SECTION 2. BACKGROUND

.01 Overview of pre-OBBBA §§ 45Y and 48E .

Sections 45Y and 48E were added to the Code by §§ 13701(a) and 13702(a), respectively, of Public Law 117-169, 136 Stat. 1818, 1982 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022. The § 45Y credit is determined with respect to electricity produced by a taxpayer at a “qualified facility” and either sold by the taxpayer to an unrelated party during the taxable year or, if the facility is equipped with a metering device which is owned or operated by an unrelated person, sold, consumed, or stored by the taxpayer during the taxable year. The § 48E credit is determined with respect to a taxpayer’s “qualified investment” in a qualified facility. A taxpayer’s qualified investment in a qualified facility is determined with respect to the taxpayer’s basis in “qualified property” placed in service by the taxpayer that is part of the qualified facility as well as expenditures paid or incurred for certain qualified interconnection property.

Sections 45Y(b)(1)(A) and 48E(b)(3) (A) define a “qualified facility” for purposes of §§ 45Y and 48E, respectively, as a facility which is used for the generation of electricity, which is placed in service after December 31, 2024, and for which the greenhouse gas emissions rate (for § 45Y) or anticipated greenhouse gas emissions rate (for § 48E) is not greater than zero. The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) published final regulations under §§ 45Y and 48E on January 15, 2025 (90 FR 4006). Sections 1.45Y-2 and 1.48E-2 clarify the definition of a “qualified facility” for purposes of §§ 45Y and 48E, respectively.

Section 45Y(b)(2)(C)(i) requires that the Secretary of the Treasury or the Secretary’s delegate annually publish a table that sets forth the greenhouse gas emissions

rates for types or categories of facilities, which a taxpayer must use for purposes of § 45Y. The Treasury Department and the IRS published the initial annual table required by § 45Y(b)(2)(C)(i) in Revenue Procedure 2025-14, 2025-7 I.R.B. 770. That table lists both wind facilities and solar facilities as having a greenhouse gas emissions rate of not greater than zero.

As noted in section 2.02 of Notice 2022-61, 87 FR 73580, 2022-52 I.R.B. 560, the IRS has issued several notices, collectively referred to in this notice as the “IRS Notices,” ² which provide that taxpayers may establish the beginning of construction using the “Physical Work Test” or the “Five Percent Safe Harbor,” and may satisfy either the “Continuity Requirement” or the “Continuity Safe Harbor,” with respect to the credits determined under §§ 45, 45Q, and 48.

Section 5 of Notice 2022-61 provides guidance, in part, to determine when construction begins for purposes of the credit determined under §§ 45Y and 48E. Section 5 of Notice 2022-61 states that principles similar to those under Notice 2013-29 regarding the Physical Work Test and Five Percent Safe Harbor apply, and taxpayers satisfying either test will be considered to have begun construction. Section 5 of Notice 2022-61 additionally provides, in part, that principles similar to those provided in the IRS Notices regarding the Continuity Requirement and the Continuity Safe Harbor apply for purposes of §§ 45Y and 48E, and that taxpayers may rely on the Continuity Safe Harbor provided the facility is placed in service no more than four calendar years after the calendar year during which construction began.

.02 Overview of OBBBA Changes to §§ 45Y and 48E .

Sections 70512(a) and 70513(a) of the OBBBA added new §§ 45Y(d)(4) and 48E(e)(4), respectively, to the Code. These new Code provisions terminate the § 45Y credit and the § 48E credit, respec

1 Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

2 See Notice 2013-29, 2013-20 I.R.B. 1085; clarified by Notice 2013-60, 2013-44 I.R.B. 431; clarified and modified by Notice 2014-46, 2014-36 I.R.B. 520; updated by Notice 2015-25, 2015-13 I.R.B. 814; clarified and modified by Notice 2016-31, 2016-23 I.R.B. 1025; updated, clarified, and modified by Notice 2017-04, 2017-4 I.R.B. 541; Notice 2018-59, 2018-28 I.R.B. 196; modified by Notice 2019-43, 2019-31 I.R.B. 487; modified by Notice 2020-41, 2020-25 I.R.B. 954 ; clarified and modified by Notice 2021-5, 2021-3 I.R.B. 479; clarified and modified by Notice 2021-41, 2021-29 I.R.B. 17; Notice 2020-12, 2020-11 I.R.B. 495.

Bulletin No. 2025–36 351 September 2, 2025

tively, for applicable wind and solar facilities placed in service after December 31, 2027. For purposes of this notice, the term “applicable wind facility” means an applicable facility as provided in §§ 45Y(d)(4) (B)(i) and 48E(e)(4)(B)(i) (except as provided in § 48E(e)(4)(C) relating to energy storage technology) and “applicable solar facility” means an applicable facility as provided in §§ 45Y(d)(4)(B)(ii) and 48E(e)(4)(B)(ii) (except as provided in § 48E(e)(4)(C)). Sections 70512(l)(4) and 70513(g)(5) of the OBBBA provide that the amendments made by §§ 70512(a) and 70513(a) of the OBBBA, respectively, apply to facilities the construction of which begins after the date which is 12 months after the date of enactment of the OBBBA (that is, July 4, 2026).

.03 Executive Order 14315 . Section 3(a) of Executive Order 14315 directs the Secretary of the Treasury, within 45 days following enactment of the OBBBA, to take action he deems necessary and appropriate to strictly enforce the termination provisions with respect to the § 45Y credit and the § 48E credit for wind and solar facilities. Such action includes issuing new and revised guidance for applicable wind and solar facilities to ensure that policies concerning “beginning of construction” are not circumvented, including guidance to prevent the artificial acceleration or manipulation of eligibility and to restrict the use of broad safe harbors unless a substantial portion of an applicable wind or solar facility has been built. ³

The Treasury Department and the IRS have determined that the guidance contained in this notice is necessary and appropriate to properly enforce the credit termination date for applicable wind and solar facilities. Congress provided a beginning of construction deadline after which the new credit termination date for applicable wind and solar facilities applies. This notice provides beginning of construction guidance to prevent taxpayers from circumventing the statutory

credit termination date, prevent the artificial manipulation of eligibility for the § 45Y credit and § 48E credit for applicable wind and solar facilities, and ensure that a substantial portion of any applicable wind or solar facility not subject to the credit termination date is built by the beginning of construction deadline. Accordingly, except as provided in section 6 of this notice, the Five Percent Safe Harbor provided under the IRS notices is not available for purposes of determining whether an applicable wind or solar facility has met the beginning of construction deadline and, thus, is not subject to the credit termination date.