Author: ASES Staff   Published: 7/4/2025  American Solar Energy Society 

The U.S. Senate recently passed HR 1, a bill with provisions that may affect future eligibility for clean energy tax incentives. The legislation now moves to the House for further debate.

 

Key provisions related to renewable energy include:

• For Section 48E (business investment tax credit – commercial solar), projects must either begin construction within 12 months of the bill’s enactment (e.g., by July 4, 2026), OR be placed in service by December 31, 2027, to remain eligible for the credit. Section 48E projects that begin construction within the 12-month window will not be subject to the 2027 placed-in-service deadline. Instead, under existing IRS continuity safe harbor rules, they will generally have up to four years to be placed in service without losing credit eligibility.
• Leased and PPA-based residential systems remain eligible under Section 48E, provided the timing requirements listed above are met. The credit is claimed by the system owner (usually the installer or financing entity).
• Solar projects will STILL be eligible for accelerated Modified Accelerated Cost Recovery System (MARCs) Depreciation after all, unlike an earlier version of the Senate bill.
• The Foreign Entity of Concern (FEOC) sourcing restrictions for “Qualifying Facilities” such as solar begin in 2026 now instead of mid-year this year, with thresholds requiring 40% domestic content in 2026, 45% in 2027, and increasing thereafter.
• Similar FEOC thresholds apply to energy storage systems, with more stringent benchmarks 55% domestic content in 2026, 60% in 2027 and increasing thereafter.
• The bill fixes an old IRA bill drafting deficiency by clarifying that domestic content bonus amounts and eligibility criteria apply to 48E projects in the same way as to 45Y projects.
• The residential solar tax credit under Section 25D becomes unavailable for expenditures made after December 31, 2025.
• The bill explicitly prohibits 25D eligibility for leased solar hot water and battery storage systems, even though all leased systems are generally already excluded for 25D by current legal interpretations of the tax code.
• The excise tax that had been proposed as an additional penalty for projects not meeting FEOC sourcing requirements has been removed from the final Senate bill.

These changes could influence project timelines, procurement strategies, and investment decisions across the clean energy sector.

 

What you can do

• Every House Rep. needs to know these implications of the bill. Contact yours now.
• Join us at the SOLAR 2025 Conference on August 4-6 in Boulder, CO, for in-depth sessions, expert panels, and real-time discussions on the future of renewable energy legislation.