Solar & Storage: A New & Challenging Landscape
Understand how new rules may affect your school project
Due to the government shutdown and reduced IRS services, school districts filing for energy tax credits through Elective Pay should expect slower processing times. A government shutdown does not change tax filing deadlines nor the availability, eligibility, or requirements tied to tax credits or Elective Pay. School districts should continue with next steps to meet filing deadlines and are encouraged to be proactive due to slower processing times.
Schools across the country have embraced solar to reduce costs, but a July 2025 law makes significant changes that make it harder for schools to access tax credits. In many places, solar and storage remain compelling technologies for schools to evaluate despite the changes to tax credits.
See information and resources below to understand these new rules and how to manage projects under this changing environment.
Starting in 2025, solar and storage projects are eligible for the Clean Electricity Investment Credit (Sec. 48E). The new rules affect solar and storage projects accessing the Sec. 48E tax credit.
Changes to Tax Credits for Solar Energy, Energy Storage, and Thermal Storage Projects
Changes Affecting Solar Energy Projects
Accelerated phase-out schedule: In general, solar projects must be placed into service by Dec 31, 2027 to be eligible for a tax credit.
New restrictions: Solar projects are subject to new Prohibited Foreign Entity (PFE) rules.
These provisions address not only the sourcing of materials used in the solar project but other transactions to which school districts are a party (e.g. municipal debt issuances, licensing agreements).
New guidelines: New Beginning of Construction (BOC) guidelines only apply to solar projects greater than 1.5 megawatts (MW) and therefore, are unlikely to affect schools. Please consult a qualified tax professional to confirm whether these new guidelines apply to your project.
No changes to the energy & thermal storage phase-out schedules: Energy storage and thermal storage projects must begin construction by Dec 31, 2035 to be eligible for a tax credit.
100% of credit amount is available through CY2033
75% of credit amount is available in CY2034
50% of credit amount is available in CY2035
0% of credit amount is available in CY2036
New restrictions: Storage projects are subject to new Prohibited Foreign Entity (PFE) rules.
These provisions address not only the sourcing of materials used in the storage project but other transactions to which school districts are a party (e.g. municipal debt issuances, licensing agreements).
Changes Affecting Energy Storage & Thermal Storage Projects
Schools that commence construction by Dec 31, 2025 and place systems into service by June 30, 2026 (assuming a July 1 - June 30 fiscal year) can receive full credit and avoid many of the new rules.
However, any solar or storage projects commencing after Dec 31, 2024 should be prepared to navigate the new "payments" rule.
For more on PFE rules, watch our video and accompanying slides.
Video: Budget Reconciliation and Energy Tax Credits (July 2025)
Additional Information:
Lawyers for Good Government: Guidance Brief on Beginning of Construction for the 48E and 45Y Tax Credits
NYU Tax Law Center: Navigating OBBBA: phaseouts, prohibited foreign entity rules, and other new rules
NYU Tax Law Center: Summary of Prohibited Foreign Entity (PFE) Rules (48E/45Y/45X only)
NYU Tax Law Center: Treasury releases much-anticipated beginning of construction guidance for solar and wind
IRS: Prevailing Wage & Apprenticeship Overview and FAQs about PWA
U.S. Department of Labor: Prevailing Wage Guidance
IRS: Clean Electricity Low-Income Communities Bonus Credit Amount Program
Baker Tilly: Energy Communities Map
Additional Resources for Support
We Build Progress & Lawyers for Good Government (L4GG) Monthly Elective Pay Office Hours
Thursday, Nov 13 at 1pm ET
We Build Progress and L4GG host monthly office hours on Elective Pay. Share your clean energy project project plans, talk through roadblocks, and ask your questions.
Lawyers for Good Government (L4GG) Beginning of Construction Office Hours
Tuesday, Nov 18 at 1pm ET
L4GG is hosting an office hour session on establishing Beginning of Construction for clean energy projects, highlighting new rules. Attend to ask your questions.
Wednesday, Nov 19 at 1pm ET
The Internal Revenue Service (IRS) hosts monthly office hours dedicated to Elective Pay and energy tax credits. Attend to ask your questions.
L4GG has launched the Elective Pay Sprint Hub to help entities maximize energy tax credits while they are still available. Complete the intake form and receive assistance for your project.
Questions? Reach out to us at: info@undauntedk12.org.
The information on this page represents our best understanding of certain tax provisions for general informational purposes only and is not itself tax guidance. Please consult qualified tax professionals about your specific circumstances and refer to guidance issued by the IRS for detailed information on the rules associated with energy tax credits, elective pay, and other relevant tax provisions.