US Treasury Tightens Renewable Tax Credit Rules, Industry Pushes Back

The US Treasury Department has announced new regulations that impose stricter requirements on solar and wind projects seeking federal tax subsidies, as part of President Donald Trump’s newly signed tax-and-spending legislation.

The rules redefine what qualifies as a project 'under construction.' Developers of utility-scale renewable projects will now be required to demonstrate physical construction activity rather than simply showing financial investment. Permitting, design work, or stockpiling components will no longer be accepted as proof of progress. The changes follow an executive order from Trump that sought to limit tax credit eligibility unless a significant portion of the project was physically developed.

The updated guidance is tied to the recently enacted One Big Beautiful Bill Act, which stipulates that projects must either begin construction by July 2026 or be operational by the end of 2027 to secure a 30 percent tax credit. Additional bonuses will be available for qualifying projects. The new rules will apply to projects beginning construction after September 2, 2025, and developers will have a four-year window to claim subsidies.

Previously, developers could 'safe harbour' their projects for up to four years by incurring at least five percent of total costs before tax credits expired or were reduced. Under the new framework, this safe harbour provision will remain only for smaller projects below 1.5 MW in capacity, a move that the Treasury says will benefit the residential solar market.

As per reports,  industry leaders have expressed alarm over the tightened standards. Solar Energy Industries Association CEO Abigail Ross Hopper said the Treasury’s guidance represents 'an unprecedented side deal with anti-clean energy ideologues' that undermines Congress’s intent in passing H.R. 1. She warned that the decision threatens thousands of small businesses, delays the deployment of affordable and reliable power, and risks allowing China to widen its lead in renewable energy manufacturing and deployment.