race to finish what got in under the wire.

The law changed the two credits that replaced the old production and investment credits from 2025: section 45Y, paid per kilowatt-hour, and section 48E, paid as a share of project cost. Wind and solar facilities keep them only if they began construction before 5 July 2026 or start producing power before 1 January 2028. Projects that missed the first date now face the second, with about fifteen months to go. Geothermal, nuclear, hydropower and battery storage keep full credits for construction that starts before the end of 2033, then phase down to zero after 2035.

The fight over what counts as starting

How a developer proves it began construction decides who qualifies. Since 2013 the IRS has accepted two methods: physical work of a significant nature, or paying at least 5% of the project’s total cost. On 15 August 2025, acting on Executive Order 14315, Treasury issued Notice 2025-42. It scrapped the 5% route for all wind projects and for solar above 1.5 megawatts, effective 2 September 2025, leaving physical work as the only path for most of the market.

On 6 June 2026, a month before the deadline, the US District Court for the District of Columbia vacated the notice in full in Oregon Environmental Council v. IRS. The court found the IRS had acted arbitrarily: one paragraph of explanation for dropping a method used for twelve years, no attention to reliance interests and no reason for singling out wind and large solar. It applied the vacatur to everyone, not just the plaintiffs. The government let its 60-day appeal window close on 5 August without filing. No appeal had been filed as of 4 September, the last day it could ask the court for more time. Treasury can still write new guidance, but it would have to answer the court’s objections.

The ruling came late. Most developers had already planned around physical work, so the restored test mattered mainly for projects scrambling in the last four weeks.

How much got in

A lot. Wood Mackenzie estimates the safe-harboured solar pipeline at more than 200 gigawatts of DC capacity, which it says is enough to cover forecast installations through the end of the decade. Its earlier figure for onshore wind was about 16 gigawatts. Most of that capacity was locked in well before the deadline; about 85% of safe-harboured projects had qualified by December 2025.

The rush shows in the build numbers. The US installed 11.4 GWdc of solar in the second quarter of 2026, up 45% on a year earlier, with utility-scale up 61% as developers energised qualifying projects. The Energy Information Administration expects 86 gigawatts of new utility-scale capacity of all kinds this year, the most in over two decades, including 43.4 gigawatts of solar and 24.3 gigawatts of batteries. Gas is 6.3 gigawatts.

Safe-harboured projects have four years from the start of construction to enter service. That gives the pipeline a long tail. After it runs out, the subsidised wind and solar build ends.

The other strings attached

Starting construction isn’t the only test. The law bars credits for projects that take “material assistance” from a prohibited foreign entity, meaning mainly Chinese suppliers. Treasury’s interim rules, Notice 2026-15, issued in February, measure this with a cost ratio: the share of a project’s direct costs for manufactured products that doesn’t come from prohibited sources. The rules apply to 45Y and 48E projects that began construction after 31 December 2025, and the required share rises each year. Credits found to break the rules can be recaptured up to ten years after they’re claimed.

Trade policy stacks on top. A 15% Section 232 tariff on polysilicon, with a minimum import price, takes effect on 4 December, as covered in our Section 232 post.

What Congress saved, and what it ended outright

The Joint Committee on Taxation’s numbers, as compiled by CRS, show where the savings came from. For fiscal 2026 to 2033, JCT expects the changes to 48E to save $136.7 billion and those to 45Y to save $15.5 billion. The older production and investment credits, still claimed by projects that began construction before 2025, were left largely alone and save nothing. CRS warns that comparisons with earlier repeal estimates are rough because JCT’s methods changed.

Consumer credits went faster. The $7,500 new electric vehicle credit, the used EV credit and the commercial clean vehicle credit ended for vehicles bought after 30 September 2025. The residential clean energy credit, used for rooftop solar, ended for installations completed after 2025. EV sales fell after the credit ended and have settled at about 5 to 6% of new car sales, according to Edmunds. Residential solar installations fell to 995 megawatts in the second quarter, the lowest in five years.

So wind and solar get one last subsidised cohort. Congress set the deadline. A district court ruling and the equipment developers bought in 2025 decided how big that cohort turned out.