New deadline for wind and solar: If a wind or solar project begins construction after July 4, 2026, it must be placed in service by December 31, 2027 to qualify for § 45Y or § 48E tax credits. Projects placed in service after that date will lose eligibility unless construction began before the July 4, 2026 “beginning-of-construction” deadline. IRS+2KPMG+2
Tighter “beginning of construction” rules:
The IRS has largely eliminated the 5% safe harbor test for large wind and solar projects. Instead, it requires construction to be shown through the Physical Work Test—meaning actual significant on-site or off-site physical work must have started. PwC+3IRS+3Willkie Farr & Gallagher+3
There’s also a continuity requirement: Once construction is considered begun, it must continue without unreasonable delays, and a project generally must be placed in service within four years to maintain eligibility. KPMG+2Willkie Farr & Gallagher+2
Foreign entity restrictions: Projects may be disqualified from § 45Y and § 48E credits if they are owned by, controlled by, or receive assistance from certain “foreign entities of concern” or “prohibited foreign entities” (FEOC / PFE). These foreign entity rules add new risk layers for projects with international supply chains or financing. IRS+2Mayer Brown+2
Credit phase-out for other clean electricity technologies: Clean electricity technologies beyond wind and solar—such as geothermal, hydropower, energy storage, and fuel cells—are not subject to the same accelerated December 2027 deadline. However, developers must still monitor whether construction timing or foreign entity restrictions apply, potentially affecting eligibility. RSM US+2Sullivan & Cromwell+2
New prohibitions on leases: The OBBBA also places restrictions on certain leasing arrangements for clean energy property. For example, for solar water heating and small wind energy property used in residential leasing, the § 48E credit may be disallowed if those systems are leased to a third party.
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