Senate budget bill looks no better for residential solar
The solar industry is watching each step of the budget reconciliation bill process with rapt attention because so much rests on the cuts and adjustments to federal tax credits. The version drafted by the U.S. House would effectively end the investment tax credit for home solar, and dramatically change project timelines for utility-scale solar. Will the Senate volley back a version with better language for the solar industry?
Doesn’t look like it.
A draft of the Senate Finance Committee’s version of the budget reconciliation bill was released Monday night. Below is the bulleted list we published summing up the House bill, contrasted with the text from the Senate Finance Committee, based on our understanding and our sources:
Still devastating for residential solar
House: End the residential solar investment tax credit (25D).
Senate: NO CHANGE. Applicable 180 days after enactment.
House: End the applicability of residential solar leases for 48E tax credits.
Senate Finance Committee: NO CHANGE. This would start 180 days after enactment. But, note that the commercial investment tax credit would still be viable for energy storage.
Less bad for utility-scale solar
House: The 48E (ITC) and 45Y (PTC) phaseouts would be removed, and the credits would go away completely for any project not placed in service by year end 2028. A construction start requirement within 60 days of the bill enactment.
Senate Finance Committee: The 48E/45Y placed-in-service language was changed to allow “construction starts” through 2027, but with a phased-down ITC/PTC value. The Senate Finance Committee draft allows 100% credit if construction starts by year-end 2025, 60% of the credit by 2026, and 20% of the credit by year end 2027. Zero thereafter. The House version required commercial/utility scale solar projects to be placed in service by year-end 2028, but the Senate text indicates projects can get the full credit through 2029.
Unclear on Transferability
House: Transferability would be eliminated for 45X tax credits for manufacturing upon enactment of the legislation. Transferability of 48E/45Y would be eliminated two years after enactment.
Senate Finance Committee: Transferability is not mentioned in the Senate text. But there is prohibition of the transfer of credits to specified foreign entities, which may have been what the House language was going for originally.
Surprise for manufacturing tax credits
Senate Finance Committee: The 45x manufacturing credits may not be “stackable”. Credit to Roth Capital for noting the Senate Finance draft strikes paragraph (4) from Section 45X(d), which states, “A person shall be treated as having sold an eligible component to an unrelated person if such component is integrated, incorporated, or assembled into another eligible component which is sold to an unrelated person.” It is their understanding that this would repeal the integrates components provision in 45x and the ability to stack credits for wafer, cell, module.
FEOC language
Senate Finance Committee: Projects that start construction after 2025 would not be able to receive credits if receiving “material assistance” from a Foreign Entity of Concern (FEOC) aka China. This is a change from the House bill language. “The material assistance language would be much more clear/workable for projects using Chinese equipment/components,” says Philip Shen with Roth Capital.
