IRA vs. the One Big Beautiful Bill: How Commercial Solar Tax Credits Changed in 2025
Important note: Federal tax legislation and IRS implementation guidance evolve continuously. The comparison in this article reflects the Inflation Reduction Act as…
Important note: Federal tax legislation and IRS implementation guidance evolve continuously. The comparison in this article reflects the Inflation Reduction Act as originally enacted and the One Big Beautiful Bill Act as passed and available guidance as of June 2026. Specific provisions, thresholds, and deadlines should be verified with qualified tax counsel before making project decisions.
For businesses that have been following commercial solar tax incentives since the Inflation Reduction Act passed in August 2022, the One Big Beautiful Bill Act signed into law in 2025 represents the most significant policy shift since the IRA itself. The two pieces of legislation share some elements — the base 30% ITC survived — but differ substantially in timeline structure, bonus credit mechanics, domestic content requirements, and the urgency they create for businesses with projects in development.
Understanding what changed — and what stayed the same — is essential for any business whose solar financial model was built on IRA assumptions and has not been updated for the OBBB-A framework.
What Stayed the Same: The Core ITC Architecture
The foundational mechanism of the commercial solar Investment Tax Credit — a direct, dollar-for-dollar credit against federal tax liability equal to a percentage of the qualifying system’s installed cost — survived unchanged through the legislative transition.
The base credit rate: Both the IRA and the OBBB-A provide a 30% base ITC for qualifying commercial solar energy property. The IRA established this rate as part of a decade-long authorized window; the OBBB-A modified the timeline and added structural requirements while preserving the 30% baseline.
Eligible property scope: Both frameworks cover the same categories of qualifying energy property — solar panels, inverters, racking and mounting systems, associated electrical balance-of-system components, and battery storage systems (even standalone storage not paired with solar).
The basis reduction rule: Under both frameworks, Section 50(c) requires that the depreciable basis of qualifying property be reduced by 50% of the ITC claimed. This interaction between the credit and depreciation is unchanged.
The bonus adder structure: The Energy Community bonus (+10%), Domestic Content bonus (+10%), and Low-Income Community adders (+10% or +20%) established by the IRA remain in effect under the OBBB-A, with modifications to qualification thresholds discussed below.
The Section 6418 transferability mechanism: The credit transfer market established by the IRA remains operative under the OBBB-A. Credits generated under the new framework are transferable on the same general terms as IRA credits, with the same ordinary income treatment for transfer proceeds at the seller level.
What Changed: The Timeline and Urgency Structure
The most consequential change introduced by the OBBB-A is the imposition of a hard deadline structure where the IRA had provided a gradual phase-down over a decade.
Under the IRA
The IRA established a 30% ITC with the following phase-down schedule for projects that do not meet prevailing wage and apprenticeship requirements:
- 2023–2032: 30% (or 6% without PWA compliance)
- 2033: 26% (or 5.2% without PWA compliance)
- 2034: 22% (or 4.4% without PWA compliance)
- 2035 and later: Credit expires
For projects meeting prevailing wage and apprenticeship requirements — which most commercial solar projects of meaningful scale do — the 30% rate was authorized through 2032 before beginning the phase-down. This gave commercial buyers a 10-year window in which the incentive structure was stable, predictable, and not urgency-creating in any immediate sense.
Under the OBBB-A
The OBBB-A restructured this timeline significantly, introducing a construction-start requirement and a placed-in-service deadline that create a cliff rather than a ramp:
Construction-start deadline: Projects must establish a construction start — either through the five-percent safe harbor (incurring at least 5% of total project costs) or through significant physical work — to be eligible for the full ITC at the rate applicable in the construction-start year.
Placed-in-service deadline: Projects that have established a valid construction start must be placed in service (commissioned and operational) by the end of 2027 to capture the full authorized credit.
Post-2027 eligibility: Projects placed in service after December 31, 2027 without a qualifying construction start face either reduced credit rates or ineligibility for the full ITC, depending on implementation guidance that continues to be developed by the IRS.
The practical impact: The IRA’s 10-year stable window has been replaced by a structure with specific, near-term deadlines. A business that was planning a solar installation for 2028 or 2029 under IRA assumptions — confident that the 30% ITC would still be available at that point — must now revisit that assumption against the OBBB-A framework.
What Changed: Domestic Content Requirements
The IRA introduced the Domestic Content bonus adder as a voluntary credit enhancement — projects using qualifying U.S.-manufactured components could earn an additional 10% ITC, but there was no penalty for using non-domestic content. The domestic content standard was an opportunity, not a baseline requirement.
