Two things happened in the last five weeks that together determine what federal tax credit is available to a commercial solar or storage project from here.
On June 6, a federal court vacated the IRS notice that had eliminated the 5 percent safe harbor for establishing when construction begins. On July 4, the statutory begin-construction deadline for wind and solar passed.
The first is good news that arrived four weeks before the second stopped mattering for most projects. Here is where things stand.
In August 2025, IRS Notice 2025-42 eliminated the 5 percent safe harbor for wind and solar, preserving it only for solar facilities of 1.5 MW AC or smaller, with an aggregation rule that prevented dividing a larger project into qualifying pieces. For anything above that threshold, physical work of a significant nature became the only path.
On June 6, 2026, the US District Court for the District of Columbia vacated that notice in Oregon Environmental Council v. Internal Revenue Service, No. 25-4400 (CKK). The court held the notice arbitrary and capricious under the Administrative Procedure Act, finding that Treasury had offered only a cursory justification for departing from a decade of settled guidance and had not accounted for the industry’s reliance on the safe harbor. It vacated the notice in full and remanded to the agency.
The vacatur is nationwide. The 5 percent safe harbor is restored for wind and solar at any size, and the framework established by the pre-2025 notices governs again.
Two caveats matter.
The vacatur restored a method of proving you met the deadline. It did not move the deadline. July 4, 2026 stood, and has now passed.
And the matter was remanded to the agency, which means Treasury may issue new guidance. As of this writing we are aware of no notice of appeal, no motion for reconsideration, and no replacement guidance. The government’s window to appeal a civil judgment of this kind is 60 days, which runs in early August. Anyone relying on the restored safe harbor should confirm the docket directly and should document a construction start under both the physical work test and the 5 percent test where the facts allow it.
For wind and solar, the One Big Beautiful Bill Act set two pathways. A project that began construction on or before July 4, 2026 escapes the termination provision entirely and has no statutory placed-in-service deadline, subject to the ordinary continuity requirement, which in practice means energizing by December 31, 2030. Everything else must be placed in service by December 31, 2027.
That second date is now approximately seventeen months out.
Seventeen months is enough for a rooftop or carport system with interconnection already secured and equipment available. It is not enough for a ground-mount project that needs a new interconnection study, discretionary county permitting, or long-lead equipment. Anyone starting a solar project of any scale today should assume the federal credit is unavailable unless they can point to a specific, credible path to energization inside that window.
If your project did begin construction before July 4, the priority now is documentation. That evidence will be examined years from now, potentially by someone reconstructing it from records you did not know you needed to keep. Contemporaneous documentation assembled this summer is worth considerably more than a reconstruction assembled in 2029.
Storage was never subject to the wind and solar termination provisions. A storage project beginning construction today still receives the full 30 percent investment tax credit with prevailing wage and apprenticeship compliance, or without it under 1 MW AC, with domestic content and energy community adders stacking on top. The phase-down does not begin before the mid-2030s.
For our water district and agricultural clients this is the single most important fact about the current landscape, and it is the one most often lost in coverage that treats “clean energy credits” as a single category. Solar is on a clock. Storage is not.
Storage’s constraint is sourcing, and it is a real one.
The material assistance cost ratio applies to facilities and storage beginning construction after December 31, 2025. For generation facilities the threshold is 40 percent this year and 45 percent next. For energy storage it is 55 percent this year and 60 percent next.
Those storage thresholds are the toughest sourcing requirements in the statute, and they were written with Chinese battery cell supply chains in mind.
Notice 2026-15, issued in February, provided interim guidance. It offers three safe harbors: taxpayers may use the domestic content safe harbor tables to identify which components are in scope, use the assigned cost percentages from those tables rather than tracing actual costs, and rely on supplier certifications made under penalties of perjury, subject to a standard that fails if the taxpayer knows or has reason to know a certification is inaccurate.
Two limits worth knowing. Qualified interconnection property requires a separate calculation and cannot use the identification or cost percentage safe harbors. And the notice deliberately deferred the harder questions about entity status, ownership attribution, and effective control, which remain pending proposed regulations. Treasury is required to publish purpose-built tables by the end of this year, and the current approach may be relied on for 60 days after they appear.
The practical point for storage owners is that this is a different diligence question than domestic content. Domestic content asks where equipment was made. The foreign entity rules ask who made it, looking through to ownership and control. A cell assembled in a US plant owned by a foreign parent can satisfy one test and fail the other.
There is also a long tail. Taxpayers claiming Section 48E credits beginning in 2028 face 100 percent recapture if they make a payment conferring effective control to a specified foreign entity within ten years of placing the facility in service. That obligation attaches to operations and maintenance agreements, warranty arrangements, and battery service contracts. Those contracts are being signed now and should be read with a ten-year horizon.
Storage: full 30 percent credit, plus adders, transferable under Section 6418 or monetizable through elective pay under Section 6417 for public agencies. Clear the 55 percent material assistance ratio. Diligence the supply chain before procurement, not after.
Solar: only if you began construction before July 4, 2026, or can genuinely energize by December 31, 2027. Otherwise assume no credit.
Regardless: 100 percent bonus depreciation remains permanent for property acquired and placed in service after January 19, 2025, five-year MACRS applies, and the energy community bonus is alive and being administered, with updated eligibility lists issued last month.
A solar project that cannot reach the credit is not automatically dead. It has to stand on accelerated depreciation, avoided energy cost, demand charge reduction, and whatever state or utility programs apply. For agricultural pumping loads and municipal facilities with high demand charges, that case is often still there. It is simply a different case than the one most owners have been underwriting for the past four years.
