Solar ITC Compliance File: What EPCs Must Document

Last updated August 3, 2026 (Originally published July 23, 2026)

February 12, 2026: Treasury and IRS released Notice 2026-15, providing interim guidance for material assistance from prohibited foreign entities and MACR documentation under Sections 45X, 45Y and 48E.
June 6, 2026: A federal court reportedly vacated IRS Notice 2025-42, which had restricted use of the 5% Cost Safe Harbor for most wind and solar projects. Because this remains a fast-moving legal issue, EPCs should not certify begin-construction sufficiency themselves; the project’s tax counsel should confirm which begin-construction method is available.
Ongoing: Treasury is required to release finalized safe harbor MACR tables no later than December 31, 2026. Until those tables are published, compliance files built in 2026 must preserve enough procurement detail to support the interim method used and survive later review.

Important note: This is an EPC documentation guide, not tax advice. The EPC’s role is to produce and preserve raw, dated, contemporaneous evidence. The legal conclusion that evidence is sufficient for Section 48E, MACR, FEOC, PWA, domestic content or recapture purposes belongs to tax counsel or a qualified CPA.

Quick Answer

1. What does this guide cover?
   The documentation file EPCs should preserve for Section 48E commercial solar ITC claims.
2. Who owns the legal conclusion?
   Tax counsel or a CPA. EPCs should preserve evidence, not certify tax sufficiency.
3. What are the core evidence folders?
   Begin construction, placed in service, PWA/Form 7220, domestic content/Form 3468, and FEOC/MACR supply chain.
4. What is the biggest EPC-side risk?
   Treating contracts, permits, drawings or supplier claims as enough without dated site, payroll and procurement evidence.
5. Does the file close at commissioning?
   No. PWA repair obligations and FEOC recapture can continue years after placed in service.
6. What should be checked after supplier substitutions?
   Domestic content and MACR calculations, because the original procurement file may no longer match the final facility.
7. What should be reviewed at handover?
   O&M, warranty, monitoring, software, SCADA, inverter and BMS agreements for FEOC effective-control exposure.

Why This Matters for EPCs

Most ITC content focuses on one question: whether a solar project began construction before the deadline. That matters, but it is only the entry point.

For the client claiming Section 48E, the harder problem is proof. The IRS does not just need a project narrative. It needs dated, facility-level evidence that proves when construction began, when the facility was placed in service, which workers were paid which rates, how apprentice hours were handled, how domestic content was calculated, which suppliers touched the equipment, and whether any foreign-entity exposure continues through operations.

That evidence is created during the EPC workflow. Site logs, racking photos, commissioning reports, payroll records, supplier certifications, purchase orders, bills of materials, inverter serials, warranty agreements and O&M templates usually sit with the EPC long before tax counsel sees the file.

EPC takeaway: The EPC should not certify tax eligibility, but it is often the only party that can produce the raw evidence the taxpayer needs to defend the credit.

What the Compliance File Is and Why It Now Has Four Parts

Section 48E replaced the old investment tax credit for wind and solar, and under the One Big Beautiful Bill Act it now has a hard stop. The credit ends for facilities placed in service after 31 December 2027, unless construction begins on or before 4 July 2026, a cutoff Sidley Austin's note on the One Big Beautiful Bill Act lays out plainly, and one the instructions for Form 3468 itself confirm: the IRS added a note that there is no credit for wind or solar facilities placed in service after 2027 where the beginning of construction is after 4 July 2026.

That single sentence is why the compliance file exists. Under the guidance Sidley was working from, a project starting construction in 2025 has until end-2029 to be placed in service, one starting between 1 January and 4 July 2026 has until end-2030, and one starting after 4 July 2026 has only until end-2027. Starting earlier does not just protect the credit — it buys years of construction runway, because the four-year continuity window runs from the start date.

