OBBBA Poses Drastic ITC Changes
The One Big Beautiful Bill Act (OBBBA) poses legislation that could drastically change the future of solar profitability. Passed in a midnight session in the House on May 22, 2025, the OBBBA proposed a full repeal of the Investment Tax Credit (ITC).
Solar tax credits have consistently been a large topic of discussion, but this Bill proposes a harsh deadline for repealing the ITC, rather than phase-outs like we’ve seen in the past. If the OBBBA is passed as is, this repeal would go into effect 60 days after the Bill is signed – with the July 4th recess being the current goal for passing the final Bill into law.
The OBBBA is currently with the Senate for debate. While there has been a draft released from the Senate Finance Committee that outlines a lighter stance than the House's harsh ITC deadline, in this newsletter, we’ll focus on what the Bill in its current form means for the future of the ITC and how you can maximize your solar profitability.
Details of the OBBBA
As a reminder, there is currently a 30% ITC for solar projects. If the Bill is passed as it reads now, here’s what we can expect:
To qualify for the ITC before it is repealed, your project must begin construction within 60 days of the bill’s enactment and must be placed in service by the end of 2028.
To “begin construction” you must either incur at least 5% of the total project cost or start work that’s integral to the final project, and both methods require continuous progress towards completion.
Failure to meet either deadline will disqualify your project from receiving the ITC.
Once the Bill is passed, after the 60-day deadline is reached, there will be no more opportunity for commercial solar projects to qualify for the ITC.
This strict repeal of the ITC could drastically increase payback periods for solar projects. To ensure your project receives the 30% ITC, the best course of action is to safe harbor your project as soon as possible. There are a couple of ways that your project can still secure the ITC if the OBBBA is passed as is:
The project owner/taxpayer must incur at least 5% of the total project cost within 60 days of the Bill passing into law. You must spend this 5% on qualifying costs such as engineering costs, down payments on modules or inverters, or equipment deposits.
You must start physical work of a significant nature on the project. This cannot just be prep work like permitting or admin, but could include work such as site excavation, installing racking, or pouring concrete pads for inverters.
For either method, your project must show continuous progress towards completion once started.
The Senate Finance Committee Draft
As mentioned above, the Senate released a draft showing a lighter stance on the harsh ITC deadline and will propose a phase-out instead. From the United States Senate Committee on Finance draft text released June 16, 2025:
If construction begins in 2025, you will be eligible for the full ITC.
If construction begins in 2026, you will be eligible for 60% of the available ITC.
If construction begins in 2027, you will be eligible for 20% of the available ITC.
Complete phase-out of the ITC by 2028.
The Senate draft also includes much gentler treatment of energy storage, allowing energy storage projects to qualify for 100% of the ITC for projects beginning construction before 2033. Despite this, it does restrict access to tax credits for any project started after 2025 if the project receives materials from any prohibited foreign entities (this includes materials from China).
The Best Path Forward
As we know, the ITC is a very important part of solar profitability, but it is not the end-all, be-all when it comes to investing in on-site solar or energy storage. You will still see powerful benefits such as significant savings from reducing purchases of expensive utility power, lower demand charges through smart peak load management, extra income from demand response programs, and resiliency with reliable power during outages.
There are many moving parts in the world of solar and renewable energy right now. As we continue to navigate these changes, the best way to ensure you’re receiving optimal savings and tax credits is by getting your project started as soon as possible. Whether the House version, the Senate version, or another revised version of the OBBBA is passed, we can only expect that the current version of the ITC is the best we’re going to see in years to come.
We’re here to be your Renewable Energy Partner to educate and guide you through the best path forward. Reach out to us today at (209) 668-5303 to secure your project and long-term energy savings before these harsh changes are enacted.
Read the One Big Beautiful Bill Act here: H.R.1 - 119th Congress (2025-2026): One Big Beautiful Bill Act | Congress.gov | Library of Congress
Read the draft text from the United States Senate Committee on Finance here: [2025-06-16] Chairman Crapo Releases Finance Committee Reconciliation Text | The United States Senate Committee on Finance