One Big, Beautiful Act (OBBA): The Impact on Solar
By Sanne Wright and Isaac Baker
It’s been difficult to keep up with the ever-changing federal policy landscape, but given the recent House passage of the One Big Beautiful Bill Act (“OBBA” a.k.a. “HR.1”), we wanted to provide an update on how this legislation may impact our work. Like Biden’s 2022 Inflation Reduction Act (IRA), the OBBA is a reconciliation bill–a special type of legislation that allows for expedited consideration of tax, spending, and debt limit laws. Unfortunately, the OBBA’s impacts on the clean energy industry are significant and, at present, are designed to undo many of the climate investment provisions of the IRA. If passed into law, the language in HR.1 would eliminate tax credits for all wind and solar projects after a sooner-than-expected cutoff date. While the bill’s final contents are far from certain, things are moving quickly. Below, we dive into which solar incentives have been affected so far and how.
In case you haven’t already read it, please check out our recommended 2025 tax credit strategy. It includes a summary of the safe harbor provision, which allows customers to lock in their tax credits under FY 2025 rules if Congress eliminates the credit for future projects.
Summary Table
Detailed Summary:
Section 48(e) Clean Electricity Investment Tax Credit (ITC)
This policy currently provides a 30% base tax credit for commercial solar projects and other carbon-cutting technologies. Under the new bill, this tax credit is eliminated for all projects that do not:
Meet safe harbor requirements within 60 days of the bill’s passage AND
Get placed in service by December 31st, 2028
In other words, in order to hold onto the 30% tax credit, projects already satisfying the safe harbor requirement must be completed by the end of 2028. Projects not yet started have to meet safe harbor requirements within 60 days of the bill’s passage, which is expected to be this year, and then be completed by the end of 2028. This will leave a very narrow window to claim what has become a critical incentive for many projects.
Foreign Entity of Concern (FEOC) Provisions
The bill also tightens restrictions on foreign involvement in solar projects through their supply chain. Given China’s prevalence in the solar supply chain (see our recent blog post on the impact of tariffs) and its status as a foreign entity of concern, it will become virtually impossible to source many of the key components of a solar project. This restriction will become a significant hurdle if the Senate does not eliminate or significantly modify this provision.
Residential Leasing Restrictions
Further - the potential for “operating leases” is eliminated. Operating leases allow a financing entity to own the system for a predefined period of time in order to monetize the tax credit after which they can transfer ownership or continue to lease the system to the host customer. For context, the operating lease is a structure that has been widely used with single-family homeowners, farms, and other small businesses.
The bill also, in a very targeted way, is seeking to eliminate the ability of a 3rd party to claim a 48(e) credit for a solar project on a single-family home (buildings where the resident would otherwise be able to claim the 25D residential tax credit if they were purchasing a system). Preventing third-party owners from claiming the tax credit would gut residential leasing, which is a critical tool to make solar and storage financially viable for homeowners.
Section 48(e) Elective Pay
Elective Pay, implemented under the IRA, allows the 48e tax credit to be captured by tax-exempt entities as a check reimbursement from the IRS. This includes 501(c)3s, tribal nations, and other governmental and public entities. While Elective Pay was not explicitly eliminated in the One Big Beautiful Bill Act, it will only be applicable for tax-exempt entities whose projects meet safe harbor requirements in 2025 and are in service by the end of 2028.
Section 48(e) Transferability
Transferability, also implemented under the IRA, allows for-profit entities to monetize the 48e tax credit by selling it to other for-profit entities. Transferability is useful for companies that have limited tax appetites, need cash, or want to avoid the complexities of tax equity arrangements. For those projects that manage to capture the 48e tax credit despite the impending restrictions, this provision remains intact.
Bonus Tax Credits
Bonus Tax Credits of 10% or 20% were also implemented under the IRA and, depending on which combination of adders a project qualifies for, can increase the total tax credit to between 40% and 70% ( between Domestic Content, Energy Communities, and Low-Income Communities Bonus Tax Credits). Eligible projects are those located in or benefiting low-income communities, including federally subsidized affordable housing. Those located near active or retired fossil fuel infrastructure, brownfield sites, or in census tracts with high fossil fuel industry employment alongside rising unemployment rates receive an additional 10% bonus. Projects sourcing a sufficient percentage of their equipment domestically can receive yet another 10% bonus.
We have already submitted more than 150 bonus tax credit applications on behalf of our clients to meet the priority deadline and will continue to do so through the final deadline on August 1, 2025. Though the bonus tax credits were not explicitly mentioned in the One Big Beautiful Bill Act either, they remain intact only as long as the 48e tax credit does. With the 48e tax credit’s existence under threat, the stakes for projects relying on bonus tax credits are even higher.
Section 25(d) Residential Clean Electricity Investment Tax Credit
This policy, which currently provides the 30% tax credit for residential solar projects, suffered the largest blow. Under the new bill, the tax credit is eliminated for residential projects that are not placed in service by December 31st, 2025. While this does not have direct implications for the commercial projects Resonant Energy works on, this is devastating news for the industry at large and, if implemented, will result in massive job loss in the residential clean energy sector (which provides over 50% of all solar jobs).
What now?
With the One Big Beautiful Bill Act officially passed in the House, the Senate has already begun working on their version in response. Historically, House reconciliation bills initiate the biggest changes to the law. Substantial modifications are expected in the Senate, who often play the role of “narrowing the approach.” We will continue to track policy updates and are prepared to carry our projects through the worst-case scenario. For the most recent policy updates, make sure you are subscribed to our newsletter.
If the changes outlined here are passed, we will work with our clients and partners to ensure safe harbor requirements are met as soon as possible.We will work with clients to expedite contract signing and materials ordering to ensure that we can secure the tax credit for as many projects as possible.
Between the previous Trump administration and the COVID-19 pandemic, navigating change and uncertainty has become one of Resonant’s most-exercised muscles. Luckily, our goal has always been to champion projects at the margin of our industry and our commitment to that remains as strong as ever. Stay tuned.