On July 4, US President Donald Trump signed HR 1 in the law. The bill, also known as the “One Big Beautiful Bill Act”, contains a number of provisions with regard to solar energy installations, including the cancellation of section 25D tax credits at the end of 2025 and new timelines and restrictions for tax credits under sections 45y and 48th.
Experts who spoke PV Magazine USA Given details about what these provisions mean for residential sun companies and offered advice for what those companies can do to position their companies for constant success.
In short, they advise companies to concentrate on building the current company with purchased systems, while carefully considering their options when it comes to working with external ownership providers in the future. They also say that companies must collaborate with expert advisers and build relationships with equipment suppliers that can offer guarantees about the eligible tax credit of products they wear.
With regard to the end of paragraph 25D, experts agree that the determination or a homeowner is eligible has shifted from the previous test “in service” to the new “expenses” test of the bill.
“If the homeowner pays the installation in 2025, they can lock the credit, even if the system is later employed,” said Bryen Alperin, partner and director of Foss & Company.
Another important result of the bill is that residential installations under lease and power purchase agreements will continue to be eligible for the tax credits of section 48th as long as certain conditions are met. These conditions have to do with three separate qualification criteria:
- The date of the beginning of construction
- The date on which the system is placed in service
- The fraction of the costs of manufactured products used in a project that can be attributed to materials that are mined, produced or manufactured by a forbidden foreign entity
According to advice from Keith Martin, a partner and tax and project financing expert at the Norton Rose Fulbright law firm, each solar project can be eligible for the 48th tax credit if the end of 2027 is employed. In addition, solar projects that start with construction by July 4, 2026, for the credit when the system starts in the construction of construction within four years of the year after the year after the year after the year. With the right schedule, this living companies can keep working for years.
HR 1 codes the current IRS rules for the start of construction under IRS knowledge 2013-29 and 2018-59, both of which determine that project developers can be eligible for the credits in a certain tax year by starting “starting physical work of an important nature” or by having “5% or more of the total costs” of the project.
The bill also leaves room for adjustments to those tests under “any subsequently issued guidelines that clarify, change or update the notifications”. Those changes can come earlier than many expected. On July 7, 2025, Trump signed an executive order that, among other things, commissioned the secretary of the Treasury to issue such “new and revised guidelines as the secretary of the Treasury that is suitable and consistent with the applicable laws to ensure that the policy concerning the” start of the construction “is not circumvented.”
While the Outcome of Such Revised Guidance is not Yet Known, Alperin Has Expressed Conerns, Saying “If the Treasury Department Interprets The Rules Narrowly, Projects That Only Passed The 5% Spend Test Lose Cidsical Progresse Couldersical Progress Diversifying Their Safe-Harbor strategies for a ‘Multi Prong’ Approach, and Prepare for Any Outcome. “
It is important that the provisions described above apply to solar projects, but energy storage installations under section 48th will continue to receive the full amount of the tax credit. This can lead to providers from third parties only offering individual financing structures for batteries, and that residential solar installers can make a much larger part of their business in the near future.
Experts advise that residential solar installers must carefully evaluate their options in considering working with third-party financing companies (TPO).
“Animals on the TPO providers in the same way as they come across you,” said Dean Chiaravalloti, Chief Revenue Officer of Solar Insure. “Ask how they deal with reserves for O&M, inverter, solar panel and battery replacements.”
He added that installers “should build a balanced portfolio: multiple cash and loan options, and more than one TPO partner. This is how you protect your company during the next cycle.”
The final major care for solar installers regards HR 1 as ‘forbidden foreign entities’, usually called ‘foreign entities’ or for short FEOC. A forbidden foreign entity is an entity with ties with China, Russia, Noord -Korea or Iran, as determined by the percentage of the entity owned by shareholders from one of these countries, among others.
For projects that will start construction in 2026, a solar project will not be eligible for tax credits on the basis of sections 45 or 48th, unless at least 40% of the value of all manufactured products that are used in a solar project must come from manufacturers who are not prohibited from foreign entities. That percentage will increase by 5 percentage points per year to reaching a level of 60% for facilities that start with construction after December 31, 2029.
Energy storage installations have individual rules for the threshold percentage. The percentage is 55% for facilities that start construction in 2026 and rises by 5% per year to reaching a level of 75% for projects that start construction after 2029.
In practical terms, this means that installers of solar and energy storage must qualify their projects under Safe Harbor provisions by starting the construction before the end of 2025 or finding sources of products that are free of foreign influence. That will be a challenge.
“While the FEOC thresholds and domestic content requirements are gradual, there are limitations of the supply chain,” said Alperin. “It is important to have the relationships to gain access to equipment that is clearly eligible and getting those contracts.”
Chiaravalloti said that “the demand will surpass a lot for these approved products. If you are a contractor, start protecting relationships now.”
Due to the complex nature of the law in question, it is crucial to get the right advice and guidance. Alperin said: “It will be important to work with the right advisers – whether they are lawyers or accountants – and to ensure that you do it right.”
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