On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. With it came a hard deadline that is reshaping project timelines across the clean energy industry: wind and solar projects that don’t begin construction by July 4, 2026, lose years of development runway.
That deadline is now days away.
And it’s not the only hurdle. Starting this month, new Foreign Entity of Concern restrictions apply to every clean energy project that breaks ground in 2026. If your supply chain touches China, you now face specific thresholds for domestic content or risk losing your tax credits entirely. Not a bonus reduction. The whole credit.
For operators who’ve been waiting for clarity, the message is clear: the window to act is shrinking fast.
Update (June 2026): Two developments have changed this picture since publication. First, on June 6, 2026, a federal district court vacated IRS Notice 2025-42, the guidance that had restricted the 5% Safe Harbor for larger wind and solar projects. As a result, both the 5% Safe Harbor and the Physical Work Test are again available methods of establishing beginning of construction, regardless of project size, though the government may appeal. Second, Treasury issued its interim Foreign Entity of Concern guidance, Notice 2026-15, in February 2026. The July 4, 2026 begin-construction deadline itself is unchanged and is now days away. The sections below have been updated to reflect the restored Safe Harbor.
What Did the One Big Beautiful Bill Act Change for Clean Energy?
Why Does July 4, 2026 Matter for Wind and Solar Construction?
The One Big Beautiful Bill Act fundamentally altered the IRA’s technology-neutral tax credits for wind and solar. Here’s the new structure:
Under IRC Section 45Y (production tax credit) and IRC Section 48E (investment tax credit), wind and solar facilities now face a two-track timeline:
Path A (Safe Harbor Route): Begin construction before July 4, 2026, and you retain the traditional four-year continuity safe harbor. A project that starts construction in Q1 2026 has until early 2030 to come online and still claim the credits.
Path B (Deadline Route): Begin construction after July 4, 2026, and you must place the facility in service by December 31, 2027. That’s an 18-month window at best. For most utility-scale projects, that’s not enough time.
The practical effect: July 4, 2026 is a de facto termination date for wind and solar credits unless your project is already far enough along to break ground in the next five months.
How Are IRS Safe Harbor Rules Changing for Large Projects?
It gets more complicated. A July 7, 2025 Executive Order directed Treasury to restrict “broad safe harbors unless a substantial portion of a subject facility has been built.” Treasury responded with IRS Notice 2025-42, issued in August 2025.
That Notice proposed that projects over 1.5 MW AC could no longer rely on the 5% Safe Harbor Test and would instead need to satisfy the Physical Work Test. On June 6, 2026, however, a federal district court vacated Notice 2025-42, holding that the IRS had not adequately justified eliminating the 5% Safe Harbor. As a result, the 5% Safe Harbor is again available for wind and solar projects of all sizes, alongside the Physical Work Test. The government may appeal or seek a stay, so developers should confirm the current status with tax counsel before relying on either method.
The two methods work differently. The 5% Safe Harbor is satisfied by incurring 5% of total project costs. The Physical Work Test requires actual construction activity on the project site, such as ground-breaking, foundation installation, or on-site assembly of major components. Preliminary activities like site surveying, permitting, or road building may not qualify.
For developers planning beginning-of-construction strategy, the restored Safe Harbor preserves flexibility that Notice 2025-42 would have removed.
How Do Foreign Entity of Concern Restrictions Affect Clean Energy Projects?
As if the July 4 deadline weren’t enough, 2026 marks the first year that Foreign Entity of Concern restrictions actually apply to clean energy tax credits.
Which Supply Chain Thresholds Apply to Your Project Type?
Under the OBBBA amendments to IRC Sections 45Y and 48E, projects that begin construction in 2026 or later cannot receive “material assistance” from a prohibited foreign entity and still claim credits. The covered nations are China, Russia, North Korea, and Iran.
“Material assistance” is defined by thresholds that vary by project type:
Power Projects (Wind, Solar, Geothermal): 40% of manufactured products must not be sourced from FEOCs, rising to 60% by 2030.
Storage Projects (Batteries): 55% threshold in 2026, rising to 75% by 2030.
Inverters: 50% in 2026, rising to 70% by 2030.
The math is straightforward. The compliance isn’t. If you’re sourcing solar panels from a manufacturer with Chinese parent company ownership, or batteries with cells produced in FEOC facilities, you need to verify your supply chain now.
What Was the December 31, 2025 FEOC Grace Period?
Here’s what many developers missed: projects that were “under construction for tax purposes” by December 31, 2025, are exempt from FEOC material assistance requirements.
That deadline passed two weeks ago.
If your project didn’t satisfy the Physical Work Test or 5% Safe Harbor by year-end, you’re now subject to FEOC compliance. There’s no retroactive fix.
Has Treasury Issued Final FEOC Guidance Yet?
The clean energy industry waited on detailed FEOC guidance from Treasury after the OBBBA passed. Treasury issued interim guidance, Notice 2026-15, in February 2026. It took a measured approach to the material assistance rules rather than a punitive one, though several questions remain open pending further rulemaking.
That’s encouraging. But you can’t build a project timeline around hoped-for guidance. Until the rules are final, the conservative approach is to assume the statutory thresholds apply as written.
