The Treasury Department and Internal Revenue Service updated guidance for wind and solar energy companies trying to qualify for tax credits, nixing the 5% investment criterion for most companies while sparing small solar facilities.
The U.S. Treasury Department has cleared the air around the eligibility criterion for solar incentives, bringing clean energy companies like First Solar Inc. (FSLR), Sunrun Inc. (RUN), Enphase Energy Inc. (ENPH), and NextEra Energy Inc. (NEE) on Wall Street’s radar.
The Treasury Department and the Internal Revenue Service (IRS) on Friday released guidance on what would be considered the beginning of the construction phase for clean energy projects to qualify for tax credits.
According to a Bloomberg Law report, the new guidance ends the 5% investment criterion to qualify for wind and solar incentives. This safe harbor allowed companies to delay physical work by paying at least 5% of the cost of the project and showing that the work on these projects is ongoing.
As per Notice 2025-42 by the IRS, companies will have to now rely on the physical work test instead of the 5% investment safe harbor. This criterion must be met before the solar incentives expire. However, the report added that for small solar facilities with a maximum net output of 1.5 megawatts, the 5% safe harbor remains in place.
Following the announcement, solar stocks surged on Friday. Sunrun shares rallied the most at 33%, followed by SolarEdge Technologies Inc. (SEDG) at 17%, First Solar at 11%, Enphase Energy at 8%, and NextEra Energy at 4%.
During Monday’s pre-market trade, these solar stocks were up between 0.1% and 2.5%.
While retail investors on Stocktwits were ‘neutral’ on the NextEra stock, the sentiment around the other four companies was in the ‘bullish’ or ‘extremely bullish’ territory.
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