Federal Judge Strikes Down IRS Tightening of Renewable Energy Tax Credit Rules, Sends Agency Back for Further Review
A U.S. District Court ruling on Saturday overturned an August 2025 IRS rule that removed the Five Percent Safe Harbor standard for wind and solar projects seeking federal tax credits.
usatoday.comA federal judge struck down an Internal Revenue Service rule that made it harder for wind and solar projects to qualify for federal tax credits. S. District Court for the District of Columbia issued the ruling on Saturday.
She said the IRS failed to adequately explain why it eliminated a long-standing standard used to determine when a clean energy project had begun construction. The court decision sends the IRS guidance back for further consideration. The rule, issued in August 2025, removed a provision that allowed developers to qualify for tax credits by spending at least 5% of a project's total cost before the credits expired.
Developers had relied on the Five Percent Safe Harbor standard for more than a decade. According to the court's decision, the IRS change was a "significant change" from the agency's long-standing practice. " The lawsuit was filed by a coalition that included the Oregon Environmental Council.
