Going Solar? There May Be a Tax Credit for That.
by Tina Azarvand, Esq., LL.M.
Fifty days after Super Typhoon Sinlaku made landfall, many on Saipan and Tinian are still without power, and Fuel Adjustment charges keep climbing for those who have it. The case for going solar has never been more obvious. What is less obvious is that the federal tax law signed on July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”), contains provisions that will significantly affect whether switching to solar still makes financial sense, and for how long.
The OBBBA headlines focused on income tax cuts, but buried in the legislation are sweeping changes to clean energy tax credits that will reshape rooftop solar for years to come. Nowhere are those stakes currently higher than in the Marianas, where electricity costs rank among the highest in the entire United States. Here is where each credit now stands.
A. Commercial
The Investment Tax Credit
The Investment Tax Credit is a credit available to businesses, commercial solar developers, and companies behind residential leases and power purchase agreements (“PPA”). At its base rate, it provides a 30% credit against the cost of qualifying solar installations, with additional bonuses available for domestic content, energy infrastructure placement, and other criteria that can raise the effective rate. It remains available, but within a compressed and now-binding timeline.
Wind and solar projects that do not begin construction by July 4, 2026, lose access to the ITC unless placed in service by December 31, 2027. Projects that begin construction by that date have a four-year window to be placed in service. However, developers should be aware that IRS Notice 2025-42, issued in August 2025, significantly tightened the rules for establishing a construction start: for solar projects over 1.5 MW and all wind projects, the five-percent cost safe harbor (under prior law) has been eliminated, leaving physical work of a significant nature as the only qualifying method.
For homeowners considering a lease or PPA rather than an outright purchase, the leasing company claims the ITC rather than the homeowner, but the benefit is typically passed through to the homeowner as lower monthly payments. That arrangement remains viable, provided the leasing company's project meets the construction-start deadline.
Battery storage, geothermal, hydropower, and nuclear fared considerably better under the OBBBA, retaining full ITC access through 2033 with phase-downs beginning in 2034 and running through 2036. For island communities where battery storage paired with solar is the most practical path to grid resilience, that distinction matters significantly. A standalone battery storage project beginning construction through 2033 can still access the full 30% ITC.
The law also added escalating restrictions on components sourced from Foreign Entities of Concern, a framework aimed at Chinese manufacturers who have dominated global solar supply chains. For projects beginning construction in 2026, at least 40% of the manufactured value of components must come from non-prohibited foreign entities, a threshold that rises by 5 percentage points per year through 2029.
The Production Tax Credit
The Production Tax Credit, or PTC, provides a per-kilowatt-hour credit for electricity generated by qualifying facilities over 10 years after they are placed in service. For 2025, the base PTC rate for qualifying facilities was approximately 0.3 cents per kilowatt-hour, increasing to 1.5 cents per kilowatt-hour for projects that meet prevailing wage and apprenticeship requirements, with bonus tax credits available in addition to those credits. The ITC and PTC are generally used as alternatives rather than in combination, with larger utility-scale projects often favoring the PTC for its long-term production-based structure.
The OBBBA imposed the same construction deadline on the PTC as on the ITC. Wind and solar facilities must begin construction by July 4, 2026 and be placed in service by December 31, 2027 to qualify. Projects that miss that window are cut off entirely from the PTC for wind and solar. As with the ITC, battery storage, geothermal, and nuclear retain much longer timelines under the new law. Note that the same Notice 2025-42 tightening of beginning-of-construction rules applies here as well, meaning physical work of a significant nature is now the only qualifying pathway for utility-scale wind and solar projects.
The stakes for Guam on both the ITC and PTC are acute. Guam Power Authority has a statutory mandate under Public Law 35-46 to reach 50% renewable electricity sales by 2035 and 100% by 2045. GPA canceled a 40-megawatt commercial solar farm in March 2025. A Phase IV bidding round attracted more than 330 megawatts of bids for new renewable capacity with storage, and GPA has begun awarding contracts from that pool, including a 132-megawatt solar-plus-storage agreement signed in early 2025. The July 4, 2026, construction-start deadline is the most pressing date on the calendar for any project in that pipeline.
Commercial Building Energy Efficiency Deduction
Commercial Building Energy Efficiency Deduction is less often discussed in the context of solar, but it is directly relevant to any business or building owner incorporating energy-efficient systems into a commercial property. The deduction allows commercial building owners, and notably the architects, engineers, and contractors who design government or nonprofit buildings, to deduct the cost of qualifying energy-efficient upgrades covering interior lighting, HVAC, hot water systems, and the building envelope. For projects placed in service during the 2025 tax year that met prevailing wage and apprenticeship requirements, the deduction was up to $5.81 per square foot. For qualifying projects placed in service in 2026, the rate increases to up to $5.94 per square foot under IRS Revenue Procedure 2025-32.
