The OBBBA bucket-two window closed on July 4, 2026 for beginning-of-construction purposes. Projects that qualified into bucket-two, on either the physical work test or the 5% expenditure test under IRS Notice 2025-42, now have a placed-in-service deadline of December 31, 2030 under the four-year continuity presumption. The one-month-in coverage from August 4 walked through the mechanics of the bucket-two window itself. What comes next is the documentation-completion side, and the working deadline that tax counsel and project sponsors have on the calendar is December 31, 2026 for the 5% election documentation set. That date is not a Treasury filing deadline. It is the internal completion date for the audit package that supports the 5% election on the 2026 return, and it is the date that a sponsor’s tax counsel wants the file closed by before the FY2027 IRS examination cycle opens on 2026 originally-filed returns.
The 5% election is the more paperwork-intensive of the two beginning-of-construction methods, and the paperwork is what carries the four-year continuity presumption. The physical work test, in bucket-two projects that qualified on that basis, has its own documentation set on the physical-work side (executed EPC contracts with actual work performed by July 4, off-site component fabrication logs, on-site excavation or foundation photos with dated GPS metadata). The 5% test documentation set has five distinct categories, and the audit failure mode on any single category is the loss of the four-year continuity presumption for the whole project.
The five categories of the 5% documentation set
The audit-ready 5% documentation set has the following components.
First, a master supply agreement or equipment purchase order that was executed and dated inside the bucket-two window. The document date matters, and the counterparty must be a third party (an affiliate or an in-house entity does not satisfy the transferred-title requirement). The agreement can be for major components (modules, trackers, inverters for solar; nacelles, towers, blades for wind) or for a bundled equipment package. What it cannot be is a memorandum of understanding, a letter of intent, or a term sheet. The agreement has to be binding on both counterparties at the beginning-of-construction date, with a defined price and a defined quantity.
Second, evidence of transferred title on components equal to at least 5% of the total project cost basis. The 5% figure is a total project cost basis figure at the beginning-of-construction date, not a total contract price figure. Cost basis includes eligible equipment, transportation to the site or to storage, installation labor, and capitalized interest during construction. It does not include land acquisition, land improvements not integral to the energy property, or non-capitalized soft costs. The transferred-title evidence is typically a paid invoice with a title-transfer clause and a corresponding bill of sale or comparable transfer document. The paid-invoice element is important: an unpaid invoice at year-end 2026, even with title transferred, is a weaker record than a paid invoice.
Third, delivery or storage records for the transferred components. The 5% election does not require the components to be installed at the project site by the beginning-of-construction date. It does require the components to be delivered to a location the taxpayer controls (the project site, a bonded warehouse, a manufacturer’s storage yard on a title-transferred basis). The storage arrangement has to be documented, dated, and continuous through the placed-in-service date. A storage arrangement that lapses in an intervening year, without a corresponding transfer to a new location, breaks the continuity chain.
Fourth, a project cost basis worksheet that is locked to the beginning-of-construction date. The worksheet is the calculation that supports the 5% figure and that ties the transferred-title amount to a total project cost basis. It has to be prepared as of the beginning-of-construction date and it has to be preserved in its as-of form. A worksheet that has been updated for cost overruns or scope changes after the beginning-of-construction date, without preservation of the original, is not the audit record. The as-of worksheet is what the IRS examiner will ask for.
Fifth, continuous efforts evidence dated to each intervening year through placed-in-service. The four-year continuity presumption presumes continuous efforts across the four years between beginning of construction and placed-in-service. The presumption is rebuttable, and the taxpayer’s file needs contemporaneous evidence in each intervening year to defend it. For bucket-two projects, that means calendar year 2026, 2027, 2028, 2029, and 2030 each need a documented continuous-efforts entry. Acceptable evidence in each year includes additional equipment orders, incremental payment milestones, permitting submissions or approvals, interconnection agreement progress, and site preparation work. Evidence that is dated to the wrong calendar year, or that is undated, does not satisfy the presumption.