Beyond the calendar, the credit is no longer a single number to compute and defend. It is now four evidence categories the IRS tests independently: the date construction began, the labour records behind the five-times wage multiplier, the domestic content certification, and — new for 2026 starts — the foreign-entity supply chain proof. Two of those four outlive the installation by five to ten years. The taxpayer, not the EPC, eats a disallowance if any one of them fails.

The Four Evidence Files, Segment by Segment

Proving the Date Construction Began

There are two recognized ways to establish a begin-construction date: the physical work test, or the 5% cost safe harbor. The IRS instructions for Form 7220 describe the safe harbor as paying or incurring 5% or more of the total cost of the facility, with continuous effort to complete it afterward. The physical work test is different in kind — IRS Notice 2018-59 states that this test "focuses on the nature of the work performed, not the amount or the cost," and that there is no fixed minimum dollar amount or percentage once the work is of a significant nature. That distinction determines what the file needs to contain: a safe-harbor claim is proven with invoices and cost ledgers, a physical-work claim is proven with dated records of what was actually built.

Not everything that happens early on a project counts. The same notice lists planning or designing, securing financing, exploring, researching, resource mapping and modelling, obtaining permits and licences, and geophysical surveys as preliminary activities that do not start the clock — "even if the cost of those preliminary activities is properly included in the depreciable basis of the energy property." A stack of engineering drawings and a signed interconnection application prove the project is real, but neither one is evidence of begin-construction.

What does count is more concrete. Off-site work can start the clock: the manufacture of racking, mounting equipment, inverters, and transformers stepping voltage up to less than 69 kilovolts. On site, for solar specifically, the notice gives installation of racks or other structures that affix PV panels, collectors or cells to the site as the textbook example of on-site physical work of a significant nature. That means the day racking goes into the ground is the day worth photographing, with a timestamp, and the fabricator's production records for any off-site racking or inverter work belong in the same file. One thing to watch: work to produce components already sitting in inventory, or that a vendor normally holds in inventory, does not count — a purchase order against a warehouse shelf does not start construction, only an order that triggers something being made for this specific project does.

Neither method ends at the start date. Both require continuous progress toward completion, and the IRS has said plainly that it "will closely scrutinize energy property and may determine that construction has not begun" where a continuous program of construction is not maintained. That is the argument for keeping a running construction log rather than relying on one dated milestone photo.

There is a wrinkle specific to 2026: Treasury issued Notice 2025-42 on 15 August 2025, modifying the begin-construction rules for wind and solar credit eligibility — but that notice, according to Reunion's guide to prohibited foreign entities, explicitly does not cover begin-construction for the foreign entity restrictions discussed further below. There are effectively two begin-construction rulebooks running in parallel right now: one for whether the credit exists, one for the foreign-supplier test. One vendor's 2026 guide, EnergyScape Renewables, states that under Notice 2025-42 the 5% safe harbor is available only for solar projects at or under 1.5 MW AC and that larger projects must use the physical work test — that figure is worth verifying against the notice text directly before relying on it, since no primary IRS document confirms it.

Fixing the Placed-in-Service Date

Form 7220 requires the date construction began on line 3 and the date the facility was originally placed in service on line 4. The second date sets the tax year of the claim and starts the five-year recapture clock discussed below, so it needs its own dedicated evidence. EnergyScape's documentation guide recommends the Permission to Operate letter — dated within the qualifying tax year — alongside the signed interconnection agreement, the final AHJ inspection report, and a commissioning report. None of this is an IRS-prescribed list, but the PTO letter in particular is the document most commonly used to fix the date because it is dated, issued by an outside party (the utility), and hard to dispute in an audit.

A separate Form 3468 has to be completed for each facility or property — Part I carries the facility information, and portfolio-level claims covering multiple sites on one form are no longer possible. Every site needs its own complete file.

