Notice 2025-42 (the Notice) was issued in August of last year, providing updated guidance to determine the beginning of construction (BOC) date for clean energy credits under Sections 45Y and 48E. Beginning July 4, 2026, the Notice essentially removed (with some exceptions) the “Five Percent Safe Harbor” as an option for establishing BOC. However, Oregon Environmental Council v. IRS challenged the changes implemented by the Notice, and in the memorandum opinion issued June 6, 2026, the judge “vacate[d] the Notice in full and remand[ed] the matter to the agency for further consideration.” In other words, the Notice was overturned and the Five Percent Safe Harbor is back.
The memorandum addresses the question of whether this holding should be applicable only to the plaintiffs of the case or to all taxpayers more broadly. Given precedent in the Circuit, the judge applied “universal vacatur”, meaning it would apply to more than just the plaintiffs in the case. He stated that “only universal vacatur would afford complete relief to the injured parties with standing who are before the Court and a narrower remedy risks causing confusion or other harms.”
What is not yet known is the IRS’s reaction to the finding, and whether there will be an appeal. The challenge is the timing. Given changes from the One Big Beautiful Bill Act (OBBBA), unless solar and wind projects have a BOC date prior to July 5, 2026, they must be placed in service by the end of 2027 to claim the § 45Y or §48E credit. Therefore, the Notice puts further pressure on clean energy developers and investors to begin physical work of a significant nature prior to the July 5 date. With the ruling, there may be more flexibility and potential for a longer project timeline (while also claiming the applicable credits). Many developers have adjusted construction plans to account for the Notice, but this decision may warrant a reexamination of projects, their timelines, and credit models.