July 4, 2026 was the beginning-of-construction deadline for solar projects to qualify for federal tax credits under the rules set after the One Big Beautiful Bill Act, as explained in a POWER Magazine analysis. Projects that began construction by that date can qualify for a four-year continuity safe harbor: those started in 2026 have until the end of 2030 to be placed in service. Projects that missed the July 4 deadline must be placed in service by December 31, 2027, or they will not qualify for the Section 48E investment credit or the 45Y production credit.
IRS Notice 2025-42 also narrowed how construction can be shown to have begun. For solar projects that began after September 2, 2025, the 5% spending safe harbor applies only to systems of 1.5 MWac or less. Larger systems must meet the physical work test, showing that physical work of a significant nature has started. New foreign entity of concern restrictions also tighten over time, and under Section 48E a prohibited payment can trigger full recapture of the credit.
If your business has a rooftop or ground-mount solar project in discussion, ask your installer three questions in writing: did construction begin before July 4, 2026, and how is that documented; if not, can the system realistically be placed in service before the end of 2027; and how does the equipment supply chain comply with foreign entity of concern rules. Keep records of physical work, timelines and delays.
Do not rely on a sales proposal's tax credit assumptions without confirming eligibility with your own tax advisor, since the timing rules now determine whether the credit is available at all.
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