The Trump administration is tightening the rules on qualifying for tax credits on new wind and solar construction, but not as much as some feared it would.
IRS Notice 2025-42 released Aug. 15 indicates the Five Percent Safe Harbor provision for the clean energy production and investment credits will be eliminated for new solar facilities larger than 1.5 MW and new wind facilities that start work after Sept. 2, 2025.
It is being replaced with a protocol to establish that significant physical construction has been started before July 5, 2026; proceeded continuously; and was completed within four calendar years to establish eligibility for the tax credits.
This is not as harsh as it could have been, or as some in the clean energy industry had feared — some companies in the sector saw their stock prices soar later Aug. 15 as the guidance was digested.
As the S&P 500 and Nasdaq closed fractionally lower, NextEra Energy closed 4.4% higher, Enphase Energy 8.1%, First Solar 11.1%, Nextracker 12.2% and Sunrun 32.8%.
Research and strategy firm Jefferies called it a win for utility-scale renewables and a huge win for residential solar, saying the guidance was “significantly better than expected.”
The sector’s trade organization, the American Clean Power Association, was critical of the guidance but struck a more measured tone than it has with some of the many setbacks President Donald Trump and his cabinet agencies have dealt to renewable energy in his second term.
CEO Jason Grumet said: “The Treasury Department’s decision to accelerate the phaseout of clean energy tax credits undermines the integrity of our energy grid and our legislative process. In the One Big Beautiful Bill Act, Congress explicitly chose to provide energy companies with one year to phase out tax credits to keep energy prices low while meeting growing power demand.”
But he continued: “We acknowledge and appreciate the hard work of senators who led the effort to elevate pragmatism over partisanship in the legislative process. Their continued advocacy to protect this legislative agreement was instrumental in avoiding greater impediments to energy deployment.”
On July 4, Trump signed the bill, which contained provisions accelerating the phaseout of the Clean Electricity Production Tax Credit and Investment Tax Credit — 45Y and 48E, respectively.
Some Republicans in Congress wanted the credits eliminated immediately, and Trump was widely reported to have won their support for OBBBA and its slower phaseout by promising a firm hand carrying out OBBBA’s provisions.
Trump followed up on July 7 with an executive order directing Treasury to issue new guidance on 45Y and 48E and directing the Department of the Interior to review and revise all policies deemed preferential to wind and solar facilities within 45 days of OBBBA’s enactment. (See U.S. Clean Energy Sector Faces Cuts and Limitations and Trump Executive Order Targets Renewable Energy Tax Credits.)
Interior already has issued a series of policy changes to comply with the order that most observers would characterize as harsh. (See Dept. of Interior Launches Overhaul of OSW Regs and Feds Pile on More Barriers to Wind and Solar.)
Treasury dropped the next shoe on Aug. 15. More is to come, however, including guidance on the safeguards Trump ordered against foreign entities of concern.
