Federal Solar Tax Credit Deadline Is Approaching

For commercial businesses, nonprofits, schools, libraries, municipalities, counties, and other public-serving organizations, the clock is now ticking on one of the most valuable federal clean energy incentives available.

New federal legislation passed in July 2025 dramatically accelerated the timeline for organizations hoping to take advantage of the 30% federal solar Investment Tax Credit (ITC). For nonprofits, governments, and commercial businesses considering solar energy projects, the deadline to qualify for the federal solar tax credit is fast approaching.

Organizations that delay planning could lose access to this major federal incentive.

Congressional passage of the “One Big Beautiful Bill Act” (OBBBA) significantly shortened the timeline for commercial, nonprofit, and publicly owned solar projects to qualify for the federal solar ITC. Businesses, nonprofits, and local governments now face aggressive deadlines that require immediate action.

The next deadline is July 4, 2026.

Organizations that fail to act before then may lose the ability to preserve access to the 30% federal solar tax credit.

The Investment Tax Credit (ITC) is a federal incentive that helps reduce the cost of installing clean energy systems. Commercial businesses can receive a 30% tax credit for qualifying solar project costs. And through direct pay provisions available to tax-exempt organizations, nonprofits and government entities can receive a 30% reimbursement for qualifying solar project costs.

Solar and other clean energy projects located in federally qualified “energy communities” may be eligible for an additional 10% Energy Community Bonus Credit. More information about this program is available here: https://home.treasury.gov/policy-issues/tax-policy/data-transparency/energy-communities. A map of qualified census tracts is available here: https://arcgis.netl.doe.gov/portal/apps/experiencebuilder/experience/?id=a2ce47d4721a477a8701bd0e08495e1d.

Solar and other clean energy projects using U.S.-produced steel, iron, and manufactured products may be eligible for an additional 10% Domestic Content Bonus Credit. To qualify, 100% of structural steel and iron must be produced in the United States, and 50% of the cost of manufactured components must be U.S.-made for projects starting in 2026, and 55% thereafter. More information about this program is available here: https://www.irs.gov/credits-deductions/domestic-content-bonus-credit. 

Solar and other clean energy projects built in low-income communities may qualify for an additional 10% tax credit bonus through the Clean Electricity Low-Income Communities Bonus Credit Amount Program, with a 20% tax credit bonus available for projects deemed part of a “qualified low-income residential building or project” or a “qualified low-income economic benefit project.” More information about this program is available here: https://www.irs.gov/credits-deductions/clean-electricity-low-income-communities-bonus-credit-amount-program

A key upcoming federal solar ITC deadline is July 4, 2026. Solar projects that “commence construction” before this date can qualify for a four-year “safe harbor” period while still preserving eligibility for the federal solar tax credit.

This means projects may still qualify for the 30% solar ITC even if construction is completed as late as 2030.

Solar projects under 1.5 MW (AC) can generally qualify for safe harbor by spending more than 5% of the total project cost before July 4, 2026. This is commonly known as the “5% Safe Harbor Rule.” For many nonprofits and municipalities, this may include:

• Purchasing equipment
• Securing materials
• Making documented project expenditures

Solar projects larger than 1.5 MW (AC) must satisfy the federal “Physical Work Test.”

This means actual construction activity must begin before the deadline. Examples include:

• Site preparation
• Installing racking systems
• Foundation work
• Other documented physical construction activity

Organizations planning larger solar arrays should begin conversations with installers and engineers now to avoid missing the deadline.

Organizations that do not meet the July 4, 2026, safe harbor deadline must have their solar projects fully completed and interconnected with the utility by December 31, 2027.

This is known as the “placed in service” deadline. After December 31, 2027, the federal solar ITC will no longer be available for non-safe-harbored solar projects. For nonprofits and local governments, this means projects currently in the “thinking about it” stage must act quickly to avoid missing the federal solar tax credit window. 

The residential solar investment tax credit for homeowners expired on December 31, 2025. 

These rules and deadlines apply only to solar and wind projects; energy storage, geothermal, hydro, and nuclear projects remain eligible for the 30% ITC and associated bonus credits through 2033, with a phaseout beginning in 2034.

Beginning in 2026, solar projects seeking to qualify for the federal Investment Tax Credit (ITC) must meet new sourcing requirements tied to “Foreign Entities of Concern” (FEOC) rules.

To help protect access to the federal solar tax credit, businesses, nonprofits, and public entities should ask their solar installer for clear documentation related to FEOC compliance, including:

• Verification that solar modules, inverters, and other major project components are not produced by a prohibited foreign entity – These rules prohibit certain levels of manufactured equipment from companies tied to China, Russia, Iran, or North Korea.
• A clear explanation of what responsibility the installer will assume if the IRS later disallows the organization’s ITC filing due to inaccurate FEOC compliance information provided during the project development process

Early conversations with experienced solar partners can help organizations reduce risk, maintain eligibility, and avoid costly delays.

Because FEOC compliance may impact federal solar tax credit eligibility, businesses, nonprofits, and governments should request clear written documentation from solar developers and installers.

Ask:

• Are the solar modules and inverters sourced from non-FEOC manufacturers?
• Does the project meet federal sourcing thresholds?
• What compliance documentation will be provided?
• What responsibility will the installer take if the IRS disallows the ITC due to sourcing issues?

For commercial businesses, nonprofits, and small governments, the federal solar ITC represents one of the largest incentives available for energy infrastructure projects. But the deadline to qualify for the federal solar tax credit is approaching quickly. Organizations that wait too long could lose access to significant federal funding and miss a major opportunity to reduce operating costs for decades to come.