Understanding Beginning of Construction Rules for Wind & Solar Projects

Defining the beginning of the construction date for a renewable energy project has historically been a thorny task for developers with respect to tax credits qualification. A project’s beginning of construction (BoC) date is widely referenced in the statutes and related Treasury guidance governing clean energy tax credits. Notably, the BoC date determines: 

• Eligibility of the project for certain tax credits/bonus credits 

• Exemption from prevailing wage and apprenticeship requirements 

• Exemption from PFE/FEOC restrictions 
  

Historically, the two ways to establish BoC are by starting physical work of a significant nature, or by proving spend-to-date exceeds 5% of the total project costs (the “Five Percent Safe Harbor”).  

Physical work of a significant nature 

A taxpayer can establish BoC by starting physical work of a significant nature (within the meaning of section 4 of Notice 2013-29) and thereafter maintaining a continuous program of construction (“Continuous Construction”). Physical work may occur on-site or off-site, performed by either the taxpayer or by another party under a binding written contract. On-site physical work does not include preliminary activities such as planning and design, obtaining permits and licenses, or performing surveys, studies, test drilling, site clearing, or excavation for the purpose of recontouring land (as distinguished from excavation for footings and foundations).

For a wind facility, some examples of on-site physical work include the beginning of the excavation for the foundation, the setting of anchor bolts into the ground, or the pouring of the concrete pads of the foundation. For off-site physical work, the manufacture of components must be done pursuant to a binding written contract, with such components not held in a manufacturer’s inventory. 

One of the most common ways to satisfy physical work of a significant nature through off-site means is through physical work on a custom-designed transformer that adjusts the voltage of electricity generated by a project for purposes of transmission and distribution. 

Five percent safe harbor 

Alternatively, a taxpayer can establish BoC through the Five Percent Safe Harbor by paying or incurring (within the meaning of §1.461-1(a)(1) and (2)) five percent or more of the total cost of the facility and thereafter making continuous efforts towards completion of the facility (“Continuous Efforts”). Only costs properly included in the depreciable basis of the facility are taken into account to determine whether the Five Percent Safe Harbor has been met; the total cost of the facility does not include the cost of land or any property not integral to the facility. 

Continuity safe harbor 

Given that both physical work of a significant nature and the Five Percent Safe Harbor require continuous progress toward completion once construction has begun via either Continuous Construction or Continuous Efforts (collectively, the “Continuity Requirement”), the IRS also provides a safe harbor (the “Continuity Safe Harbor”) pursuant to which the Continuity Requirement is deemed to be satisfied if a taxpayer places a project in service by the end of a calendar year that is no more than four calendar years after the calendar year during which construction began. For example, a project that begins construction in early 2026 will have until the end of 2030 to be placed in service. Notice 2021-41 extended the four-year window to six years for projects where construction began in 2016, 2017, 2018, or 2019, and to five years for projects where construction began in 2020. 

Changes to BoC for solar and wind projects under §45Y and §48E 

Under the OBBBA, solar and wind projects are subject to an early phasedown in tax credits; projects seeking §45Y or §48E credits must be placed in service before January 1, 2028, unless the projects started construction before July 5, 2026. As a result, solar and wind developers have been racing to establish BoC in order to secure additional time to complete projects. In connection with the OBBBA, President Trump issued Executive Order 14315, directing the Treasury to issue new and revised beginning of construction guidance within 45 days of the order. On August 15, 2025, the Treasury updated guidance (via Notice 2025-42) for purposes of determining whether a wind or solar project has started construction under §45Y or §48E. 

Under Notice 2025-42, solar projects with a maximum net output of greater than 1.5 megawatts and all wind projects must perform physical work of a significant nature to establish the beginning of construction. These projects can no longer utilize the Five Percent Safe Harbor and must also maintain a continuous program of construction, which can be satisfied through the existing Continuity Safe Harbor if the project is placed in service by the end of a calendar year that is no more than four calendar years after the calendar year during which construction began. 

