Key provisions in Notice 2025-8:
1. Refinements to safe harbor framework and cost allocation methodologies
Notice 2025-8 introduces several important changes that refine the safe harbor framework and cost allocation methodologies outlined in Notice 2024-41. This includes, but is not limited to, updated definitions for certain technologies referenced in Table 1 of Notice 2024-41. These updates aim to improve the accuracy and clarity of the guidance, ensuring better application across various renewable energy projects.
2. Expanded and refined Solar PV Tables
Notice 2025-8 restructures the Solar PV Table. It now includes two separate tables: one for PV Ground-Mount (Tracking and Fixed) Projects and another for PV Rooftop (MLPE and String). Each table features updated cost percentages and new columns for domestically produced crystalline silicon photovoltaic (c-Si PV) cells and wafers. These changes reflect the premium cost of domestically manufactured product components.
3. Clarified component terminology for land-based wind projects
Notice 2025-8 clarifies terminology for land-based wind projects. Two components have been renamed for greater clarity. "Steel or iron rebar in foundation" is now "Steel or iron reinforcing products in foundation." "Material" has been renamed "Preform." While cost percentages remain the same, these updates reduce ambiguity, making it easier for projects to comply.
4. Updated cost percentages for Battery Energy Storage Systems (BESS)
Notice 2025-8 revises cost percentages for Battery Energy Storage Systems. These updates apply to both grid-scale and distributed BESS projects. The changes are based on the latest market data and refine the cost calculations introduced in Notice 2024-41. They ensure the cost allocations reflect current industry conditions.
5. Introduced flexibility for certain placed-in-service projects
Notice 2025-8 introduces more flexibility for placed-in-service projects. Projects that meet the 80/20 Rule and are placed in service after Dec. 31, 2022 (or Dec. 31, 2024, for section 45Y and 48E projects) can choose between the original Table 1 from Notice 2024-41 or the First Updated Elective Safe Harbor under Notice 2025-8. This gives projects more options to select the framework that best fits their needs.
Taxpayer reliance
Notice 2025-8 clarifies that taxpayers may rely on the First Updated Elective Safe Harbor effective January 16, 2025. Taxpayers may continue to rely on Notice 2024-41 for any projects the construction of which begins before April 16, 2025. Taxpayers can also rely on Notice 2023-38 regardless of the beginning of construction date.
Washington National Tax takeaways
With the issuance of Notice 2025-8, developers must be aware of the refined domestic content thresholds and cost allocation rules that directly impact eligibility for the enhanced tax credit under the IRA. The updated guidance strengthens the need for clear documentation and proper recordkeeping to substantiate claims of domestic content, building on the foundational principles laid out in Notice 2023-38 and Notice 2024-41. While the notice does not expand on technologies such as qualified biogas, some of the definitions used could be helpful for interpreting the steel and iron and manufactured product components rules as they apply to these technologies. The transition to the 45% threshold for projects starting construction in 2025 and ultimately 55 percent for projects starting construction after 2026 under section 45Y, will require proactive adjustments in supply chain management, especially for developers involved in projects with contracts signed prior to Jan. 1, 2025. For all developers, the safe harbor provisions in Notice 2025-8 offer some relief by protecting them from penalties related to minor discrepancies in meeting the updated content requirements. Developers should continue to work closely with suppliers to confirm that the materials they use meet the updated guidelines.