The 2025 federal budget reconciliation bill is accelerating construction timelines for solar photovoltaic (PV) projects at commercial and tax-exempt properties.
The Commercial Solar Energy Credit, otherwise known as the Investment Tax Credit (ITC), Section 48E currently provides a 30-percent tax credit for owners of a commercial solar PV system. Instead of phasing down starting in 2033, the ITC will now expire on December 31, 2027 (see Section 70513), subject to certain rules and important timelines described below.
Still, renewable energy remains a viable solution. In fact, battery energy storage systems remain eligible for a 30-percent credit through 2033, with phasedown starting in 2034. Solar PV and battery storage projects can provide long-term financial returns: low-cost power supply, lowered operating costs, reduced volatility in energy pricing, resilience amid increasing risk of power outages, and increased property value.
The Philadelphia Energy Authority is here to help you navigate this changing landscape and to support you throughout the solar installation process. Learn more about Solarize Greater Philadelphia’s support services.
Key Takeaways
There are new rules that businesses and solar developers must navigate in order to take advantage of the ITC. The benefits of solar energy persist, however, and will remain worthwhile well beyond these newly imposed deadlines:
🗓️ By December 31, 2025: Projects that begin construction by this date do not need to meet new Foreign Entity of Concern (FEOC) requirements. These projects can receive the full 30-percent credit so long as they are placed in service by 2029.
🗓️ Between January 1 – July 4, 2026: Projects that begin construction in this timeframe are still eligible for the 30-percent credit if placed in service within four years. Must comply with FEOC rules.
🗓️ Between July 4, 2026 – December 31, 2027: Projects that begin construction in this timeframe are still eligible for the 30-percent credit if completed by December 31, 2027. Must comply with FEOC rules.
🔗 Overview of tax credit changes to clean energy projects
That said, certain elements remain unaffected. Tax-exempt organizations can still receive a direct payment for the full amount of the ITC (direct pay). Tax credits can still be transferred from one entity to another in certain circumstances (transferability).
What Counts as “Start of Construction?”
President Donald J. Trump issued an Executive Order on July 7, 2025 requiring the Treasury Department to tighten and clarify ITC eligibility rules. Updated guidance is expected to be issued within 45 days of the Executive Order (August 21, 2025). PEA does not know what the updated guidance will entail, but potential outcomes are:
🚧 The updated guidance may require more spending and/or physical work to be done to meet the “start construction” requirement, which triggers ITC eligibility.
📄 Stricter FEOC compliance checks are also being written.
Foreign Entity of Concern (FEOC): What It Means
Projects using materials or components sourced from a “foreign entity of concern” — particularly materials manufactured in China — may not be eligible for federal tax incentives after December 2025. Solar developers and contractors will need to analyze supply chains carefully to determine how this impacts projects’ eligibility for ITC.
Suppliers will be expected to provide certifications on the source of their components and materials. Solar developers will need to inform their customers as to whether the materials they are purchasing make the project ineligible for the ITC.
Accelerated & Bonus Depreciation: What’s Changed
Accelerated and Bonus Depreciation enables projects to deduct eligible costs over a compressed time period, rather than the full lifetime of the asset. This reduces the owner’s taxable income. Prior to passage of the reconciliation bill, clean energy projects could use a five-year accelerated depreciation schedule.
Now, any clean energy project beginning construction after December 31, 2024 — or otherwise ineligible for the Section 48E tax credits — can no longer apply the five-year accelerated depreciation. That said, all projects, regardless of accelerated depreciation eligibility, may still take a bonus depreciation of 100 percent of the project costs in the first year placed in service.
For more guidance, we recommend you talk to an accountant or tax advisor about project-specific eligibility.
What Commercial Property Owners Should Do Now
If you’re looking to reduce your energy costs and lock in long-term value for your property, the time to act is now. Projects beginning this year face the fewest restrictions all while getting the most of available benefits.
Start the process by obtaining installation quotes. Solarize Greater Philadelphia offers commercial property owners a streamlined path to navigate the installation process:
☀️ A solar feasibility study
✴️ Issuing RFPs to vetted solar developers
🪙 Comparing proposals
🤝Financing and implementation guidance
Additionally, PEA’s affiliate, the Philadelphia Green Capital Corp. has contracted with energy tax advisory firm CliftonLarsonAllen LLP (CLA) to make tax credit support available for the region’s property owners and clean energy project developers.
If you would like personalized advice on how your project may be impacted by the new rules, sign up for a tax advisory support session.