The Labour File: Prevailing Wage and Apprenticeship

This is the largest new documentation burden. Meeting the prevailing wage and apprenticeship requirements multiplies the base credit amount by five, according to the IRS's PWA FAQ — which is the entire reason this file exists. Get it right and the credit is five times larger; get it wrong and it drops to the base rate, or worse, triggers recapture.

Anyone claiming the increased credit for meeting these rules under section 48E must file Form 7220 for each facility, property, project or energy storage technology. If a developer filed increased-credit claims for three separate facilities, three separate Forms 7220 are required — labour records cannot be pooled across a portfolio. Where no alterations or repairs were performed in a given tax year on a facility placed in service earlier, a signed statement attesting to that has to be attached instead, so even a quiet year generates a filing obligation.

The wage rate itself is not set by the EPC. Prevailing wages must be paid to all laborers and mechanics employed by the taxpayer, contractor or subcontractor at rates not less than the Department of Labor's Davis-Bacon rates for the type of work in the facility's geographic area. The applicable determination is the one in effect when the taxpayer and contractor execute the construction contract — meaning the file needs the wage schedule pulled and saved on the signature date, not the date work starts on site, and separate contracts each carry their own determination.

Apprenticeship has its own threshold: the share of total labour hours that must be worked by qualified apprentices is 15% for construction beginning in 2024 or later. Any taxpayer, contractor or subcontractor employing four or more individuals at any point during the work must hire at least one qualified apprentice — a rule that bites per company, not per project, meaning a four-person electrical subcontractor with no apprentice can break compliance for the entire site even if the general contractor's own numbers are fine. Apprenticeship requirements end once the facility is placed in service; there are none for alterations or repairs afterward. Where a registered apprenticeship program denies a request or fails to respond within five business days, the good faith effort exception treats the requirement as satisfied — but only if the request and the response (or lack of one) are documented. Cherry Bekaert's guide to the wage and apprenticeship rules calls this documentation — emails, certified mail — "mandatory" to claim the exception.

Two exceptions remove the labour file entirely: a facility with maximum net output under one megawatt AC gets the increased credit without meeting the wage and apprenticeship requirements at all, and a project that began construction or installation before 29 January 2023 is exempt the same way. In both cases Form 7220 is not required — but the capacity rating in the design package, or the begin-construction date itself, becomes the document that proves the exception applies.

On the payroll side, Form 7220's wage table requires each labor or work classification as defined by the Davis-Bacon Act, used consistently throughout the construction, alteration or repair for the location where the work is performed — reclassifying workers partway through the job breaks the record. Cherry Bekaert recommends maintaining certified-payroll-style records for every contractor and subcontractor showing worker names, classifications, hours worked, hourly rates and fringe benefit contributions, plus copies of the sam.gov wage determinations applicable to the specific project location and construction timeline, since determinations get replaced and the version priced against needs to be provable later. Cherry Bekaert is direct about what happens without this: "the burden of proof for PWA compliance rests entirely on the taxpayer. In the event of an IRS audit, lack of documentation is equivalent to non-compliance." An empty folder reads the same as an actual violation.

The labour obligation does not end at commissioning. For section 48E, the prevailing wage requirement period for alterations and repairs runs five years from the date the facility is originally placed in service, and failing to satisfy prevailing wage rules on repair work during that window is itself a recapture event for a credit already claimed at the increased rate. Routine maintenance — inspections, cleaning, replacing filters or light bulbs, calibrating equipment — is not construction, alteration or repair and does not trigger the rule, but any O&M work order needs to state clearly which category the work falls into.

Penalties for underpayment scale with how the error is handled. A $5,000-per-worker penalty is waived if correction payments are made by the last day of the first month following the end of the calendar quarter when the failure occurred, and either the failure affected under 10% of pay periods or total underpayments were not more than 5% below the prevailing rate — a fact that argues for auditing wage rates quarterly rather than at year end. Where the IRS finds intentional disregard, the penalty doubles to $10,000 per laborer or mechanic.

