Proposed Budget Cuts Residential Solar Tax Credit, Maintains Commercial and Manufacturing Incentives
Commercial-Solar.org | May 13, 2025
In a major shift that could reshape the solar incentive landscape, the House Ways and Means Committee has introduced a draft budget that eliminates the residential Investment Tax Credit (ITC) while largely preserving credits critical to commercial-scale solar and domestic manufacturing.
Under the proposal, the 30% residential ITC (Section 25D) would sunset at the end of 2025—potentially reversing a key driver of rooftop solar adoption for homeowners. Meanwhile, the draft maintains full value for commercial clean energy tax incentives (Sections 48E and 45Y) through 2028, followed by a structured phase-down through 2031.
Key Takeaways for Commercial Solar Stakeholders:
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Residential ITC (25D) would be eliminated after 2025
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Electric Vehicle tax credits (30D, 30C, 45W) also face full repeal
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Commercial ITC (48E) and Production Tax Credit (45Y) remain fully available through 2028, with gradual reductions through 2031
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Transition from “start of construction” to “placed in service” for eligibility
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Transferability of credits ends two years post-enactment
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Low-income and energy community “adders” are preserved, based on current guidance
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Advanced Manufacturing Credit (45X) continues at full value through 2031, ending abruptly in 2032
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Wind products excluded starting in 2028
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New restrictions tied to materials and components sourced from “Foreign Entities of Concern” (FEOC)
These proposed changes send a clear signal: the federal government may be pivoting away from supporting residential adoption and refocusing resources on utility-scale and industrial projects—those with greater potential to contribute to grid-scale decarbonization and domestic manufacturing.
However, the removal of transferability and the switch to “placed in service” requirements could introduce project timeline risks for commercial developers.
The Solar Energy Industries Association (SEIA) responded with sharp criticism, warning the bill could jeopardize America’s momentum in clean energy manufacturing. SEIA estimates the proposed changes would force closures at hundreds of U.S. factories, particularly in red-state economies that currently house over 75% of at-risk clean energy investments. The effects of Trump’s latest July 2025 bill has culled tax credits across the US, cancelling huge swaths of renewable energy projects. Along with the US tarriffs, the effects have rippled across North America including Canada’s own solar incentives where they did not renew budget to fund various Greener Home programs due to widening trade deficits.
“This legislation will cause hundreds of American factories to close, eliminate tens of thousands of jobs, force electric bills to skyrocket for everyone, weaken the reliability of our electric grid, and eliminate our capacity to compete with China,” said SEIA President Abigail Ross Hopper.
What This Means for Commercial Solar Developers
For commercial solar stakeholders, the draft budget preserves key incentives—but not without caveats. The potential end of transferability could reduce financing flexibility. And the emphasis on domestic content, while aligned with long-term industrial policy goals, introduces sourcing challenges that could impact project costs and timelines.
Commercial-Solar.org will continue monitoring the bill’s progression through committee markups and provide updates on how these federal policy shifts could impact project development, tax strategy, and investor confidence across the commercial solar sector.