Big Changes are Coming to Wind and Solar: The One Big Beautiful Bill Act’s Impact on Clean Energy Credits
Category | Announcements
By Colin M. Bruns
Colin is a shareholder of the firm’s Construction Law Department. He can be reached at 612.359.7665 or Cbruns@fwhtlaw.com.
Introduction
The One Big Beautiful Bill Act (“OBBB”) was signed into law by President Trump on July 4, 2025. The bill has significant tax implications across several industries, including wind and solar. Specifically, the OBBB accelerates the timeline for the termination of federal clean energy tax credits, which have been an important driving force behind the investment in wind and solar projects. The OBBB will have significant long-term and short-term ramifications for the renewable energy industry.
Given the much shorter window to qualify for clean energy tax credits, the renewable energy industry may see an increase in the construction of wind and solar facilities within the next year. This briefing paper summarizes some of the notable requirements and deadlines that contractors, developers, and other stakeholders in the wind and solar industries need to know in order to determine eligibility for critical federal tax credits.
Background on Federal Clean Energy Tax Credits
The Internal Revenue Code[1] allows certain business credits, including the production tax credit (“PTC”) and the investment tax credit (“ITC”) for renewable energy facilities. The PTC provides a tax credit for each kilowatt-hour of electricity generated by an eligible renewable energy source and sold to a third party. The ITC provides a dollar-for-dollar reduction in taxes owed to promote investment in renewable energy.
In August 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA”), which modified and extended the PTC and ITC for renewable energy facilities that began before the end of 2024. Beginning on January 1, 2025, the IRA replaced the traditional PTC with the Clean Electricity Production Tax Credit (“CEPTC”) and the traditional ITC with the Clean Electricity Investment Tax Credit (“CEITC”).
These tax credits implemented under the IRA are similar to the traditional ITC and PTC, but they are tech-neutral, meaning they are not specific to any particular technology. Rather, the credits apply to all zero-emission generation facilities. Specifically, the CEPTC is a per unit credit for electricity generated and sold by a qualified facility that has a greenhouse gas emission rate that does not exceed zero.[2] The CEITC is a tech-neutral investment tax credit for investment in a qualified clean energy facility that has a greenhouse gas emission rate that does not exceed zero.[3]
The IRA extended the CEPTC and CEITC through 2032 or when U.S. greenhouse gas emissions from electricity fall below 25% of the emissions in 2022. The OBBB, however, significantly accelerates the termination dates for these tax credits.
OBBB’s Impact on Clean Energy Credits
The OBBB has significant impacts on a number of federal tax incentives across industries. Particularly important for contractors and developers in the wind and solar industries, the OBBB terminates the CEPTC and CEITC for solar and wind facilities placed in service after December 31, 2027, except for projects on which construction began on or before July 4, 2026.
Over the last decade, the IRS has issued guidance regarding the “beginning of construction” on a project in order to qualify for renewable energy tax credits. The IRS has used two methods for taxpayers to establish that construction has begun on an energy facility: (1) the Physical Work Test; and (2) the Five Percent Safe Harbor.
At a high level, the Physical Work Test requires a taxpayer to begin physical work of a “significant nature” on the project. The test focuses on the nature of the work performed rather than the amount or the cost of the work. The Five Percent Safe Harbor, on the other hand, generally requires a taxpayer to pay or incur at least five percent of the total cost of the project. Under either method, the taxpayer must satisfy the Continuity Requirement, which requires the taxpayer to make continuous progress towards completion of the project once construction has begun.
On July 7, 2025 the White House issued an Executive Order titled “Ending Market Distorting Subsidies For Unreliable, Foreign Controlled Energy Sources”. The Executive Order states that it is the policy of the United States to “build upon and strengthen the repeal of, and modification to, wind, solar, and other ‘green’ energy tax credits in the One Big Beautiful Bill Act”. In furtherance of that stated policy, the Executive Order provides that within 45 days following the enactment of the OBBB,[4] the Secretary of Treasury shall take all actions he deems necessary and appropriate to strictly enforce the termination of the clean electricity production and investment tax credits for wind and solar facilities. Specifically, the Executive Order directs the Secretary of Treasury to issue new and revised guidance to ensure that policies concerning the “beginning of construction” are not circumvented, “including by preventing the artificial acceleration of manipulation of eligibility and by restricting the use of broad safe harbors unless a substantial portion of a subject facility has been built.”
Given the new requirements imposed by the OBBB, the renewable energy industry may see an increase in the construction of wind and solar projects in the next year in an effort to qualify for federal clean energy tax credits before they terminate. And, in the coming days, the Secretary of Treasury is expected to issue guidance that may materially change the requirements to establish the “beginning of construction” of solar and wind projects. As a result, it is critical for contractors and developers considering beginning construction of a wind or solar facility within the next year to be aware of the new guidance, as it may have a significant impact on whether their projects are eligible for federal tax credits.
Conclusion
The OBBB significantly accelerates the timeline for the termination of important federal tax credits for wind and solar projects. For parties considering construction of a wind or solar facility within the next year, it is critical to understand the new requirements and timelines to qualify for these tax credits. Contractors and developers that have questions regarding the new requirements under the OBBB or related guidance should contact their attorney to determine whether their projects are eligible for clean energy tax credits.
[1] U.S. Code Title 26.
[2] 26 U.S. Code § 45Y.
[3] 26 U.S. Code § 48E.
[4] As of the date of this briefing paper was written, the Secretary of Treasury has not yet issued such guidance.
Announcements
Congratulations to the eight attorneys from Fabyanske, Westra, Hart & Thomson, P.A. who have been named 2025 “Minnesota Super Lawyers”. The polling, researching, and selecting of “Super Lawyers” is designed to identify Minnesota lawyers who have attained a high degree of peer recognition and professional achievement. Only five percent of Minnesota attorneys receive this honor. FWHT’s 2025 “Minnesota Super Lawyers” include Mark Becker, Matt Collins, Hugh Brown, Julia Douglass, Rory Duggan, Kyle Hart, Jesse Orman, and Dean Thomson. Dean Thomson was also selected as a Top 100 “Super Lawyer”. For more information click here.
Congratulations to the Fabyanske, Westra, Hart & Thomson, P.A. attorneys who have been named Super Lawyer’s 2025 Minnesota “Rising Stars”. They are Colin Bruns, Elise Radaj, Erinn Valine and Leon Wells. “Rising Stars” are nominated by their peers and must be 40 years old or under, or have been practicing for 10 years or less. No more than 2.5 percent of the lawyers in the state are named to the list. For more information click here.
Dean Thomson was one of eight attorneys in Minnesota selected to be on the Forbes inaugural list of America’s Best-In-State Lawyers. This list recognizes top attorneys across all 50 states and U.S. jurisdictions. For more information click here.