When the One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, it significantly reshaped the landscape for clean energy tax incentives. Although many federal credits remain available, businesses considering clean energy investments should be aware of new deadlines, restrictions and compliance requirements.
Two of the most important incentives, the Clean Electricity Investment Credit under IRC Section 48E and the Clean Electricity Production Credit under IRC Section 45Y, continue to offer tax benefits. However, qualifying for these credits has become more complex, making planning essential.
Wind and Solar Projects Face Accelerated Deadlines
Wind and solar projects are now subject to an accelerated phase-out schedule. To qualify for either the investment or production credit, a project generally must:
- Begin construction before July 4, 2026, or
- Be placed in service by December 31, 2027.
For businesses considering a qualifying project, timing is critical. Completing construction alone may not be sufficient. Projects relying on the December 31, 2027, deadline generally need to be fully operational, including necessary permits, regulatory approvals, utility interconnection agreements and other required governmental authorizations. Because utility providers and governmental agencies may experience increased demand as the deadline approaches, early planning and coordination are important.
New Foreign Entity Restrictions
The OBBBA also introduced restrictions related to certain foreign ownership and supply chain relationships. Projects that begin construction after December 31, 2025, may face eligibility issues if they receive material assistance from certain prohibited foreign entities. In addition, prohibited foreign entities are generally not eligible to claim these credits directly.
Businesses should evaluate ownership structures, financing arrangements and supply chains early in the development process to help avoid potential disqualification.
Understanding the Section 48E Investment Credit
The base Clean Electricity Investment Credit under IRC Section 48E is generally 6% of qualified project costs. However, several provisions can significantly increase the available benefit.
Prevailing Wage and Apprenticeship Requirements
Meeting the prevailing wage and apprenticeship requirements increases the credit by a factor of five, from 6% to 30%. To qualify:
- Laborers and mechanics employed by the taxpayer, contractors and subcontractors must be paid at least the applicable prevailing wage rates established by the U.S. Department of Labor.
- Prevailing wage requirements continue to apply during construction and for repairs or alterations performed during the five-year period following placement in service.
- A specified percentage of construction labor hours must be performed by qualified apprentices.
Because these requirements involve extensive documentation and compliance procedures, businesses should address them during the earliest stages of project planning. Contractor agreements, payroll reporting processes, apprentice participation requirements and record retention practices should all be carefully documented.
Additional Bonus Opportunities
Several bonus credit opportunities may also apply, depending on the project facts:
- Small project exception: A 30% credit, rather than the standard 6% credit, may be available for projects with a maximum net output of less than one megawatt or projects that began construction before January 29, 2023.
- Domestic content bonus: Projects meeting domestic content requirements may qualify for an additional 2% credit when claiming the 6% base credit or an additional 10% credit when qualifying for the 30% credit rate.
- Energy community bonus: Projects located within qualifying energy communities may receive an additional 2% credit when claiming the 6% base rate or an additional 10% credit when qualifying for the 30% credit rate.
- Low-income community bonus: Certain projects located in qualifying low-income communities may receive an additional 10% to 20% credit increase, but an allocation from the IRS is required before the bonus may be claimed.
Similar Requirements Apply to the Section 45Y Production Credit
Many of the same concepts, including prevailing wage and apprenticeship requirements, domestic content incentives, energy community bonuses and foreign entity restrictions, also apply to the Clean Electricity Production Credit under IRC Section 45Y. Careful planning is necessary to maximize available benefits under either credit regime.
Geothermal and Energy Storage Projects Largely Unaffected
Unlike wind and solar projects, tax incentives for geothermal and energy storage projects were generally left intact by the OBBBA. As a result, these technologies may continue to present attractive opportunities for businesses pursuing long-term energy investments.
Planning Ahead: Don’t Leave Valuable Credits on the Table
While the OBBBA introduced new deadlines, restrictions and compliance requirements, significant clean energy tax incentives remain available for qualifying projects. The challenge is that many of the most valuable benefits now require earlier planning, more detailed documentation and careful coordination among project teams, contractors and tax advisors.
If your business is considering a solar, wind, geothermal, energy storage or other qualifying energy project, now is the time to evaluate eligibility, assess available incentives and build a strategy around key construction and placed-in-service deadlines. Taking action early can help maximize available credits and avoid costly surprises later in the process.
Talk with your advisor to determine how these changes may impact your planned investments and identify opportunities to maximize available tax benefits.