Accounting

Wind/solar energy facilities left out in the cold under IRS guidance

Published

11 months ago

August 28, 2025

The Internal Revenue Service has issued guidance clarifying when the construction of a facility begins for purposes of the accelerated termination, enacted as part of the One Big Beautiful Bill Act (P.L. 119-21), of the clean electricity production and investment credits for wind and solar projects.

Under the OBBBA, if the construction of a facility begins by July 4, 2026, it is not subject to the accelerated termination provisions. With a limited exception, the new guidance eliminates a previously provided safe harbor for determining the beginning of construction based on the percentage of total costs incurred. Thus, to avoid the accelerated termination provisions, a taxpayer generally will have to show that physical work of a significant nature began by July 4, 2026.

The clean electricity production credit under Internal Revenue Code Section 45Y provides a credit based on the amount of electricity produced at a “qualified facility” and sold to an unrelated buyer, or, in some cases, sold, consumed or stored by the taxpayer. A qualified facility generally has been placed in service after 2024, is used for the generation of electricity, and has a greenhouse gas emissions rate not greater than zero.

The clean electricity investment credit, under IRC Section 48E, is based on a percentage of a taxpayer’s “qualified investment” with respect to a “qualified facility” or “energy storage technology.” In general, a taxpayer’s qualified investment is the basis of “qualified property” that the taxpayer places in service as part of a qualified facility and includes expenditures related to certain interconnection property. As in Section 45Y, a qualified facility generally is a facility that is placed in service after 2024, used for the generation of electricity, and for which the anticipated GHG emissions rate is not greater than zero.

OBBBA’s accelerated termination of credits for wind and solar

Before OBBBA, the clean electricity production credit was to phase out beginning with facilities where construction begins the second year after the later of (1) 2032 or (2) the year in which Treasury determined that the annual GHG emissions from the production of electricity in the United States are equal to or less than 25% of such emissions for calendar year 2022. The clean electricity investment credit had a parallel phaseout period and termination date.

OBBBA accelerated the termination of such credits for facilities that use wind or solar to produce electricity. The legislation generally provides that: (1) the clean electricity production credit is unavailable for such facilities placed in service after 2027, and (2) the clean electricity investment credit is unavailable for property (excluding energy storage property) placed in service after 2027, that is part of such a facility. The new termination provisions apply only to facilities the construction of which begins after July 4, 2026, however.

IRS notice

On August 15, the IRS issued Notice 2025-42, providing guidance on the beginning of construction with respect to the termination of credits for wind and solar. The notice states that its purpose is “to prevent taxpayers from circumventing the statutory credit termination date, prevent artificial manipulation of eligibility for the § 45Y and § 48E credit for applicable wind and solar facilities, and ensure that a substantial portion of any applicable wind or solar facility not subject to the credit termination date is built by the beginning of construction deadline [i.e., July 4, 2026].”

Under Notice 2025-42, the IRS will determine the beginning of construction for most wind and solar facilities based on the “Physical Work Test,” under which construction of a facility begins when “physical work of a significant nature begins.” In that regard, other than for “low output solar facilities,” the guidance eliminates a “Five Percent Safe Harbor” that had been provided in previous beginning-of-construction guidance. Under the safe harbor, the IRS considered construction to have begun if the taxpayer paid or incurred 5% or more of the total cost of a facility. For such purposes, all costs included in the depreciable basis of the facility were taken into account.

Whether Notice 2025-42’s Physical Work Test has been met depends on the relevant facts and circumstances. The focus is on the nature of the work, not the amount or the cost, and if the physical work performed is of a significant nature, there is no fixed minimum amount or monetary or percentage threshold that must be satisfied. Under the notice, both off-site and on-site work count in establishing physical work of a significant nature, and examples of each are provided. The guidance emphasizes that physical work of a significant nature does not include preliminary activities, such as planning or designing, securing financing, exploring or researching, even if the cost of such activities is properly includible in the depreciable basis of the facility.

