Internal Revenue Bulletin 2025–36

Bulletin 2025–36: OBBBA Guidance, Partnership Relief, and Rates

This edition of the Internal Revenue Bulletin (IRB) 2025-36 contains guidance on several key tax areas. Chief among these are updates related to the One, Big, Beautiful Bill Act (OBBBA) concerning the tax credits available for wind and solar facilities under Section 45Y, the clean electricity production credit, and Section 48E, the clean electricity investment credit. Notice 2025-42 provides crucial clarifications on the "beginning of construction" requirements for these facilities. This guidance is especially pertinent given the looming sunset dates imposed by the OBBBA. Furthermore, the IRB includes proposed regulations (REG-108822-25) offering relief for partnerships regarding information reporting obligations on Form 8308, Report of a Sale or Exchange of Certain Partnership Interests. Finally, as is routine, the bulletin also publishes updated corporate bond yield curves (Notice 2025-43), Applicable Federal Rates (AFR) (Rev. Rul. 2025-17) for September 2025, and announcements regarding the revocation of exempt organizations (Announcements 2025-24 & 25).

Strict Enforcement: New Wind & Solar Construction Deadlines (Notice 2025-42)

Following the discussion of partnership reporting relief, this section delves into Notice 2025-42, which addresses the "Beginning of Construction" (BOC) requirements for wind and solar facilities seeking to claim the clean electricity production credit under Section 45Y and the clean electricity investment credit under Section 48E. The notice reflects the government's commitment to strictly enforce new deadlines introduced by the One, Big, Beautiful Bill Act (OBBBA) and Executive Order 14315.

The Rule

Notice 2025-42 provides guidance, consistent with Executive Order 14315, regarding when construction of an applicable wind facility or applicable solar facility has begun for purposes of determining whether such facility is subject to credit termination provisions. The notice defines key terms: the "Credit Termination Date" as December 31, 2027, and the "Beginning of Construction Deadline" as July 4, 2026. These dates were mandated by amendments to Section 45Y(d)(4) and Section 48E(e)(4) introduced by the OBBBA. Specifically, facilities placed in service after December 31, 2027, are ineligible for the Section 45Y and Section 48E credits if construction began after July 4, 2026.

The Context

The issuance of Notice 2025-42 is directly linked to the enactment of the One, Big, Beautiful Bill Act (OBBBA). The OBBBA, signed into law on July 4, 2025, amended Sections 45Y and 48E, introducing a credit termination date for applicable wind and solar facilities. Executive Order 14315, issued shortly thereafter, mandated the Treasury Department to strictly enforce these termination provisions. The IRS, through Notice 2025-42, is implementing this directive, aiming to prevent what it perceives as "artificial acceleration" or manipulation of eligibility for these credits. This marks a significant shift in policy, prioritizing stricter enforcement over the incentives previously offered under the Inflation Reduction Act. The OBBBA also targets "Prohibited Foreign Entities," denying credits to facilities receiving "material assistance" from or making substantial payments to specified foreign entities (SFEs).

The Implication

Notice 2025-42 significantly tightens the standards for establishing the beginning of construction. Taxpayers must now rely on the "Physical Work Test" to demonstrate that construction has commenced before the July 4, 2026, deadline. This test requires demonstrating significant physical work on the facility itself. Critically, the notice explicitly excludes the "Five Percent Safe Harbor" as a method to establish the beginning of construction, except in very limited circumstances, such as for low-output solar facilities where physical work is demonstrably difficult. This represents a departure from prior guidance, particularly Notice 2022-61, which allowed taxpayers to establish BOC by incurring costs equal to at least five percent of the total project cost. By eliminating the Five Percent Safe Harbor (except in very limited instances), the IRS is signaling its intent to scrutinize claims for the Section 45Y and Section 48E credits more rigorously, demanding concrete evidence of physical progress to qualify for the credit before the termination date. This increased scrutiny will likely lead to more disputes and potentially litigation, as taxpayers struggle to meet the stricter "physical work" requirements within the compressed timeframe.

Partnership Reporting Relief: Form 8308 Deadlines (REG-108822-25)

The prior section detailed how the One, Big, Beautiful Bill Act (OBBBA) and Executive Order 14315 have led to stricter enforcement of "beginning of construction" rules for clean energy projects. Now, we turn to a deregulatory move by the IRS aimed at easing the administrative burden on partnerships related to information reporting on transfers of partnership interests. This concerns Form 8308, Report of a Sale or Exchange of Certain Partnership Interests.

The proposed regulations address challenges partnerships face in complying with reporting requirements under Section 6050K, which mandates information reporting when there is a sale or exchange of a partnership interest that involves Section 751 assets. Section 751, often called the "collapsible partnership" rule, prevents partners from converting ordinary income into capital gain by selling a partnership interest. It recharacterizes gain attributable to "hot assets"— unrealized receivables and inventory items— as ordinary income.

1. The Rule:

Specifically, the IRS is proposing to modify the reporting obligations for partnerships when certain interests are sold or exchanged. Partnerships have found it difficult to provide Part IV of Form 8308, which deals with the calculation of gain or loss attributable to Section 751 "hot assets" (inventory items and unrealized receivables), to the relevant partners by the existing January 31 deadline.

The proposed regulations (REG-108822-25) seek to alleviate this burden by removing §1.6050K-1(c)(2) from the regulations. This effectively delays the deadline for furnishing Part IV of Form 8308 to partners until the due date of the partnership's tax return (Form 1065, U.S. Return of Partnership Income), including extensions.