Why December 31, 2026 is the internal working deadline
The December 31, 2026 date is the year-end for the first calendar year of the four-year presumption window. The 2026 originally-filed return, whether it is a partnership return for a project-level entity or an individual or corporate return that picks up the project through a Schedule K-1 or a Form 8582 or a Form 3468 investment credit filing, is the return on which the beginning-of-construction date is first substantiated. The IRS examination cycle for FY2027, which opens in the fall of 2027 for 2026 originally-filed returns, is the first examination opportunity for the 5% election.
Tax counsel typically want the audit package closed by year-end of the beginning-of-construction year, for two reasons.
The first reason is contemporaneous evidence. The IRS’s position on beginning-of-construction documentation, restated in Notice 2025-42 and in prior notices going back to Notice 2013-29, is that the strongest evidence is contemporaneous evidence. A supply agreement that is executed and dated in the bucket-two window is contemporaneous. A payment record that is dated in the bucket-two window and paid by year-end 2026 is contemporaneous. A cost basis worksheet that is prepared, signed, and dated in 2026 is contemporaneous. A document that is prepared in 2027 or later, even if it describes 2026 events accurately, is a reconstruction, and reconstructions are weaker under audit.
The second reason is the transferability market. OBBBA bucket-two projects that intend to monetize the credit through Section 6418 transferability need a clean documentation package to price into the buyer’s due diligence. The transferability market’s pricing for 2026 credits, on the secondary side, is compressing the discount for well-documented projects and widening the discount for projects with documentation gaps. A project sponsor that closes its 5% documentation set by year-end 2026 is positioning for a tighter transfer discount in the 2027 to 2028 transfer window. A project sponsor that leaves the documentation set open into 2027 is not.
The interconnection layer
The OBBBA bucket-two documentation set is a tax-side document set, and it sits alongside the interconnection-side document set that the same project runs on the standard cluster study cycle. The two document sets are not the same, and the interconnection-side documents are not, by themselves, sufficient to substantiate a 5% election.
The interconnection agreement itself, when it is executed, is continuous-efforts evidence for the year in which it is executed. It is not beginning-of-construction evidence, because interconnection agreement execution can happen well after beginning of construction. Interconnection deposits are cost basis items and can contribute to the 5% figure if they are paid to a transmission provider by beginning of construction, but they are not, standing alone, transferred-title evidence, because there is no title transfer on a study deposit. The network upgrade cost commitment, once it is fixed in the interconnection agreement, becomes part of the total project cost basis and can move the 5% denominator meaningfully upward. If the network upgrade cost is revised upward after the beginning-of-construction date, the 5% election needs to be tested against the original cost basis worksheet, not against the revised total.
The relationship to the PJM expedited interconnection window covered on August 5 is that the expedited window is a separate interconnection process and is not open to bucket-two solar and wind. Bucket-two projects in the PJM footprint remain on the standard cluster cycle. The interconnection-side documents that a bucket-two project files in 2026 are cluster study milestones, not expedited window filings.
What a completed 2026 package looks like
A closed and audit-ready 5% documentation set for a bucket-two solar project, as of December 31, 2026, includes the executed master supply agreement dated in the January 1 to July 4, 2026 window, paid invoices with transferred title for at least 5% of the total project cost basis, delivery or bonded storage records for the transferred components dated through year-end 2026, a project cost basis worksheet signed and dated in 2026, and one or more continuous-efforts documents dated between the beginning-of-construction date and December 31, 2026.
The package is preserved in its as-of form in the project’s tax file, with a memorandum from tax counsel documenting the file contents. The memorandum is not a Treasury filing. It is the internal record that establishes, in 2026, what the file looked like in 2026. The purpose of the memorandum is to defeat any later argument that the file was reconstructed after the fact.
The project sponsor’s audit exposure on the four-year continuity presumption runs from the 2026 examination cycle through the 2030 placed-in-service year and the subsequent examination of the placed-in-service claim on the 2030 return. The 2026 documentation set is the foundation, and every intervening year builds on that foundation. Sponsors that complete the 2026 set on schedule preserve the presumption at its full strength through the placed-in-service claim. Sponsors that carry an incomplete 2026 set into 2027 carry a weaker presumption, and the weakness compounds across the intervening years.