Within the years because the Inflation Discount Act was enacted, U.S. photo voltaic building has seen constant annual progress in each the industrial and utility markets; the latter charging ahead and making photo voltaic the most important supply of recent electrical energy on the American grid in recent reports.
With the passage of HR1, or the One Massive Stunning Invoice Act, the subsidies bolstering U.S. photo voltaic output are slated to sundown with a considerably shorter runway than beforehand granted by the IRA. Nevertheless, the fantastic particulars of those waning incentives are nonetheless in flux.
Massive-scale photo voltaic ITC modifications in HR1
- Should start building by July 4, 2026 or enter service by the tip of 2027 to qualify for the ITC. Tasks that begin building inside 12 months should end inside 4 years.
- Protected harbor remains to be in impact for initiatives starting building earlier than efficient date of any legislative change.
- Bonus adders are nonetheless out there whereas the ITC remains to be in impact.
- Non-residential photo voltaic venture house owners can nonetheless obtain direct pay and switch project-related tax credit.
Because it stands, the Funding Tax Credit score (ITC) — the first subsidy for photo voltaic building from the IRA — has a shortened efficient size. Tasks that begin building one yr after HR1 was enacted, July 4, 2026, are nonetheless eligible for the ITC and have to be positioned in service by the tip of 2027.
To know the present standing of extra large-scale photo voltaic incentives, Photo voltaic Energy World corresponded with Raiza Kho, director of tax with Scrubbed, an accounting agency specializing in renewable vitality financing and tax {qualifications}, amongst different fields.
SPW: Has secure harbor been affected by HR1?
Kho: HR1 threatens to remove the ITC for non-residential photo voltaic initiatives, which might have an effect on the provision of secure harbor provisions. Nevertheless, till any repeal or modification turns into efficient, the present secure harbor provisions — together with these for home content material — stay in impact for initiatives that start building earlier than the efficient date of any legislative change. Practitioners ought to carefully monitor legislative developments to find out the continued availability of the ITC and its related secure harbors.
Do bonus adders nonetheless exist by way of the tip of the ITC?
Sure, the bonus adders for the ITC, together with the home content material, vitality neighborhood and low-income neighborhood bonus credit, nonetheless exist and can be found by way of the tip of the ITC interval beneath HR1. There is no such thing as a indication within the enacted regulation or legislative summaries that these bonus adders have been repealed or sundown earlier than the tip of the ITC interval. They proceed to use to eligible initiatives, together with these qualifying beneath the brand new technology-agnostic Sec. 48E Clear Electrical energy Funding Credit score for property positioned in service after 2024.
The place does the home photo voltaic business stand within the overseas entity of concern (FEOC) state of affairs?
HR1 imposes strict prohibitions on the usage of elements or supplies from prohibited overseas entities — together with China, Russia, North Korea and Iran — for initiatives in search of federal tax credit beneath Secs. 45Y and 48E. Photo voltaic and different clear vitality initiatives that embrace panels, inverters or different elements manufactured, assembled or containing crucial minerals from these entities are ineligible for credit if building begins after December 31, 2025. The act requires taxpayers to acquire and retain provider certifications and adjust to new recordkeeping and reporting necessities, but it surely doesn’t mandate a common “FEOC-free provide chain” certification for all producers. These new guidelines signify a major tightening of eligibility and are anticipated to have a considerable influence on sourcing, provide chains and credit score eligibility for the U.S. photo voltaic business.
How has this affected direct pay and transferability?
HR1 didn’t repeal or materially change the direct pay (Code Sec. 6417) or transferability (Code Sec. 6418) provisions for the ITC as they apply to non-residential photo voltaic initiatives. Non-residential photo voltaic venture house owners can nonetheless make the most of direct pay if they’re an “relevant entity” (resembling a tax-exempt group or authorities entity) or switch the ITC to an unrelated taxpayer for money, as established by the Inflation Discount Act of 2022.
Extra protection of how HR1 impacts U.S. photo voltaic:
