What Treasury’s New BOC Guidance Means for Solar and Wind Tax Credits

With the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025, and U.S. President Donald Trump’s subsequent executive order directing stricter enforcement of clean energy tax credit rules, the U.S. Treasury has moved swiftly to narrow the “beginning of construction” (BOC) standard for solar and wind projects. The new guidance, issued on August 15, restricts eligibility pathways for key tax credits and heightens uncertainty for developers and investors seeking to safe harbor projects ahead of looming statutory deadlines. 

Key Changes at a Glance 

• This latest update, in response to the July 7, 2025, Executive Order, only addresses solar and wind-related 48E and 45Y tax credit eligibility. 

• The new guidance takes effect on September 2, 2025, and is not retroactive. Projects meeting the BOC safe harbor requirements prior to this date will not be affected.  

• In previous guidance, both the 5% and the physical work test were options to safe harbor projects. This update eliminates the 5% safe harbor method for solar and wind projects, including the 10-year offshore wind safe harbor. The only exception to the 5% safe harbor is for solar projects that are 1.5 megawatts or smaller in size (community solar).  

• The physical work test is now the only method to satisfy the BOC safe harbor requirements for the start of construction. While the criteria for the physical work test remain the same and must be met for all projects, preliminary activities that were previously accepted as evidence to demonstrate continuous construction are no longer valid. 

• On-site work: Excavation for foundations, setting anchor bolts, installing racks, or mounting structures. 

• Off-site work: Manufacturing components under a binding written contract (not held in inventory).  

• Preliminary activities (e.g., permitting, site clearing, financing) do not count. 

• The guidance does not address the upcoming prohibited foreign entity material assistance rules, which will take effect after December 31, 2025. Thus, the Treasury will be releasing additional guidance later this year related to solar and wind beginning construction criteria based on this new requirement from the One Big Beautiful Bill Act (OBBBA) that takes effect on January 1, 2026.  

What This Means for Businesses and Investors 

As companies and investors move beyond the September 2, 2025, safe harbor deadline for solar and wind projects, it is essential to maintain strong documentation showing compliance with the IRS physical work test. Executives and their respective teams should ensure that project contracts and procurement strategies directly connect component inventories and construction activities to the specific project to provide clear, defensible evidence for securing tax credits. Failing to do so not only risks forfeiting significant financial incentives but may also trigger compliance concerns, potentially impacting a company’s reputation with investors and regulators.