WASHINGTON (LN) — A federal judge in the District of Columbia on June 6, 2026, vacated an Internal Revenue Service notice that redefined the “beginning of construction” standard for wind and solar tax credits, ruling the agency’s action was arbitrary and capricious under the Administrative Procedure Act.
The order resolves a dispute over whether projects must meet stricter physical work requirements to qualify for credits that are set to expire. The court granted summary judgment for five of the seven plaintiffs, including the Oregon Environmental Council, the Natural Resources Defense Council, Public Citizen, Woven Energy LLC, and the City and County of San Francisco.
The court dismissed two other plaintiffs, Hopi Utilities Corporation and the Maryland Office of People’s Counsel, from the action. The court also denied the IRS’s motion for summary judgment and granted in part the agency’s motion to dismiss.
The ruling centers on Internal Revenue Service Notice 2025-42, which affected the availability of tax credits for new clean energy projects. Under current law, those credits are available only for projects that begin construction on or before July 4, 2026, or are completed and placed in service by December 31, 2027.
The court declared the notice arbitrary and capricious in violation of 5 U.S.C. § 706(2)(A). The order vacates the notice in full and remands the matter to the IRS for further administrative action consistent with the accompanying memorandum opinion.
The court issued the decision on June 6, 2026, noting the time sensitivity of the matter. The order is final and appealable.