Phasing Out Green Energy Tax Credits: What Real Estate & Construction Firms Need to Know

The One Big Beautiful Bill Act (OBBBA) compresses the phaseout timeline for nearly every major federal green energy tax credit. Real estate developers and construction firms that have depended on these incentives now face a much shorter window to benefit from them.

Unlike the decade-long runway originally built into the Inflation Reduction Act of 2022, the OBBBA accelerates sunset dates for energy-related tax credits by several years. From EV fleets to rooftop solar and utility-scale wind, the credits that helped make these upgrades financially viable are being eliminated in stages starting now (in fact, some have already disappeared). For many developers, that means project schedules need urgent revision.

To make matters more complex, some deadlines are tied to when a vehicle or component is acquired, not when it is delivered or installed. Others depend on being placed in service, a definition that varies depending on asset type. These nuances create added risk for firms that assume they can simply accelerate deliveries or push back commissioning dates without losing eligibility.

We’re already seeing real-time impact across our client base. Developers designing new residential communities with environmentally friendly features may lose access to millions in offsets if even one project phase falls behind schedule. Construction firms that help execute these plans are also affected. The OBBBA removes key tools from their pricing, client advisory and compliance toolkits.

The longer firms wait to adjust to these changes, the more likely they’ll forfeit high-value credits. With hard statutory cliff dates now written into law, it’s time to revisit every green-building assumption and prioritize what can realistically qualify before the clock runs out.

EV incentives end first: Why your fleet plan needs a Q4 pivot

The first category of green tax credits to disappear affects electric vehicles. That includes personal, commercial and leased vehicles that qualify under several key provisions of the Internal Revenue Code. These are disappearing faster than many firms realize.

Three credits expire for vehicles acquired after Sept. 30, 2025:

• § 30D: Clean vehicle credit for new EVs
• § 25E: Credit for previously owned EVs
• § 45W: Commercial clean vehicle credit

Because this firm cutoff is based on acquisition date, a vehicle ordered in time but delivered in October may not qualify.

For construction firms and developers operating truck fleets or on-site EVs, this change is immediate and material. The § 45W commercial credit was worth up to $40,000 per vehicle. That credit has been used to electrify last-mile vans, material haulers and security vehicles. Without it, many firms will see a direct hit to budgeted project costs.

Real estate owners should also reconsider how EV incentives intersect with tenant acquisition and ESG goals. Multifamily developments often included EV readiness as a value-add, advertising § 25E’s used EV credit as a $4,000 perk for renters. With that incentive now ending, marketing teams will need to pivot and recalculate leasing value propositions.

Procurement teams should issue orders for qualifying vehicles as soon as possible. Purchase agreements must be clearly dated and documented. If your firm plans to purchase vehicles in Q4 2025 or later, you may lose access to these incentives entirely.

Still time for charging infrastructure, but barely

Electric vehicle charging stations are one of the last clean energy investments still eligible for tax incentives under the One Big Beautiful Bill Act. However, the clock is ticking fast for developers and contractors hoping to take advantage of the Alternative Fuel Vehicle Refueling Property Credit (§ 30C).

This credit offers a 30% tax incentive for the cost of installing EV chargers, including those in parking garages and surface lots. But the new law limits eligibility to charging equipment placed in service by June 30, 2026. After that date, even projects already under construction or fully permitted will no longer qualify.

The challenge is that placing EV chargers “in service” isn’t as simple as finishing construction. It typically requires passing final inspections from the local authority having jurisdiction (AHJ) and securing utility sign-off, both of which are subject to lengthy backlogs. In many metro areas, permitting timelines and utility transformer lead times already exceed 18 months.

This makes December of 2025 a practical deadline to begin plan reviews, finalize site engineering and order long-lead electrical components. Developers that wait until 2026 risk installing chargers without the benefit of the 30% credit, adding tens of thousands in unrecoverable cost to each site.

For real estate owners, this can also affect lease-up timelines. Multifamily properties, office buildings and mixed-use campuses that promote EV readiness as an amenity will need to confirm that charging stations meet all placement and service requirements ahead of the statutory cutoff.

Contractors should coordinate closely with site engineers, utility representatives and permitting agencies to map out energization dates early. AHJ workload spikes in the first half of 2026 could create bottlenecks, even for well-prepared projects.

For a deeper breakdown of EV infrastructure planning timelines and tax incentives, refer to the U.S. Department of Energy’s guidance on Section 30C.

