Navigating the safe harbor rules for solar energy projects above 1.5MW is crucial for securing tax incentives and ensuring project feasibility.
The Physical Work Test is a crucial aspect of the safe harbor rules for solar energy projects exceeding 1.5MW. To qualify for certain tax incentives, these projects must demonstrate that significant physical work has commenced. This is not merely a formality; it involves tangible actions that signify the start of construction.
Examples of significant physical work include activities like the installation of racking systems, inverters, or other key components of the solar facility. The objective is to show that the project is genuinely underway, not just in planning or preliminary stages.
The deadline of July 5, 2026, is a critical date for solar projects larger than 1.5MW. To meet the safe harbor requirements, these projects must begin significant physical work by this date. Missing this deadline means the project will not qualify under the current safe harbor provisions.
This deadline adds a layer of urgency to project planning and execution. At Harvest Solar, each project requires careful coordination— from site assessment and permitting to securing financing and preparing for construction. Because these steps take time, it’s important to plan ahead so we can begin physical work by the deadline.
Once a project has met the Physical Work Test, it must also adhere to the Continuity Requirement to maintain its qualification. This means that the project must either be placed in service within four years or show continuous construction progress.
Continuous construction progress can include ongoing activities such as site preparation, equipment installation, and other construction milestones. However, certain excusable delays, like those caused by natural disasters or severe weather, can be taken into account.
Given the potential changes in safe harbor provisions, strategic planning has never been more critical. Businesses should consider accelerating their project timelines to mitigate regulatory uncertainties and ensure compliance with evolving guidelines.
At Harvest Solar, we are committed to helping our customers navigate these complexities. By planning ahead and leveraging our expertise, businesses can secure their energy future and maximize their financial advantages. Contact us today to start planning your future energy projects and take full advantage of the current solar incentives.
Important Disclaimer
Harvest Solar is not a tax advisory firm or legal counsel. This information is provided for general educational purposes only. The interpretation of tax law can be complex and may evolve rapidly as new regulations, executive orders, and guidance are developed. Given the recent executive order signed July 7, 2025, and ongoing regulatory changes, the landscape for solar tax credits is particularly fluid. We strongly recommend consulting with qualified tax professionals and legal counsel who specialize in renewable energy tax law to understand how these changes specifically impact your business tax situation and to ensure you receive accurate, up-to-date advice for your circumstances.