WASHINGTON (LN) — U.S. District Judge Colleen Kollar-Kotelly on Saturday vacated Internal Revenue Service Notice 2025-42, which redefined the “beginning of construction” standard for wind and solar tax credits. The court ruled the agency’s action was arbitrary and capricious under the Administrative Procedure Act.
The order, issued in Oregon Environmental Council v. Internal Revenue Service, grants summary judgment to 5 of the 7 plaintiffs: 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 2 other plaintiffs, Hopi Utilities Corporation and the Maryland Office of People’s Counsel, from the action.
The ruling resolves a dispute over whether projects must meet stricter physical work requirements by July 4, 2026, to qualify for tax credits under Sections 45Y and 48E of the Internal Revenue Code. The credits are available only for projects that begin construction by that date or are placed in service by December 31, 2027.
The court declared IRS Notice 2025-42 arbitrary and capricious in violation of 5 U.S.C. § 706(2)(A). The court remanded the matter to the IRS for further administrative action consistent with the order and an accompanying memorandum opinion.
The court issued the decision on June 6, noting the time sensitivity of the matter. The order is final and appealable.