The Domestic Content Certification

The domestic content bonus requires certifying that the facility was built with set percentages of steel, iron or manufactured products mined, produced or manufactured in the United States, according to the IRS's domestic content bonus credit page. The certification statement must be attached to Form 3468 and filed with the annual return for the first tax year the bonus is reported — meaning the supplier cost data behind it has to be assembled before the return is filed, not after.

Steel and iron are held to an all-or-nothing standard: PwC's note on Notice 2025-8 states that steel or iron is produced in the United States "only if all steel and iron manufacturing processes take place in the United States," apart from metallurgical processes refining steel additives. Racking and structural steel fail entirely on one foreign process step; manufactured products like modules and inverters instead work on a cost-percentage basis. A taxpayer relying on the Notice 2025-8 safe harbor for that cost calculation must affirmatively elect it in the certification statement filed with the IRS — and can use only one safe harbor per project, so the modelling has to happen well before the return is prepared.

The percentage threshold itself escalates by start date. Under the OBBBA, section 48E carries an escalating domestic content threshold: 40% for construction beginning before 16 June 2025, 45% from then through end-2025, 50% for 2026, and 55% after 2026. A 2026 start needs half the manufactured-product cost to be American; a project that started in 2024 needed two-fifths.

The Foreign-Entity Supply Chain File

This is the newest and least forgiving category. Projects beginning construction after 31 December 2025 must satisfy the material assistance rules; those starting before 1 January 2026 are outside the project-level test entirely. For a solar qualified facility, the share of manufactured-product cost that must be clear of prohibited foreign entities is 40% for a 2026 construction start, rising to 45%, 50%, 55% and 60% for 2027 through 2030 and after, per Kirkland & Ellis's alert on the Act. Falling below the threshold does not shrink the credit — it eliminates it.

Treasury and the IRS issued Notice 2026-15 on 12 February 2026, giving taxpayers a reliance method for calculating the material assistance cost ratio for any 48E facility beginning construction after 31 December 2025, usable until 60 days after the forthcoming safe harbor tables are published, according to the IRS's own release. Those official safe harbor tables are expected no later than 31 December 2026; until they land, taxpayers fall back on the existing domestic content tables from Notice 2025-08.

The evidentiary demand here runs deep into procurement. Every supplier has to sign a certificate confirming whether its products were made by a prohibited foreign entity, retained by both the taxpayer and the supplier for six years. Reunion's guide states these certificates should carry the supplier's EIN, any foreign identification number, supplier signatures, and a statement of any relationship to a prohibited foreign entity — language that belongs in the purchase order itself, not a follow-up email after commissioning. A supplier issuing an inaccurate certificate faces a penalty of the greater of 10% of the understatement of the taxpayer's tax basis or $5,000, which is exactly why some vendors will resist signing and why that conversation needs to happen at quoting, not at closeout.

There is one carve-out worth knowing: costs under binding contracts and purchase orders entered into before 16 June 2025 are excluded from the material assistance test, provided the project begins construction by 31 July 2025 and is placed in service by 31 December 2027 for solar. All three conditions have to hold, and the executed contract with its date needs to be in the file to claim it.

Beyond certificates, the broader evidence set should include supplier and sub-supplier lists with entity names, addresses and countries, plus bills of materials, purchase orders and invoices identifying every covered item and its source — a full parts list traced back through the supply chain and tied to actual invoices, which only exists in the EPC's own procurement records. Projects claiming legacy section 48 credits are not subject to any of these restrictions at all, so which credit a project sits on determines how thick this particular folder needs to be.

The clawback here is unusually severe and reaches well past commissioning. If any payment giving effective control is made to a specified foreign entity within ten years after the facility is placed in service, the entire 48E credit is clawed back — not a fraction of it. That means O&M, SCADA, and warranty service agreements signed years after the plant is running belong in the same compliance file as the build documents, not a separate archive that gets closed out at handover.

