A New Safe Harbor for Farm Wind and Solar Projects

The OBBBA has a safe harbor for new farm wind or solar projects and the IRS has provided new guidance

Photo by Vadym Alyekseyenko on Unsplash

The One Big Beautiful Bill Act is terminating the wind and solar tax credits for new projects that are placed in service after December 31, 2027. However, there is a safe harbor for projects that are initiated before July 5, 2026. For these projects, they will likely have a four-year time period to get the project done and placed in service to qualify for the tax credit.

Under previous guidance, the project simply needed to incur 5% of the overall cost of the project to qualify for old safe harbors. However, for this safe harbor, the IRS just issued notice 2025-42 which will require a lot more cost and effort.

For purposes of the OBBBA’s beginning of construction deadline (July 5, 2026), a taxpayer must now satisfy the Physical Work Test as the sole method for establishing that construction has begun, except for specific low output solar facilities (which most farmers should qualify for).