CSG Law Alert: How One Big Beautiful Bill Act Alters the Investment Tax Credit Timeline for Solar Projects
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (the “Act”), significantly altering the deadlines solar energy projects must meet to qualify for the investment tax credit (“ITC”) under the Inflation Reduction Act (the “IRA”).
Under the IRA, solar projects under 1 megawatt (AC) automatically qualify for an ITC equal to 30 percent of qualified project costs. Solar projects of 1 megawatt (AC) or more qualify for the 30 percent ITC only if prevailing wage and apprenticeship requirements are met. Projects that use specified quantities of domestic content qualify for an additional 10 percent ITC. Other site-specific adders are available for projects, including an additional 10 percent for projects located in energy communities, which include certain brownfield sites. A stacking of the adders can result in a total ITC of 60 percent of qualified project costs.
Under the Act, in order to qualify for the ITC, solar projects must be either (i) placed in service on or before December 31, 2027, or (ii) commence physical construction before July 4, 2026, provided once construction is commenced, it must be continuously pursued to completion.
Under the IRA, a solar project was deemed to have commenced construction either by the performance of substantial physical work or by incurring at least 5 percent of the total project costs. On August 15, 2025, the Department of Treasury issued a notice eliminating the 5 percent safe harbor for solar facilities with an output of more than 1.5 megawatts (AC). As such, solar projects with an output of more than 1.5 megawatts (AC) must begin “physical work of a significant nature,” and continuously pursue construction to completion, to qualify for the ITC.
Under the Act, investors may avail themselves of 100 percent bonus depreciation in the year in which the solar facility achieves commercial operation. For those who opt out of bonus depreciation, accelerated five-year depreciation is available. The depreciation basis is reduced by 50 percent of the ITC claimed.
For more information regarding the Act and its impact on renewable energy, please contact a member of our Renewable Energy & Sustainability Team: Stephen A. Kisker and Amy Howlett or our Tax Team: Milan Jakubcak and Spencer Tierney.