The One Big Beautiful Bill (OBBB) represents one of the most comprehensive clean energy legislative updates since the IRA. For solar investors, it means:
- Accelerated Phase-Out of Credits
- Securing Construction state date to avoid PIS deadline
- Foreign Entity Restrictions
- Material Assistance Cost Ratio (MACR) Compliance
- Consulting tax counsel early to navigate new regulations
One Big Beautiful Bill (OBBB) Key Changes and Updates to ITC:
- Section 48E credit will not be available for qualified solar facilities placed in service after December 31, 2027, if construction began after July 4, 2026 (12 months from enactment of the bill).
- Projects that start within 12 months from the enactment of the bill (i.e., BOC before July 4, 2026) are eligible based for a 4-year continuity safe harbor PIS deadline.
- Projects starting construction after December 31, 2025, must not involve material assistance from prohibited foreign entities or are owned by foreign-influenced entities (FEOC) to be eligible for the credit.
- The bill corrects the domestic content bonus for ITC projects. Construction started before June 16,2025; the adjusted percentage is 40%. If construction begins after June 16, 2025, and before January 1, 2026, the adjusted percentage is 45%. If construction begins in 2026, the adjusted percentage is 50%, and if construction begins after 2026, the adjusted percentage is 55%.
- The bill imposes new restrictions on elective pay. No elective pays for projects tied to “foreign entities of concern” (e.g., China, Russia, North Korea, Iran). Applicable to taxable years beginning after July 4, 2025.
- The bill preserves the ability to transfer tax credits. However, credits cannot be transferred to Specified Foreign Entities (SFEs) or Foreign Influenced Entities (FIEs). Applicable to taxable years beginning after July 4, 2025.
Bonus ITC Opportunities Under the IRA/OBBB
The IRA introduced additional bonus credits, and the OBBB further clarified and expanded several provisions, especially for commercial and utility-scale projects:
- 10% Domestic Content Bonus: For using U.S.-manufactured components.
- 10% Energy Community Bonus: For projects in areas impacted by fossil fuel transitions (Census tract) or contaminated by hazardous substances or pollutants (Brownfield site)
- Up to 20% Low-Income Community Bonuses: For systems benefiting underserved populations.
Example:
Installing a $500,000 solar array could yield a $150,000 tax credit (30%) against your federal liability. If the project site is in the energy community or materials used in the project meets the domestic content requirement threshold, an additional $50,000 bonus (10%) could be added to the base credit.
