WASHINGTON (LN) — A federal court on June 6, 2026, vacated an Internal Revenue Service notice that redefined the "beginning of construction" standard for clean energy tax credits, declaring the agency’s action arbitrary and capricious.
U.S. District Judge Colleen Kollar-Kotelly granted summary judgment for five of the seven plaintiffs in Oregon Environmental Council v. Internal Revenue Service, ruling that IRS Notice 2025-42 violated the Administrative Procedure Act. The court also dismissed two other plaintiffs, Hopi Utilities Corporation and Maryland Office of People’s Counsel, from the action.
The ruling affects the availability of two significant tax credits for wind and solar energy projects under 26 U.S.C. §§ 45Y and 48E. Under current law, projects must either begin construction on or before July 4, 2026, or be completed and placed in service on or before December 31, 2027, to qualify.
The central dispute concerned what taxpayers must do by the July 4 deadline to satisfy the "beginning of construction" requirement. The court held that the IRS's new interpretation lacked sufficient justification.
The order denied the defendants' motion for summary judgment and granted the plaintiffs' motion in favor of Oregon Environmental Council, Natural Resources Defense Council, Inc., Public Citizen, Woven Energy LLC, and the City and County of San Francisco.
The court vacated the notice in full and remanded the matter to the IRS for further administrative action consistent with the court's opinion.
The court issued the decision on June 6, 2026, noting the time sensitivity of the matter. The order is final and appealable.