A federal judge has revoked an exclusion that prevented solar and wind projects of a certain scale from receiving tax credits through long-established means for qualification.
Judge Colleen Kollar-Kotelly with the U.S. District Court for the District of Columbia has vacated Notice 2025-42, which prevented solar and wind projects larger than 1.5 MW from qualifying for the waning 48E investment and 45Y production tax credits through safe harboring by incurring 5% of a project’s total cost. Solar and wind projects above that scale were limited to completing a “physical work test” to qualify for the subsidies. Now, they can qualify through the 5% safe harbor — with less than a month until its deadline on July 4.
Several groups, including the Oregon Environmental Council, Natural Resources Defense Council (NRDC) and Public Citizen, filed a lawsuit against the IRS, alleging that the notice — which was published shortly after the One Big Beautiful Bill Act was enacted — had caused material harm against its membership and utility customers.
“The Trump administration’s illogical and illegal war on clean energy is making it harder to get the electricity the grid needs now more than ever, raising costs for cash-strapped utility customers,” said Grace Henley, a tax attorney at NRDC. “This decision demonstrates, yet again, that its attacks are unlawful. The administration should take the hint and get to work on an energy policy that actually serves the American people.”
Much of their argument centered on the rising cost of electricity and increased pollution production from relying on existing fossil fuel-powered plants. The court agreed that by limiting these tax credits’ availability, it slowed the development of new electricity resources at scale, like wind and solar projects. It also noted that this IRS notice only affected wind and solar.
“Finally, the notice doesn’t explain why the agency chose to treat wind and large-scale solar projects differently from other kinds of clean energy projects, even though the tax credits themselves are technology-neutral,” the document reads.
The court filing states that the 5% safe harbor rule has become a standard for clean energy tax credit qualification. The IRS created the rule in 2013, and clean energy developers have relied on it to safe harbor new projects since then.
“The court’s decision reinforces that the Trump administration acted unlawfully in using the IRS to target wind and solar energy projects,” said Nandan Joshi, attorney with Public Citizen. ”The Trump administration’s war on solar and wind power results in concrete harm to consumers by raising energy prices. By using the tax code to wage war on wind and solar energy, the Trump administration will cause electric bills to rise, workers to lose their jobs, and older, dirtier power plants to spew more pollution into our air.”