Notice 2025-42’s Physical Work Test also requires the taxpayer to maintain “a continuous program of construction,” which involves continuing physical work of a significant nature and generally is determined by the relevant facts and circumstances. The notice provides, however, that certain disruptions in construction that are beyond the taxpayer’s control, such as delays due to severe weather, will not be considered failures to satisfy the continuity requirement. In addition, the notice establishes a continuity safe harbor: If a taxpayer places a facility in service by the end of the calendar year that is no more than four calendar years after the calendar year during which construction began, then the facility will be considered to satisfy the continuity requirement.

As noted above, for a low-output solar facility (i.e., a facility that has maximum net output not greater than 1.5 megawatts), a taxpayer may establish the beginning of construction either by satisfying the Physical Work Test or by applying the Five Percent Safe Harbor established in prior guidance. Detailed rules for determining maximum net output, including an aggregation rule for facilities with integrated operations, are provided.

Noticed 2025-42 applies to facilities the construction of which did not begin (as determined under Notice 2022-61) before Sept. 2, 2025.

With the issuance of the new guidance, taxpayers planning wind and solar projects now have a clearer picture of what they need to accomplish by July 4, 2026, to convince the IRS that they are not subject to OBBBA’s accelerated termination of the clean electricity production and investment credits.

Accounting

Continuous Auditing Transforms Corporate ERPs

Published

5 days ago

July 21, 2026

Business Finance News

continuous auditing transforms corporate erps

As corporate accounting departments cross the threshold into late July 2026, the adoption of continuous, automated auditing systems has reached a definitive turning point. Driven by advances in artificial intelligence and deep integration with modern Enterprise Resource Planning (ERP) platforms, leading finance organizations are moving away from traditional, periodic post-hoc audits in favor of real-time, 100% transactional verification. This technological transition is redefining internal control environments, reducing compliance costs, and eliminating the structural delays inherent in legacy quarterly closing processes.

Unlike traditional auditing frameworks that rely on statistical sampling—a process that inevitably leaves operational blind spots—continuous auditing software monitors operational data feeds continuously. Every purchase order, electronic invoice, payroll disbursement, and cross-border wire transfer is automatically cross-referenced against established corporate governance parameters, regulatory tax schedules, and anti-fraud algorithms in real time. Anomalies or unauthorized ledger entries are flagged instantly, allowing internal audit teams to investigate and remediate compliance gaps immediately rather than months after the close of a financial period.

The implications for executive financial management are far-reaching. By embedding continuous verification directly into daily transaction workflows, chief financial officers gain uninterrupted visibility into the organization’s true financial standing. Real-time balance sheet auditing eliminates the severe operational bottlenecks associated with month-end and quarter-end financial reconciliations, freeing accounting professionals to focus on strategic financial modeling, tax planning, and capital allocation rather than manual data entry and spreadsheet consolidation.

However, implementing continuous auditing requires accounting leadership to invest heavily in data governance and technical upskilling. Internal audit teams must evolve from manual ledger reviewers into system architects capable of auditing complex algorithms and validating automated data pipelines. Accounting firms and corporate controllers that master continuous auditing will establish a resilient compliance framework capable of meeting stringent international regulatory standards with total transparency.

Accounting

U.S. Imposes New 50% Tariffs on Canadian Imports Under Rare Legal Provision

Published

5 days ago

July 20, 2026

Business Finance News

U.S. Imposes New 50% Tariffs on Canadian Imports Under Rare Legal Provision

WASHINGTON — In a major escalation of cross-border trade friction, U.S. President Donald Trump has signed executive orders imposing new 50% tariffs on a wide selection of Canadian exports, citing discriminatory practices by Ottawa targeting American auto, dairy, and beverage industries.

The new duties, announced Monday, will take effect in 30 days. They target a broad spectrum of consumer and industrial goods—ranging from wine, liquor, and milk products to commercial cement, furniture, clothing, and hockey equipment.

Untested Legal Mechanism

To enact the sweeping measures, the administration invoked Section 338 of the Tariff Act of 1930—a rarely used legal provision allowing the executive branch to levy additional tariffs of up to 50% on foreign nations deemed to discriminate against U.S. commerce.

