The One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, is a sweeping fiscal and tax measure that extends key provisions of the 2017 Tax Cuts and Jobs Act, cuts federal spending, and scales back clean energy incentives introduced under the Inflation Reduction Act.
Pitched as a move toward simpler tax policy and leaner federal spending, OBBBA introduces rollbacks on several clean energy tax credits, tightens domestic content requirements, and implements stricter foreign entity restrictions.
It’s important to stay updated on these changes, as these directly threaten project viability and failure to comply could trigger recapture or ineligibility when projects can least afford it. The message is clear: adapting to OBBBA’s tax credit changes is not optional.
IRA vs. OBBBA: What’s changed?
Under the Inflation Reduction Act (IRA), clean energy developers benefit from long-term, technology-neutral tax incentives, including the Production Tax Credit (PTC) under Section 45Y and the Investment Tax Credit (ITC) under Section 48E, for projects placed in service after 2024.
The IRA also offers bonus credits for domestic content, prevailing wage, and energy community siting, alongside substantial residential credits for rooftop solar, battery storage, EVs, and efficiency upgrades. These provisions have accelerated clean energy growth by providing developers and investors with clear financial incentives and compliance pathways through at least 2032.
However, the OBBBA significantly alters this framework. Under the new law, eligibility for the PTC (Section 45Y) and ITC (Section 48E) for wind and solar projects is curtailed, with credits now ending for projects placed in service after December 31, 2027. Other clean technologies, such as storage and geothermal, are treated differently and retain a longer runway under the statute. This represents a marked acceleration of the phase-out timeline compared to the open-ended structure under the IRA.
To qualify under the revised rules, developers must begin construction by a newly imposed deadline, generally by July 4, 2026, adding scheduling pressure to the development cycle. The OBBBA further rolls back or eliminates several residential clean energy tax incentives, including credits for rooftop solar installations, residential battery storage, and electric vehicle purchases, which were originally extended under the IRA.
In addition to the credit reductions, the OBBBA expands the prohibited foreign entity rules to additional energy credits. These provisions disqualify projects from receiving federal clean energy tax credits if they involve critical components or ownership interests linked to “countries of concern”, such as China, Russia, Iran, or North Korea.
What this means for developers with clean energy projects
A recent analysis from Enverus Intelligence® Research (EIR) shows that only 30% of solar and 57% of onshore wind projects in queues today are capable enough to proceed profitably without federal tax incentives. This shows how deeply clean energy financing depends on federal support to remain viable. And with the One Big Beautiful Bill Act accelerating phaseout of key tax credits and introducing new ownership and sourcing restrictions, developers now face compressed timelines and heightened compliance complexity.
For those with ongoing clean energy projects, the most important thing to do is to pay close attention to the accelerated phase-out deadlines for wind and solar tax credits under Sections 45Y and 48E, since these won’t apply to projects placed in service after December 31, 2027, unless construction starts within the allowed safe harbor period.
Meanwhile, when updating project assumptions due to OBBBA-related changes, it’s important to carefully consider how the new tax law provisions like permanent or expanded deductions, credits, and limitations, could affect cash flow and after-tax returns. It’s also essential not to overlook the need for timely documentation and updates to financial models.
The OBBBA’s new rules on foreign entities are strict, and even if a project breaks ground on time, missing these details could mean losing out on the credits altogether. Which is why it’s critical to keep thorough and timely documentation showing the following:
- When construction began
- Who owns the project
- Where materials come from
- How contracts are structured
Even indirect relationships or sourcing parts from restricted countries can disqualify a project from receiving these incentives. If a project is found to have received substantial help from a prohibited entity, even years later, the IRS can deny or claw back the credits for up to 10 years. What’s more, suppliers that provide false certifications about their foreign ties can face serious penalties.
Developers and CFOs should also stay diligent in meeting the Opportunity Zone program’s requirements like keeping clear records, filing on time, and making sure investments and improvements follow the rules under the OBBBA. Even small mistakes can lead to serious penalties or the loss of valuable tax benefits. To avoid these risks, it’s important to have strong internal controls in place and work closely with tax professionals who can help navigate the complex rules, avoid common pitfalls, and handle any compliance questions or IRS concerns that may come up.
Ensure compliance and credit retention under OBBBA
Review eligibility now before deadlines and compliance risks catch up.
The OBBBA’s phased rollbacks and stricter sourcing rules have dramatically narrowed the window for clean energy tax incentives. Developers, CFOs, and project stakeholders must reassess tax credit assumptions, scrutinize supply chains, and evaluate ownership structures to ensure continued eligibility.
The sooner finance teams engage in this review, backed by updated modeling and documentation, the better positioned they’ll be to secure remaining credits and avoid costly recapture penalties.
Michael John David is the Accounting Director at Scrubbed, specializing in real estate, hospitality, and clean technology. With over nine years of experience, he oversees end-to-end property, fund, and corporate accounting services. A Philippine CPA Board Exam topnotcher and Certified Forensic Accountant (CrFA), MJ previously worked at P&A Grant Thornton and holds a Program Diploma in Business Management and a Mini-MBA from the International Business Management Institute.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: editors@pv-magazine.com.
By submitting this form you agree to pv magazine using your data for the purposes of publishing your comment.
Your personal data will only be disclosed or otherwise transmitted to third parties for the purposes of spam filtering or if this is necessary for technical maintenance of the website. Any other transfer to third parties will not take place unless this is justified on the basis of applicable data protection regulations or if pv magazine is legally obliged to do so.
You may revoke this consent at any time with effect for the future, in which case your personal data will be deleted immediately. Otherwise, your data will be deleted if pv magazine has processed your request or the purpose of data storage is fulfilled.
Further information on data privacy can be found in our Data Protection Policy.