Judge revives 5% safe harbor for wind and solar credits
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- Judge Colleen Kollar-Kotelly vacated the Treasury's August guidance that eliminated the 5% safe harbor test for wind and solar projects, and remanded the matter to the IRS for further action.
- The Treasury Department had issued August guidance that barred wind and large-scale solar projects from using the 5% cost‑spent test to prove commencement of construction for the 45Y clean energy production tax credit and 48E clean energy investment tax credit.
- The Natural Resources Defense Council hailed the ruling, saying it adds to a string of defeats for the Trump administration’s attempts to block new wind and solar projects.
- Foley, a law firm, warned that because the ruling is subject to appeal and the July 4, 2026 deadline is near, developers should not rely on the 5% safe harbor and must consider the risk.
- Judge Colleen Kollar-Kotelly found the Treasury failed to satisfy the Administrative Procedure Act’s requirement for reasoned decisionmaking regarding the earlier credit termination date for wind and solar projects.
- Solar facilities under 1.5 MW were exempt from the August guidance and could continue to qualify for tax credits using the 5% cost threshold test.
Why it matters: The ruling reopens a tax‑credit route for wind and solar developers, preserving eligibility for the 45Y and 48E credits and undercutting the Trump administration’s effort to limit new projects. Yet the remand and possible appeal leave developers facing legal uncertainty as the July 4, 2026 deadline approaches.