Does Battery Storage Face the Same July 4 Deadline as Wind and Solar?
Not every clean energy technology faces the same deadline pressure. Battery storage projects operate under a different, more favorable timeline.
How Long Does Battery Storage Remain Eligible for Tax Credits?
Under the original IRA structure, storage projects remain eligible for 45Y and 48E credits through 2033, with a gradual phase-down after that. The OBBBA didn’t accelerate this timeline.
The catch: the 45X manufacturing credit for battery makers phases out one year earlier than originally planned. Domestic battery manufacturing loses its incentive boost in 2032 instead of 2033.
How Can Storage-First Structuring Preserve Project Economics?
This differential treatment creates an interesting play. A wind or solar project that pairs with battery storage may preserve project economics even as the generation credits expire. The storage component carries its own tax credit eligibility.
We’re already seeing developers restructure projects to lead with storage rather than generation. The interconnection queue at PJM reflects this shift, with storage-only or storage-first projects increasingly common.
If you’re developing a hybrid project, the sequencing matters for tax purposes. Talk to your tax advisor about structuring the storage component as a separate placed-in-service event.
What Questions Will Boards and Investors Ask About OBBBA Exposure?
If you’re presenting a clean energy project to your board or investors in Q1 2026, expect these questions:
“What’s our exposure to the July 4 deadline?” Be prepared to show a detailed construction timeline. Can you demonstrate physical work on-site before July 4? If not, what’s Plan B?
“How does FEOC affect our supply chain?” Your board will want to see a supplier audit. Which components are FEOC-compliant? Which need to be replaced? What’s the cost and timing of switching suppliers?
“What happens if we miss the deadline?” Have a clear answer. Does the project still pencil without tax credits? If not, what’s the wind-down plan?
“What are competitors doing?” This is the question boards really want answered. The answer: they’re racing to break ground before July 4. If you’re not, you’re falling behind.
How Is OBBBA Compliance Changing Clean Energy Transaction Documents?
The compliance crunch is already hitting transaction documents. If you’re buying, selling, or financing a clean energy project in 2026, watch for these changes:
Safe Harbor Reps: Sellers will be asked to represent that the project satisfies the Physical Work Test as of a specific date, with indemnification if the IRS disagrees.
FEOC Compliance Covenants: Financing agreements increasingly require ongoing certification that no FEOC-sourced components enter the project. Breach triggers an event of default.
MAC Definitions: The OBBBA itself may qualify as a Material Adverse Change event under contracts signed before July 2025. Review your definitions carefully.
Credit Transferability Provisions: If you’re selling tax credits, buyers will conduct enhanced due diligence on FEOC compliance. Expect more invasive supplier verification requests.
For projects in negotiation now, these provisions aren’t nice-to-haves. They’re table stakes.
Practical Takeaways
Actions your team can assign this week:
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Audit your construction timeline against the July 4, 2026 deadline. Identify every project that hasn’t broken ground and assess whether it can satisfy the 5% Safe Harbor or the Physical Work Test before the July 4, 2026 deadline.
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Engage your EPC contractor on accelerated schedules. If you need to move up site work to satisfy the Physical Work Test, start those conversations now. Not March.
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Conduct a full supply chain audit for FEOC compliance. Identify every component manufacturer, trace ownership structures, and flag any FEOC exposure. Your equipment suppliers should be providing certifications.
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Review existing contracts for MAC clauses and FEOC provisions. Understand your rights and obligations under current financing and offtake agreements.
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Brief your board on July 4 exposure. This isn’t something to surprise them with in Q2. Get it on the January or February agenda.
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Evaluate storage-first structures for hybrid projects. If the generation component faces deadline risk, consider whether leading with storage preserves project value.
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Monitor Treasury guidance on FEOC safe harbors. Set up alerts for Federal Register publications. The rules could get easier, but plan for them to stay as is.
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Document everything. If the IRS audits your safe harbor claim in 2029, you’ll need contemporaneous records of when physical work occurred. Photos, contractor certifications, and dated correspondence matter.
What We’re Watching
January 14, 2026: Virginia General Assembly session opens. Battery storage mandate bills return after previous vetoes. If they pass, Virginia becomes a more attractive storage market.
January 19, 2026: PJM must submit its co-location report to FERC, addressing reliability of co-located large loads such as data centers paired with on-site generation, and including proposals to expedite interconnection of shovel-ready generation. This could affect interconnection timelines for wind and solar seeking co-location in the PJM footprint.
Q1 2026: Treasury expected to release detailed FEOC guidance. This will clarify the most uncertain aspects of material assistance thresholds and enforcement posture.
July 4, 2026: The deadline. Projects that haven’t started physical work by this date face the compressed 2027 placed-in-service requirement.
The clean energy industry has operated under policy uncertainty for years. What’s different now is that the uncertainty has a deadline.
July 4, 2026, is coming whether your project is ready or not.
The developers who move fastest will lock in years of tax credit eligibility. The ones who wait for perfect clarity will find themselves racing against an impossible construction timeline. Or walking away from projects entirely.
Five months isn’t a lot of runway. Use it wisely.
Consilium Law advises clean energy companies on tax credit structuring, FEOC compliance, and project finance. If you’re assessing your July 4 exposure, reach out.