WASHINGTON (LN) — A federal court on Saturday vacated an Internal Revenue Service notice that sought to restrict eligibility for wind and solar tax credits, ruling the agency’s action was arbitrary and capricious under the Administrative Procedure Act.
U.S. District Judge Colleen Kollar-Kotelly granted summary judgment for five plaintiffs in the suit, which included environmental groups and energy developers. The court declared IRS Notice 2025-42 arbitrary and capricious and remanded the matter to the agency for further action.
The ruling addresses a dispute over what constitutes the "beginning of construction" for projects seeking to qualify for tax credits that expire for new projects after July 4, 2026. The credits, authorized under 26 U.S.C. §§ 45Y and 48E, are available only to projects that begin construction by that date or are placed in service by December 31, 2027.
The court dismissed two plaintiffs, Hopi Utilities Corporation and the Maryland Office of People’s Counsel, from the action. It denied the IRS’s motion for summary judgment and granted in part the agency’s motion to dismiss.
The five prevailing plaintiffs are the Oregon Environmental Council, the Natural Resources Defense Council, Public Citizen, Woven Energy LLC, and the City and County of San Francisco.
The court issued the order on June 6, noting the time sensitivity of the matter. The court stated it was issuing the decision immediately rather than waiting until the next business day.
The order is final and appealable.