On July 4th, 2025 President Trump signed his so-called One Big Beautiful Bill Act (OBBBA) into law. This sweeping legislation includes major changes to solar and energy storage incentives, most notably an abrupt end to the Investment Tax Credit (ITC). Key provisions affecting ITC eligibility for commercial solar systems begin phasing in over the next 6 to 18 months.
Bottom line for businesses seeking to build a commercial solar or solar + storage system: If your project is not yet safe-harbored, now is the time to act to secure solar tax incentives for your business!
Key Changes to Solar and Clean Energy Credits
Phasedown of the Investment Tax Credit (ITC) for commercial solar.
○ The law will abruptly phase out the 30% ITC for commercial solar projects starting in 2026. There are three important Safe Harbor dates to consider:
○ 12/31/2025 – Begin construction before this date to avoid “Prohibited Foreign Entity (PFE)” rules. More on this in the “Stricter Rules on Foreign Content” section below.
○ 7/4/2026 – Begin construction before this date to avoid a placed in service deadline of 12/31/2027, otherwise there is no deadline. “PFE Rules” do apply.
○ 12/31/2027 – Projects that began construction after 7/4/2026 must be “placed in service” by this date.
Commercial Solar Tax Credits: Transferability Preserved
○ The bill preserves the ability to sell or transfer the ITC to third parties, maintaining financial flexibility for project financing and tax equity structures.
Stricter Rules on Foreign Content
○ Starting in 2026, commercial solar projects that use key components (e.g., batteries, inverters, modules) from Prohibited Foreign Entities (PFEs) — including certain Chinese companies — will be ineligible for tax credits.
○ This is known as the “material-assistance bar.” It will require tighter supply chain documentation and sourcing compliance moving forward.
No Impact to Projects Already Under Construction
○ Projects that have already started construction or meet the “safe harbor” provisions under existing IRS guidelines are not affected by the new laws on clean energy tax credits.
Firm Power Tax Credits
○ The law extends “technology-neutral” tax credits for firm power sources—including geothermal, hydroelectric, nuclear, and now battery energy storage systems.
○ Eligible energy storage projects would continue to qualify for a 30% Investment Tax Credit (ITC) through 2033. This is a ray of positive news for the impact of the OBBBA on commercial solar projects that include energy storage systems (ESS).
Reinstated 100% Bonus Depreciation:
○ You can now depreciate 100% of the cost of the system in year 1.
More Changes Coming for the New Laws on Commercial Solar Systems
On July 7, 2025 Trump signed an executive order demanding that the Treasury redefine safe harboring rules. Specifically, he ordered the Treasury to issue, within 45 days of the law’s enactment, “… new and revised guidance … to ensure that policies concerning the ‘beginning of construction’ are not circumvented, including by preventing the artificial acceleration or manipulation of eligibility and by restricting the use of broad safe harbors unless a substantial portion of a subject facility has been built.”
Our Recommendations to Maximize Incentives for Commercial Solar Projects
Engage Early with the HES Renewables Team:
Collaborate with us now to optimize your project structure, financing strategy, and construction milestones. We’ll help you lock in the most favorable incentives for your solar system before policy shifts create uncertainty.
Accelerate Your Project Timeline:
Act now to safe harbor your commercial solar project. HES Renewables is experienced in the rules regarding Safe Harbor and can walk you through the options and required steps. Act BEFORE 12.31.25 to lock in your tax credit without PFE restrictions.
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Important Note: While we strive to provide accurate, timely news, HES Renewables is not a tax advisor, and this blog post does not constitute legal or tax advice. We strongly encourage companies to consult with their internal tax team or external tax professionals to review how these developments apply to each business’ specific financial situation.