Newsletters

IRS Announces No Changes to 2025 Returns or Withholding Under OBBBA (IR-2025-82)

The IRS has announced that, under the phased implementation of the One Big Beautiful Bill Act (OBBBA), there will be no changes to individual information returns or federal income tax withholding tables for the tax year at issue.

IRS Lists FAQs on Expiration of Energy Credits and Deductions Under OBBB and More (FS-2025-5; IR-2025-86)

The IRS issued frequently asked questions (FAQs) relating to several energy credits and deductions that are expiring under the One Big Beautiful Bill Act (OBBB) and their termination dates. The FAQs also provided clarification on the energy-efficient home improvement credit, the residential clean energy credit, and others.

IRS Provides Guidance for “Beginning of Construction” for Applicable Wind and Solar Facilities (Notice 2025-42)

The IRS has provided guidance regarding what is considered “beginning of construction” for purposes of the termination of the Code Sec. 45Y clean electricity production credit and the Code Sec. 48E clean electricity investment credit. The One Big Beautiful Bill (OBBB) Act (P.L. 119-21) terminated the Code Secs. 45Y and 48E credits for applicable wind and solar facilities placed in service after December 31, 2027.

The termination applies to facilities the construction of which begins after July 4, 2026. On July 7, 2025, the president issued Executive Order 14315, Ending Market Distorting Subsidies for Unreliable, Foreign-Controlled Energy Sources, 90 F.R. 30821, which directed the Treasury Department to take actions necessary to enforce these termination provisions within 45 days of enactment of the OBBB Act.

Physical Work Test

In order to begin construction, taxpayers must satisfy a “Physical Work Test,” which requires the performance of physical work of a significant nature. This is a fact-based test that focuses on the nature of the work, not the cost. The notice addresses both on-site and off-site activities. It also provides specific lists of activities that are to be considered work of a physical nature for both solar and wind facilities. Preliminary activities or work that is either in existing inventory or is normally held in inventory are not considered physical work of a significant nature.

Continuity Requirement

The Physical Work Test also requires that a taxpayer maintain a continuous program of construction on the applicable wind or solar facility, the Continuity Requirement. To satisfy the continuity requirement, the taxpayer must maintain a continuous program of construction, meaning continuous physical work of a significant nature. However, the notice provides a list of allowable “excusable disruptions,” including delays related to permitting, weather, and acquiring equipment, among others.

The guidance also provides a safe harbor for the continuity requirement. Under the safe harbor, the Continuity Requirement will be met if a taxpayer places an applicable wind or solar facility in service by the end of a calendar year that is no more than four calendar years after the calendar year during which construction of the applicable wind or solar facility began. Thus, if construction begins on an applicable wind or solar facility on October 1, 2025, the applicable wind or solar facility must be placed in service before January 1, 2030, for the safe harbor to apply.

Five Percent Safe Harbor for Low Output Solar Facilities

A safe harbor is available for a low-output solar facility, which is defined as an applicable solar facility that has a maximum net output of not greater than 1.5 megawatts. A low-output solar facility may also establish that construction has begun before July 5, 2026, by satisfying the Five Percent Safe Harbor (as described in section 2.02(2)(ii) of Notice 2022-61).

Additional Guidance

The notice provides additional guidance regarding construction produced for the taxpayer by another party under a binding written contract; the definition of a qualified facility; the definition of property integral to the applicable wind or solar facility; the application of the 80/20 rule to retrofitted applicable wind or solar facilities under Reg. §§ 1.45Y-4(d) and 1.48E-4(c); and the transfer of an applicable wind or solar facility.

Effective Date

Notice 2025-42 is effective for applicable wind and solar facilities for which the construction begins after September 1, 2025.

Notice 2025-42

TIGTA Critical of IRS Level of Service and Wait Time Reporting

The Treasury Inspector General for Tax Administration suggested that the way the Internal Revenue Service reports the level of service (ability to reach an operator when requested) and wait times does not necessarily reflect the actual times taxpayers are waiting to reach a representative at the agency.

"For the 2024 filing season, the IRS reported an LOS of 88 percent and wait times averaging 3 minutes," TIGTA stated in an August 14, 2025, report. "However, the reported LOS and average wait times only included calls made to 33 Accounts Management (AM) telephone lines during the filing season."

TIGTA stated that the agency separately tracks Enterprise LOS, a broader measure of the taxpayer experience, which includes 27 telephone lines from other IRS business units in addition to the 33 AM telephone lines.

"The IRS does not widely report an enterprise-wide wait time, as the reported average wait time computation includes only the 33 AM telephone lines," the report states. "According to IRS data, the average wait times for the other telephone lines were much longer than 3 minutes, averaging 17 to 19 minutes during the 2024 Filing Season."

TIGTA recommended that the IRS adjust its reporting to include Enterprise LOS in addition to AM LOS and provide averages across all telephone lines.

"The IRS disagreed with both recommendations, stating that the LOS metric does not provide information to determine taxpayer experience when calling, and including wait times for telephone lines outside the main helpline would be confusing to the public," the Treasury watchdog reported. "We maintain that whether a taxpayer can reach an assistor is part of the taxpayer experience, and providing average wait times across all telephone lines for the entire fiscal year demonstrates transparency."

The Treasury watchdog also noted that the National Taxpayer Advocate has stated the AM LOS is "materially misleading" and should be replaced as a benchmark.

TIGTA also warned that the reduction in workforce at the IRS could hurt recent improvements to LOS and wait times, noting that the agency will lose about 23 percent of its customer service representative employees by the end of September 2025.

"The staffing impact on the remainder of calendar year 2025 and the 2026 filing season is unknown, but we will be monitoring these issues."

It also noted that the IRS is working on a new metric—First Call/Contact Resolution—to measure the percentage of calls that resolve the customer’s issue without a need to transfer, escalate, pause, or return the customer’s initial phone call. TIGTA reported that analysis of FY 2024 data revealed that 33 percent of taxpayer calls were transferred unresolved at least once.

By Gregory Twachtman, Washington News Editor

FinCEN Delays Investment Adviser Rules Until 2028 (FinCEN Exemptive Relief Order)

The Financial Crimes Enforcement Network (FinCEN) has granted exemptive relief to covered investment advisers from the requirements of the final regulations in FinCEN Final Rule RIN 1506-AB58 (also called the "IA AML Rule"), which were set to become effective January 1, 2026. This order exempts covered investment advisers from all requirements of these regulations until January 1, 2028.

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Newsletters

IRS Announces No Changes to 2025 Returns or Withholding Under OBBBA (IR-2025-82)

IRS Lists FAQs on Expiration of Energy Credits and Deductions Under OBBB and More (FS-2025-5; IR-2025-86)

Energy Efficient Home Improvement Credit

Residential Clean Energy Credit

Clean Vehicle Program

Acquiring Date

IRS Provides Guidance for “Beginning of Construction” for Applicable Wind and Solar Facilities (Notice 2025-42)

TIGTA Critical of IRS Level of Service and Wait Time Reporting

FinCEN Delays Investment Adviser Rules Until 2028 (FinCEN Exemptive Relief Order)

Tax Alerts

Expatriate American Tax