The OBBB-A changed this relationship. Under the new framework, meeting domestic content thresholds is required for projects to be eligible for the full incentive stack — not just for the bonus adder.
The New Threshold Standard
As of January 1, 2026, solar projects must meet a domestic content threshold to remain eligible for incentive qualification. The current standard requires that at least 40% of the cost of manufactured components — solar panels, inverters, and structural steel — be attributable to qualifying domestic or non-Foreign Entity of Concern (FEOC) sources.
Under the IRA: Domestic content was a bonus opportunity. A project using entirely non-domestic components could still claim the full 30% base ITC.
Under the OBBB-A: Domestic content is a baseline qualification threshold. Projects that do not meet the 40% manufactured products standard face potential disqualification from some or all incentive eligibility.
The FEOC Exclusion
The Foreign Entity of Concern exclusion, which prohibits components from designated FEOC manufacturers from counting toward domestic content thresholds, has become a more significant compliance consideration under the OBBB-A than under the IRA framework. A significant portion of the global solar panel and battery component supply chain involves FEOC-designated manufacturers, particularly in China, which means the supply chain due diligence required to document compliance has increased substantially.
For projects in development: Supply chain sourcing decisions that were previously a financial optimization question (does domestic content qualify us for the bonus adder?) are now a compliance question (does our supply chain meet the baseline threshold for any incentive eligibility?). This requires earlier engagement with equipment suppliers and more thorough documentation than the IRA framework demanded.
What Changed: Bonus Depreciation
On this dimension, the OBBB-A delivered a significant improvement over the trajectory that was in place under the IRA framework.
Under the IRA (and prior law)
The Tax Cuts and Jobs Act of 2017 established 100% bonus depreciation for qualifying property, with a phase-down schedule:
- 2022: 100%
- 2023: 80%
- 2024: 60%
- 2025: 40%
- 2026: 20%
- 2027 and later: 0%
For commercial solar projects placed in service in 2025, the bonus depreciation rate under prior law was 40% — a significant decline from the 100% available in 2022. A project modeled with 100% first-year depreciation but placed in service in 2025 was receiving a fraction of the expected depreciation benefit.
Under the OBBB-A
The OBBB-A restored and made permanent 100% bonus depreciation for qualifying property, retroactive to January 1, 2025. Projects placed in service after January 1, 2025 are eligible for full first-year expensing of the depreciable basis, eliminating the phase-down that prior law had scheduled.
The financial impact of this restoration is substantial. On a $1,500,000 solar installation with a 30% ITC (30% × $1,500,000 = $450,000; basis adjustment: $1,500,000 − $225,000 = $1,275,000 depreciable basis):
- Under 40% bonus depreciation (2025 pre-OBBB-A): $510,000 depreciation deduction → $188,700 in tax savings at 37%
- Under 100% bonus depreciation (post-OBBB-A): $1,275,000 depreciation deduction → $471,750 in tax savings at 37%
The OBBB-A restoration of full bonus depreciation added approximately $283,000 in additional Year 1 tax benefit on this $1,500,000 project — a difference that significantly improves the net-cost and payback economics for any project placed in service under the new framework.
Side-by-Side Comparison: IRA vs. OBBB-A for Commercial Solar
| Provision | IRA Framework | OBBB-A Framework |
|---|---|---|
| Base ITC Rate | 30% | 30% |
| ITC Authorization Period | Through 2032 with gradual phase-down | Specific construction-start and placed-in-service deadlines |
| Construction-Start Requirement | None | Yes — required for full ITC eligibility |
| Placed-in-Service Deadline | No hard deadline through 2032 | End of 2027 for full eligibility |
| Domestic Content | Bonus opportunity (+10%) | Baseline qualification threshold + bonus opportunity |
| FEOC Restrictions | Emerging but limited | Explicitly incorporated into qualification standards |
| Energy Community Bonus | \+10% | \+10% (unchanged) |
| Low-Income Adders | \+10% or +20% | \+10% or +20% (unchanged) |
| Bonus Depreciation | Phase-down in progress (40% in 2025) | 100% restored and permanent |
| ITC Transferability | Yes, Section 6418 | Yes, unchanged |
| Prevailing Wage/Apprenticeship | Required for full 30% rate | Continued requirement |
Implications for Projects at Different Stages
Projects in early planning (decision not yet made)
For businesses that have been evaluating solar under IRA assumptions — a stable 30% ITC through 2032 with no construction-start requirement — the OBBB-A framework requires a reassessment of timeline urgency. The 2027 placed-in-service deadline means that the planning-to-commissioning timeline for a project that has not yet begun must account for interconnection queue times (4–8 months in most markets), permitting (4–12 weeks), equipment procurement (8–16 weeks), and installation — a total of 9–18 months in standard conditions.