White House officials noted that Section 338 addresses trade discrimination rather than national security or economic emergencies. The move comes months after prior global emergency tariffs faced legal challenges in domestic courts, signaling Washington’s pivot toward alternate statutory authorities to maintain import duties.

Senior administration officials briefed reporters that the measure directly responds to Canadian provincial bans on U.S. alcohol, restrictions on American vehicle exports, and import quota disparities affecting U.S. dairy and cheese producers relative to third-party trading partners.

“While the administration continues to secure reciprocal trade agreements globally, Canada retaliated against efforts to protect domestic industry,” U.S. Trade Representative Jamieson Greer stated.

USMCA Impact and Carve-Outs

Significantly, the newly ordered 50% duties will apply to designated items even if they otherwise comply with the United States-Mexico-Canada Agreement (USMCA).

However, the administration confirmed key targeted exemptions:

Energy products (including oil and natural gas)
Potash and critical minerals
Fish and seafood
Goods already governed by sector-specific duties (such as existing steel and aluminum tariffs)

Administration representatives emphasized that the tariffs do not stem from recent disputes concerning drifting Canadian wildfire smoke, noting that policy options regarding environmental spillover remain under separate review.

Canadian Response and Market Reaction

Following the White House announcement, the Canadian dollar experienced a sharp decline against the U.S. dollar, falling approximately 0.4% during evening trading.

Canadian Prime Minister Mark Carney issued a statement emphasizing that Canada’s earlier counter-duties had merely matched previous U.S. trade actions. “Canada stands ready to engage intensively to address outstanding issues with the U.S. to the mutual benefit of our citizens,” Carney stated, pointing to detailed proposals Ottawa submitted to modernize the USMCA framework.

Ontario Premier Doug Ford took a firmer stance, urging a “dollar-for-dollar” reciprocal response if the measures go into effect on August 19.

With a 30-day implementation window before the duties officially lock in, industry associations and trade groups on both sides of the border are calling for urgent bilateral negotiations to avert further supply chain disruption across North America.

Accounting

Automated Continuous Auditing: Transforming Compliance and Real-Time Financial Oversight

Published

6 days ago

July 20, 2026

Business Finance News

Transforming Compliance and Real-Time Financial Oversight

The traditional accounting paradigm—defined by periodic monthly closures and post-hoc annual audits—is rapidly giving way to continuous, automated financial oversight. As of July 2026, forward-thinking accounting practices and multinational corporate finance departments are leveraging continuous auditing systems powered by advanced machine learning models. These systems monitor operational transactions in real time, shifting audit methodologies from sample-based post-analysis to absolute, 100% transaction-level verification.

The operational advantages of continuous auditing are transformative. Standard auditing procedures historically relied on statistical sampling, which, despite rigorous methodology, inherently left gaps where anomalies or fraudulent transactions could go undetected for months. Modern continuous auditing platforms integrate directly with enterprise resource planning (ERP) databases, instantly cross-referencing purchase orders, invoices, bank feeds, and tax records. Any deviation from established control parameters or unusual transaction behavior triggers immediate flags for internal audit teams, dramatically reducing detection lag from quarters to seconds.

Beyond fraud prevention, continuous auditing fundamentally alters internal reporting and decision-making. Executive leadership no longer has to wait weeks after the close of a quarter to evaluate precise financial standing; real-time verified ledger data provides an uninterrupted view of operating margins, tax liabilities, and cash flow dynamics. This real-time visibility enables corporate controllers to adjust capital allocation strategies dynamically, mitigating liquidity constraints and capitalizing on emerging commercial opportunities far more efficiently than competitors bound to legacy reporting cycles.

However, implementing continuous auditing requires accounting professionals to acquire new analytical capabilities. The role of the auditor is evolving from manual data reconciliation toward system validation, algorithmic model governance, and strategic risk interpretation. Accounting firms and corporate finance departments must invest in continuous technical education, ensuring that audit staff possess the data engineering skills necessary to design, maintain, and evaluate complex automated compliance systems.