The OBBBA added a hard termination. Commercial Building Energy Efficiency Deduction will not apply to any property for which construction begins after June 30, 2026. Critically, projects that begin construction by that date can still be placed in service later and remain eligible. For commercial property owners and developers in the CNMI and Guam who have been considering energy-efficient construction or retrofits, this deadline is separate from and slightly earlier than the ITC and PTC construction-start window and warrants immediate attention.
B. Residential
The Residential Clean Energy Credit
The Residential Clean Energy Credit had allowed homeowners to claim a credit equal to 30% of the total cost of a purchased solar system, with no dollar cap. On a typical $30,000 residential installation, that meant $9,000 back against federal taxes. On a $40,000 system with battery storage, it meant $12,000. The Inflation Reduction Act of 2022 had locked that 30% rate in through 2032. The OBBBA ended it entirely for expenditures made after December 31, 2025, nearly a decade early and with no phase-down period. If your system was fully installed and operational by that date, you can still claim it on your 2025 return, and any unused credit can be carried forward into future tax years. If it was not installed in time, the credit is simply gone for owner-purchased residential systems.
Energy Efficient Home Improvement Credit
The Energy Efficient Home Improvement Credit covered upgrades like heat pumps, insulation, windows, and doors. The EEHIC was capped at $3,200 per year, with $2,000 available for heat pumps and $1,200 for other qualifying improvements, such as windows and doors. The credit terminated on December 31, 2025. Unlike the Residential Clean Energy Credit, unused EEHIC credits cannot be carried forward. Hence, any homeowner who did not fully use the credit in the year of installation permanently lost the remainder. For homeowners who had been planning a combined solar and efficiency upgrade, both federal incentives are now gone under Trump’s OBBBA.
The termination is direct and unambiguous. No phase-down, no grace period. Some states have their own solar incentives that partially offset the loss, but those vary enormously, and none fully replaces what the federal credit had offered.
C. Other Credits Worth Knowing
A few additional provisions matter for businesses and developers in the clean energy space.
The Advanced Manufacturing Production Credit supports domestic manufacturers of solar panels, battery components, inverters, and critical minerals. The OBBBA largely preserved it, with phase-outs for most eligible components beginning in 2030 rather than being accelerated, though wind components lost eligibility after 2027. The same Foreign Entity of Concern restrictions apply. For the Pacific, this matters because it shapes which panels and components will carry a domestically sourced premium going forward and affects supply chain decisions for larger projects.
The Advanced Energy Project Credit supported manufacturing facilities for clean energy components through a competitive $10 billion allocation pool under the IRA. The OBBBA eliminated the ability to reallocate funds from failed or withdrawn projects, effectively closing the program to new applicants without further congressional appropriation. Projects that already received allocations remain bound by their certification timelines.
The Clean Energy Tax Credit Transferability provision, which governs the transferability of clean energy tax credits, survived the OBBBA largely intact. This allows developers and businesses that generate ITC or PTC credits to sell those credits to other taxpayers, a key financing tool in commercial solar deals. The OBBBA did add a restriction prohibiting the transfer of credits to any prohibited foreign entity. Still, the mechanism itself remains available and continues to provide commercial projects with a pathway to monetize credits that exceed the project owner's tax liability.
The OBBBA did not end solar. But it did close an era of federal generosity toward residential adoption and compressed the commercial timeline in ways that will stress-test utilities and developers alike. For communities still trying to escape diesel and build genuine energy resilience, those incentives were not trivial. Their loss is a real setback, even if it is not a final one.
Navigating the new federal solar tax credit landscape is complicated, and the stakes are high whether you own your system, lease it, or are developing a commercial project. Azarvand Tax Law can help you understand what credits you may still be able to claim, how the CNMI and Guam mirror tax systems affect your situation, and what deadlines you cannot afford to miss.
With boots on the ground in the Marianas and on the mainland, Azarvand Tax Law provides uninterrupted representation even when island operations are disrupted. Our Saipan team is available from 8 AM to 6 PM CHST, and our mainland team is on standby from 10 PM to 8 AM CHST, giving us a combined 20 hours of daily availability to answer your questions. Call or text us today at 410-698-4005, or email us at info@azarvandtaxlaw.com for a complimentary 30-minute consultation.