A business that decides to pursue solar in January 2027 and begins the interconnection application at that point has meaningful risk of not commissioning by December 31, 2027. Beginning the process now — at minimum, conducting a site assessment, obtaining EPC proposals, and evaluating the safe harbor mechanism — provides the runway to capture the full incentive package.
Projects that established safe harbor under IRA rules
Some businesses may have incurred qualifying project costs before the OBBB-A was enacted with the intention of establishing IRA safe harbor. The interaction between prior IRA safe harbor rules and the OBBB-A’s new framework requires specific analysis with tax counsel. The general principle is that safe harbor established under prior law may be recognized under the new framework’s continuous construction requirements — but this determination is fact-specific and should not be assumed without verification.
Projects completed in 2025 under IRA assumptions
Projects placed in service in 2025 before the OBBB-A’s effective date may have been modeled with 40% bonus depreciation (the prior law rate for 2025). The OBBB-A’s restoration of 100% bonus depreciation with retroactive application to January 1, 2025 means these projects may be eligible to claim the full first-year bonus depreciation they did not anticipate. Amended return opportunities for qualifying 2025 projects should be evaluated with tax counsel.
The Bottom Line: What the Transition Means for Decision-Making
The shift from the IRA to the OBBB-A framework can be summarized in three principles:
1. The financial incentive is still compelling — and in one dimension (bonus depreciation), it improved. The restored 100% bonus depreciation means the combined Year 1 federal tax benefit for a qualifying commercial solar installation is stronger under the OBBB-A than it was under the phase-down schedule that would have applied in 2025 and 2026 under prior law.
2. The urgency is real and deadline-driven. The IRA’s decade-long stable window has been replaced by a 2027 placed-in-service deadline. Projects that would have been safely within the IRA’s authorized period in 2028 or 2029 need to be reassessed against the new timeline.
3. Compliance complexity has increased. Domestic content qualification is now a baseline requirement, not just a bonus opportunity. Supply chain due diligence, documentation, and FEOC compliance are more consequential under the OBBB-A framework than they were under the IRA.
Businesses that engage with these realities — specifically, the 2027 deadline and the domestic content compliance requirement — are positioned to capture the full available incentive package. Businesses that continue to operate on IRA-era assumptions without updating for the OBBB-A framework risk discovering the difference at the point when it is too late to address it.
Frequently Asked Questions
If my project was modeled under the IRA, what is the most important thing to update in my financial model? Two things immediately: the timeline urgency (does your project’s expected commissioning date fall within the 2027 placed-in-service window?) and the bonus depreciation rate (if your model used 40% or 60% bonus depreciation based on prior phase-down schedule, update it to 100% for the current framework). The bonus depreciation update will improve your model’s returns; the timeline check may reveal that the project needs to be accelerated.
Are there any categories of commercial solar projects that are better positioned under the OBBB-A than under the IRA? Yes — projects that can be permitted, procured, and commissioned within the 2027 window benefit from 100% bonus depreciation that was in the process of phasing down under prior law. Projects that were modeled with 40% or 60% bonus depreciation are materially improved by the OBBB-A restoration. Projects on brownfield or Energy Community sites that also qualify for domestic content adders are in the strongest possible position under the combined framework.
Does the OBBB-A affect the Section 6418 transferability market? The transferability market continues to operate under the OBBB-A framework. The 2027 placed-in-service deadline creates additional urgency for credit sellers — credits from projects commissioned before the deadline will be generated in higher volume in 2026 and 2027, and credit buyers should expect an active market during this period.
What happens to the ITC after the 2027 placed-in-service deadline? The OBBB-A’s post-2027 incentive framework continues to be clarified through IRS guidance. The general expectation is that projects without qualifying construction starts will face reduced or phased-down credit rates after 2027 — but the specific rates and conditions applicable to post-deadline projects are subject to ongoing guidance development. Projects relying on post-2027 incentive availability should work with tax counsel to understand current guidance before finalizing financial models.
The legislative transition from the IRA to the OBBB-A framework has preserved the core value of the commercial solar ITC while introducing timeline urgency, domestic content compliance requirements, and — positively — a restoration of full bonus depreciation that improves the financial case for projects placed in service in 2025 and beyond. Understanding both what changed and what stayed the same is the foundation for accurate financial modeling and sound project decisions in the current environment.