One notable language change in the physical work requirement is that under the previous Notice 2013-29, a taxpayer could establish the beginning of construction by “starting” physical work of a significant nature, whereas the new Notice 2025-42 requires that the work be “performed.”  

Other than re-stating that “there is no fixed minimum amount of work or monetary or percentage threshold required,” Treasury did not draw clear lines on what is required to meet the standard of performing physical work of a significant nature. Financing and insurance markets will need to determine where they are comfortable drawing the lines. 

Certain projects can continue to use the old BoC rules that were in place before Notice 2025-42, and therefore can continue to use the Five Percent Safe Harbor: 

• Projects that can establish BoC (using the old BoC rules) before September 2, 2025. 

• Solar projects with a maximum net output of 1.5 MW or less. This capacity is generally measured at each inverter, though facilities will need to aggregate their output if they (i) are owned by the same taxpayer, (ii) are placed in service within the same year, and (iii) use the same point of interconnection. 

The BoC guidance in Notice 2025-42 only pertains to tax credit qualification for wind and solar projects under §45Y and §48E; PFE/FEOC guidance (which is expected to include BoC provisions) is still being drafted by Treasury. 

Guidance 

Over a series of notices beginning in 2013, the IRS has established the standards for determining the date that a project began construction.  

These notices remain the applicable standards for any references to BoC as it relates to the tax credits and associated guidance. 

Frequently Asked Questions about the Beginning of Construction

1. How is “Beginning of Construction” defined across different IRA tax credit sections, and what documentation substantiates compliance?
   
   1. Beginning of Construction (“BoC”) is established either by performing physical work of a significant nature or by meeting the Five Percent Safe Harbor (incurring ≥5% of total facility costs). The BoC definition is consistent across IRA tax credit types. Documentation to demonstrate BoC may include construction logs, invoices, contracts, images of site construction, or satellite imagery proving physical work.
2. How do delays, redesigns, or partial project transfers affect the original BOC date and credit eligibility?
   
   1. The original BoC date generally remains valid if the taxpayer maintains Continuous Construction or Continuous Efforts, or qualifies under the Continuity Safe Harbor (usually 4 years to place in service). Transfers or redesigns may risk eligibility if they disrupt continuity or materially change project scope.
3. What strategies can developers use to establish BoC early, in order to lock in eligibility before regulatory or incentive changes?
   
   1. Developers can begin physical work (e.g., foundation excavation, transformer manufacturing) or incur ≥5% of total costs under a binding written contract before a cutoff date. These actions “lock in” eligibility under current credit rules and rates.
4. How do off-site manufacturing or preliminary activities (like grading or engineering) factor into BoC determinations?
   
   1. Offsite manufacturing counts towards the establishment of BoC only if performed under a binding contract for project-specific components that are not held in inventory. Preliminary activities (e.g., planning, grading, surveys, permit work) do not qualify as Begining of Construction.
5. How should developers coordinate BoC documentation across multiple EPCs or component suppliers for audit readiness?
   
   1. Developers should maintain centralized records of binding contracts, invoices, manufacturing milestones, and delivery logs from all EPCs and suppliers. Consistent date tracking and certification statements ensure defensible audit evidence of BoC and continuity.
6. How does BoC interact with prevailing wage/apprenticeship and domestic content rules for determining applicable credit multipliers?
   
   1. The BoC date determines whether a project is subject to or exempt from enhanced credit requirements under the IRA.
      
      1. Prevailing Wage & Apprenticeship (PWA):
         
         1. Projects that began construction before January 29, 2023, are exempt from PWA and automatically receive the 5X multiplier on the base credit rate. Projects starting on or after that date must meet PWA labor and apprenticeship rules to qualify for the higher rate.
      2. Domestic Content & PFE/FEOC:
7. The BoC date “locks in” which Treasury guidance applies to domestic content thresholds (preliminary or final guidance) and could govern future PFE/FEOC sourcing restrictions once guidance is provided by Treasury in 2026.In short, BoC is the regulatory timestamp that fixes which labor and sourcing rules apply to a project’s credit eligibility and credit rate multiplier.