2. The Context:

This proposed change comes after the IRS issued temporary relief in prior years. IRS Notices 2024-19 and 2025-02 provided penalty relief for partnerships struggling to furnish a complete Part IV of Form 8308 by the January 31 deadline for 2023 and 2024 transfers, provided they furnished Parts I-III by January 31 and the full form by the partnership's tax return due date. This proposed regulation aims to codify a more permanent solution. This action can be viewed as a deregulatory move, responding to practical difficulties encountered by partnerships in gathering and processing the necessary information within the original timeframe.

3. The Implication:

Tax practitioners should note that these are proposed regulations. However, partnerships can rely on these proposed regulations for transfers of partnership interests in 2025. This change provides partnerships with additional time to accurately compute and furnish the required information, aligning the reporting deadline with the date when all necessary data is typically available for preparing the partnership's tax return. This will likely reduce the incidence of penalties for late or incomplete reporting related to Form 8308. Practitioners should carefully review the final regulations when issued to ensure full compliance.

September 2025 Corporate Bond Yield Curves (Notice 2025-43)

Following the partnership reporting relief announcement, the IRS issued Notice 2025-43, providing guidance on corporate bond yield curves and segment rates. This notice addresses the corporate bond monthly yield curve, corresponding spot segment rates under Section 417(e)(3), which governs minimum present value requirements, and the 24-month average segment rates under Section 430(h)(2) of the Internal Revenue Code. Section 430 governs the minimum funding requirements that apply to single-employer defined benefit plans (excluding CSEC plans under Section 414(y), which addresses cooperative and small employer charity pension plans) under Section 412, which defines funding standards for pension plans. It also provides guidance on the interest rate for 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II), as in effect for plan years beginning before 2008, and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I). Section 431 outlines the minimum funding requirements for multiemployer plans under Section 412.

The 24-month average segment rates applicable for August 2025, before any adjustment for the 25-year average segment rate limits, were specified as follows: 4.86 for the first segment, 5.36 for the second segment, and 5.67 for the third segment. These rates are crucial in determining a plan’s target normal cost and funding target, as specified in Section 430(h)(2). Under this provision, present value is generally determined using three 24-month average interest rates (segment rates), each applying to cash flows during specified periods.

The notice also details the rate of interest on 30-year Treasury securities for July 2025, which was determined to be 4.92 percent. For plan years beginning in August 2025, the weighted average of the rates of interest on 30-year Treasury securities was 4.17, with a permissible range of 3.75 to 4.38 (90% to 105%). These figures are relevant for calculating current liability for purposes of the full-funding limitation described in Section 431(c)(6)(A), where the interest rate used cannot be more than 5 percent above or 10 percent below the weighted average of rates on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year, as per Section 431(c)(6)(E)(ii)(I).

September 2025 Applicable Federal Rates (Rev. Rul. 2025-17)

Following the determination of the corporate bond yield curve, spot segment rates, and 30-year Treasury rates for pension plan funding, the IRS also publishes applicable federal rates (AFRs) for various tax purposes. Revenue Ruling 2025-17 provides these rates for September 2025. These rates, prescribed under Section 1274(d), which dictates the determination of the issue price for certain debt instruments issued for property, impact various areas of the tax code.

Specifically, Rev. Rul. 2025-17 details the short-term, mid-term, and long-term AFRs. The annual short-term AFR is 4.00%, the mid-term AFR is 4.04%, and the long-term AFR is 4.83%. The ruling also includes adjusted AFRs under Section 1288(b), which addresses the treatment of original issue discount on tax-exempt obligations. The adjusted annual rates are 3.03% (short-term), 3.06% (mid-term), and 3.65% (long-term).

Furthermore, the ruling specifies rates relevant to Section 382, which limits net operating loss carryforwards and certain built-in losses following an ownership change. The adjusted federal long-term rate for September 2025 is 3.65%, while the long-term tax-exempt rate is 3.71%. Finally, the Section 7520 rate, used for valuing annuities, life estates, and remainder interests, is 4.80%. These rates play a crucial role in various calculations impacting tax liabilities and financial planning.

Exempt Organization Revocations (Announcements 2025-24 & 25)

Following the discussion of applicable federal rates, the IRB also details the revocation of tax-exempt status for several organizations. These revocations affect the deductibility of contributions made to these entities under Section 170 of the Internal Revenue Code. Section 170 allows individuals and corporations to deduct contributions made to certain qualified organizations, primarily those described in Section 501(c)(3), which are organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes.

Announcement 2025-24 reports that the IRS revoked its determination that "Foundation for Those With Special Needs," located in Orlando, FL, qualifies as an organization described in Sections 501(c)(3) and 170(c)(2). This revocation is effective January 1, 2026.

Announcement 2025-25 lists several organizations whose tax-exempt status under Sections 501(c)(3) and 170(c)(2) has also been revoked. These include "John Derner Foundation" in Milford, IA, with a revocation effective January 1, 2021, and "Second Paw Dog Rescue" at multiple locations (Abilene, TX; Jonesville, LA; Newton, MS; Knox City, TX; and McCall Creek, MS), all with a revocation effective January 1, 2022. The announcement also lists "Legacy of Faith Partners" in Rocklin, CA, revoked effective January 1, 2022.

The announcement clarifies that generally, the IRS will not disallow deductions for contributions made to these listed organizations on or before the date of the announcement in the Internal Revenue Bulletin. However, the IRS retains the right to disallow deductions for any contributions made after the organizations ceased to qualify under Section 170(c)(2) if the organization did not timely file a suit for declaratory judgment under Section 7428, which allows organizations to seek judicial review of an adverse determination regarding their tax-exempt status. Furthermore, deductions can be disallowed if the contributor (1) had knowledge of the revocation, (2) was aware that such revocation was imminent, or (3) was responsible for or aware of the activities leading to the revocation. Tax practitioners must advise clients to cease making contributions to these organizations to ensure deductibility, and to be wary of any solicitations from these organizations given the revocation dates.