The Dates an EPC Cannot Miss in 2026

• 4 July 2026 — the last day to begin construction (physical work test or 5% safe harbor) and still qualify for Section 48E; miss it and the facility must be placed in service by 31 December 2027 or lose the credit entirely.
• 31 December 2026 — the deadline by which the IRS is expected to publish the material assistance safe harbor tables for 45Y, 48E and 45X; until then, taxpayers can rely on Notice 2026-15 (issued 12 February 2026) or the existing Notice 2025-08 domestic content tables.
• 31 December 2027 — the placed-in-service deadline for any facility that began construction after 4 July 2026; also the in-service deadline for the pre-16 June 2025 binding-contract carve-out on the material assistance test.
• Five years from placed-in-service — the prevailing wage compliance window on alterations and repairs for section 48E facilities claiming the increased credit; a wage failure inside this window triggers recapture.
• Ten years from placed-in-service — the window during which any payment giving effective control to a specified foreign entity claws back the entire 48E credit.
• Six years — the minimum retention period for supplier certificates addressing prohibited foreign entity status, held by both taxpayer and supplier.

Building the Compliance File: Action Checklist for EPCs

• Assign one file owner per project. Do not let tax-credit documentation become a shared folder nobody owns.
• Capture begin-construction evidence in real time. Dated photos, logs, fabrication records and cost records should be collected as work happens.
• Preserve both physical-work and cost evidence where available. Because begin-construction guidance has shifted and been litigated, the file should be broader than the method finally chosen.
• Save the wage determination on the contract execution date. Do not rely on a live web page months later.
• Write PWA reporting into every subcontract. Subcontractors should deliver payroll, classification and apprentice records as part of normal progress reporting.
• Track apprentice hours across contractors. The 15% requirement and four-worker rule need project-level monitoring.
• Collect domestic content and FEOC certificates at PO stage. Waiting until closeout weakens leverage with suppliers.
• Recalculate after supplier substitutions. Treat every material equipment change as a domestic content and MACR trigger.
• Review O&M and warranty templates before handover. FEOC exposure can arise after construction through effective-control language.
• Keep each facility as its own binder. Separate Forms 3468 and 7220 support should not be replaced by one portfolio-level folder.
• Route legal sufficiency questions to tax counsel. EPCs should avoid signing statements that convert operational evidence into tax advice.

Common Mistakes to Avoid

• Do not treat a signed contract, permit application or engineering drawing as proof of beginning construction by itself.
• Do not assume the 5% Cost Safe Harbor is available without current tax counsel review.
• Do not rely on a single dated photo if there is no continuity evidence afterward.
• Do not treat PTO alone as the full placed-in-service file.
• Do not pool payroll records across projects if the claim is facility-specific.
• Do not let subcontractors report labour categories informally or inconsistently.
• Do not treat domestic content and MACR as the same calculation.
• Do not assume US assembly cures upstream FEOC exposure.
• Do not forget to recalculate after equipment substitutions.
• Do not let EPC staff certify begin-construction or MACR sufficiency.
• Do not close the compliance file at commissioning if O&M, warranty or software agreements can affect recapture.

How This Fits Into a Reslink Workflow

A compliance file assembled during tax season from scattered folders is exactly the kind of file that fails under review. The evidence this guide describes exists inside the normal EPC workflow: design revisions, BOMs, procurement decisions, site photos, daily logs, commissioning records, supplier certificates, O&M scopes and handover packages.

Reslink helps EPC teams keep project documentation attached to the design and proposal record instead of separating compliance evidence from the job that created it. That matters because a bankable proposal is no longer just a price, layout and generation estimate. For tax-credit-backed projects, it also needs a documentation trail that can survive review long after construction is complete.

Reslink should not replace tax counsel. It should make sure the project evidence tax counsel needs is not lost.

