TLDR. The Trump Administration is calling on the Treasury Department to restrict the use of a longstanding “beginning of construction” safe harbor, which allows solar and wind developers to “lock in” the use of existing, less restrictive tax credit rules by beginning construction of their facilities by July 4, 2026. But Treasury faces a major hurdle: Trump’s signature legislation — the One Big Beautiful Bill Act — codified existing beginning-of-construction guidance. This hurdle signals some hope that Treasury won’t eviscerate existing guidance and will permit developers to continue using the safe harbor.
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Although the One Big Beautiful Bill Act advanced the sunset date of the Section 48E tax credit for solar and wind projects (they must now be placed in service before 2028), it created an exception for projects that begin construction by July 4, 2026. The meaning of “beginning of construction” (BOC) is well understood in the industry, given the longstanding, consistent treatment of this term in Treasury sub-regulatory guidance. See, e.g. IRS Notices 2013-29 and 2018-59. That guidance provides that taxpayers begin construction (and can thereby take advantage of beginning-of-construction safe harbors) by either (i) beginning physical work of a significant nature or (ii) paying/incurring 5% or more of the total project costs. So, as of July 4, 2025, when the OBBBA was enacted, solar and wind developers understood exactly what they needed to do to invoke the beginning-of-construction safe harbor.
But then President Trump threw a curveball. On July 7, he issued an executive order instructing Treasury to redefine “beginning of construction” so as to limit the use of the BOC safe harbor to only those projects for which “a substantial portion . . . has been built.” Treasury is expected to issue this guidance by August 18. This has created some understandable anxiety among developers, tax equity partners, insurers, and other stakeholders. While it’s difficult to predict where Treasury will ultimately go with that directive, it’s worth flagging one pesky, legal hurdle to Treasury completely abandoning the BOC definition in its existing guidance. And that is that the OBBBA actually codified that guidance in other parts of the legislation.
In new provisions that restrict the use of the tax credit by certain foreign-owned or -controlled taxpayers (i.e., “specified foreign entities” and “foreign-influenced entities”) or by taxpayers whose facilities incorporate too much foreign componentry (i.e., they receive “material assistance from prohibited foreign entities”), Section 48E refers taxpayers to paragraphs 51 and 52 of IRC Section 7701(a). These two paragraphs, which were added by the OBBBA, explain when taxpayers or their facilities have reached levels of foreign influence that render them ineligible for the Section 48E tax credit. The “material assistance” thresholds in Section 7701(a)(52) increase from year to year based on when a project begins construction. Helpfully, that paragraph defines “beginning of construction” by incorporating Treasury’s existing guidance from Notice 2013-29 and Notice 2018-59. Voila, sub-regulatory guidance graduates to legislation. The physical work test/five-percent test becomes enshrined in statute!
Does this mean that the BOC definition in Section 7701 applies more broadly to other sections of the Internal Revenue Code — including Section 48E? That’s certainly an intuitive result. Indeed, one principal canon of statutory interpretation, known as the presumption of consistent usage, presumes that phrases bear the same meaning throughout any given statute. This would suggest that “beginning of construction” has the same definition in Section 48E as it does in Section 7701, and that definition cannot be altered by administrative guidance.
But the application of this presumption here is not as clear-cut. Paragraphs 51 and 52 seem to cabin the use of this “new” BOC definition to their own provisions. See, e.g. Section 7701(a)(51)(J) (BOC definition from Treasury guidance to be used “[f]or purposes of applying any provision under this paragraph”). But giving “beginning of construction” a limited-purpose definition (and creating separate definitions for the phrase in different sections of the Internal Revenue Code) creates logical inconsistencies that Treasury should want to avoid. The problem is most glaring where both sections of the IRC require application of the phrase at the same time. In Section 48E(b)(6), for instance — a subparagraph introduced by the OBBBA — taxpayers are instructed to apply the new “material assistance” rules of Section 7701(a)(52), but only if the taxpayer’s facility begins construction after December 31, 2025. So there’s a preliminary BOC determination in Section 48E. If that BOC year is after 2025, the taxpayer must then determine the correct material assistance threshold in Section 7701(a)(52) based on the year the project begins construction. A second BOC determination. Surely, it’s the same year for both determinations. It can’t possibly be that a taxpayer applies one definition of “beginning of construction” to determine whether they need to worry about “material assistance” at all and then another, different definition to determine how much “material assistance” they can get away with. A taxpayer looking at the same words (“begin construction”) in the same Internal Revenue Code (Title 26) should be able to define them the same way, especially when they are part of two sections of the code that are cross-referenced.
If Treasury wants to avoid an Internal Revenue Code that conflicts with itself, avoid violating longstanding rules of statutory construction, and avoid inevitable legal challenges from solar and wind developers challenging a new, unfounded definition of “beginning of construction”; then it should preserve the BOC framework it laid out in IRS Notices 2013-29 and 2018-59.
Stay tuned.