See how Reslink keeps design, BOM and compliance documentation attached to the project record from day one → Book a demo

Frequently Asked Questions

Q1. What documentation does the IRS actually expect for a begin-construction claim?

There is no single document. For a physical-work position, preserve dated photographs, construction logs, contractor sign-ins, fabrication records and a contemporaneous narrative of what work occurred. For a cost-based position, preserve invoices, cost ledgers, purchase orders, payment records and continuity evidence. Tax counsel should decide which method is legally available and sufficient.

Q2. Does missing July 4, 2026 automatically eliminate the Section 48E credit?

No. The safer rule is that a wind or solar facility beginning construction after July 4, 2026 must generally be placed in service before 2028 to avoid the OBBBA termination rule. If it begins construction after July 4, 2026 and is placed in service after December 31, 2027, the credit is unavailable.

Q3. Can an EPC skip the labour documentation file for a small commercial project?

Possibly, but the exception itself must be documented. Certain facilities below one megawatt AC can qualify for the increased credit without satisfying PWA requirements, and older projects may also fall outside the requirement. Preserve the capacity basis, design package and tax-counsel treatment rather than leaving the labour folder empty.

Q4. What belongs in the PWA file?

The file should include wage determinations, worker classifications, payroll records, hours, fringe benefits, apprentice-hour records, good-faith apprenticeship requests, subcontract clauses and correction-payment records. For Section 48E, repairs and alterations can create wage obligations for five years after placed in service.

Q5. Is domestic content the same as MACR?

No. Domestic content supports a bonus credit and uses its own steel/iron and manufactured-product calculations. MACR tests material assistance from prohibited foreign entities. A project can pass one and fail the other, so both calculations should be documented separately.

Q6. Does MACR need to be rechecked after construction?

Yes, if sourcing changes. MACR is facility-specific, and supplier substitutions or major component changes can alter the calculation. The original pass/fail conclusion is not enough if the final BOM no longer matches the original procurement file.

Q7. Who is responsible for supplier certificates?

The taxpayer claiming the credit is responsible for the tax position, but EPC procurement records often contain the evidence. EPCs should collect supplier certificates, BOMs, POs, invoices and country-of-origin records during procurement and preserve them for the client and tax counsel.

Q8. What is the 10-year FEOC recapture issue?

For certain Section 48E claims, payments or agreements that grant effective control to a specified foreign entity within the 10-year post-placed-in-service period can trigger recapture. The practical risk can arise through O&M, warranty, software, remote monitoring, inverter firmware or BMS agreements, not just original equipment procurement.

Q9. Should the EPC certify whether the file is enough?

No. The EPC should assemble and preserve dated evidence. Tax counsel or a CPA should decide whether the evidence is legally sufficient for Section 48E, PWA, domestic content, MACR, FEOC or recapture purposes.

Q10. How long should the file be retained?

Because different rules create different windows, the practical answer is at least ten years after placed in service for the full compliance binder, with specific attention to the five-year PWA repair window, six-year supplier/MACR documentation period and ten-year FEOC recapture exposure.

Sources

• IRS Instructions for Form 3468 (2025)
• IRS Domestic Content Bonus Credit
• IRS Instructions for Form 7220
• IRS release IR-2026-23 on material assistance guidance
• IRS Prevailing Wage and Apprenticeship FAQ
• IRS Notice 2018-59
• Sidley Austin: One Big Beautiful Bill Act — Navigating the New Energy Landscape
• Kirkland & Ellis: OBBBA Brings Big Changes to Green Energy Tax Credits
• Reunion Infrastructure: Comprehensive Guide to Prohibited Foreign Entities
• Reunion Infrastructure: Section 48 ITC Due Diligence Guide
• Cherry Bekaert: IRA Prevailing Wage and Apprenticeship Requirements Guidance
• PwC: IRS Modifies Domestic Content Credit Bonus Safe Harbor
• EnergyScape Renewables: Solar Project Compliance and IRS Audit Documentation