Rooftop solar and envelope upgrades face hard year-end deadline

Another major change under the OBBBA is the elimination of the § 25C and § 25D credits that apply to residential solar, high efficiency building envelopes and standalone battery systems. These are especially relevant for builders of single-family communities, residential developers, and solar project financiers.

The Energy Efficient Home Improvement Credit (§ 25C) and the Residential Clean Energy Credit (§ 25D) will no longer apply to any property placed in service or expenditures made after Dec. 31, 2025. Unlike other credits based on in-service dates, § 25D operates on an expenditure date basis, which means payments made in 2026 do not qualify even if the equipment was purchased beforehand.

This distinction matters. Many developers use staggered payments to align with delivery, lien releases or milestone completions. Under the new rule, unless the funds are disbursed before year-end 2025, those costs will no longer be eligible for the credit.

For example, if a homebuilder prepays for solar modules in December 2025 but releases the final installer payment in January 2026, the latter cost may be excluded from the tax credit calculation.

In addition, energy-efficient envelope features like advanced insulation, air sealing and high-performance windows often qualify under § 25C. They must be completed and paid for by December 31 to remain eligible.

Developers using rooftop solar as part of a build-to-rent or sales-based value strategy should take immediate steps to accelerate purchase orders and close financing commitments.

This rule also has implications for third-party solar providers and lease-back models. Some structures rely on installment payments and lien triggers that stretch across calendar years.

Large-scale solar and wind projects get a longer runway, with stricter rules

Utility-scale and commercial solar or wind installations are some of the few green-energy assets that retain federal tax credit eligibility beyond 2025. However, developers planning these projects should not assume business as usual. The OBBBA sets firm expiration dates and introduces new conditions that will significantly impact project feasibility.

Under the revised Production Tax Credit (PTC, § 45Y) and Investment Tax Credit (ITC, § 48E), facilities must be placed in service no later than Dec. 31, 2027 ,to qualify. That extends the timeline beyond the 2025 cliff affecting residential energy credits, but it comes with critical caveats.

After that date, projects that receive any “material assistance” from a prohibited foreign entity will be ineligible for either credit. The U.S. Department of Energy defines these entities in its supply chain security guidance. Firms sourcing equipment or capital from non-FTA jurisdictions, including certain manufacturers of photovoltaic modules, inverters, or wind turbine components, must reassess their supplier relationships immediately.

Additionally, the domestic content requirements for projects seeking the ITC increase over time:

• 40% for projects beginning construction before June 16, 2025
• 45% for projects beginning June 16 through December 31, 2025
• 50% during calendar year 2026
• 55% for any project starting after January 1, 2027

These thresholds apply to total project costs and include structural steel, electrical components and other core systems. Verifying domestic origin will require updated documentation protocols and legal language in supplier contracts.

The OBBBA also eliminates eligibility for § 48E credits for many third-party ownership structures starting on enactment. Power purchase agreements (PPAs) or lease-back arrangements that transfer energy credits to outside investors are no longer supported under the federal code. This will impact financing structures for rooftop portfolios and distributed energy aggregators that depend on tax equity monetization.

For firms planning to rely on the ITC or PTC through 2027, this means a narrower compliance path. Start dates, component sourcing and project structure will all affect tax outcomes.

Storage projects remain eligible, but sourcing rules are tightening

Standalone battery storage projects remain among the few technologies that continue to qualify for federal tax credits under § 48E beyond 2027. However, these projects face escalating compliance hurdles tied to domestic content and foreign sourcing restrictions. Developers should act now to lock in qualified supply chains and structure purchase agreements that protect their tax positions.

Beginning Jan. 1, 2026, standalone battery installations must meet the same domestic content thresholds outlined for solar and wind projects. That includes components such as battery cells, inverters and interconnection gear. If even one of these parts comes from a noncompliant vendor, the entire system could lose its credit eligibility.

More importantly, the OBBBA introduces foreign entity sourcing restrictions that apply to both storage hardware and the systems used to interconnect them to the grid. After 2025, any material or software sourced from a prohibited foreign entity could disqualify the project. This includes not only equipment vendors, but also certain battery management systems and control software.

To preserve credit eligibility, developers should:

• Finalize supply agreements before year-end 2025 with full traceability of origin
• Include supplier certification clauses in all contracts
• Begin documentation early to satisfy IRS review requirements

Failure to meet these terms could eliminate a 30% ITC, even for storage-only systems. That changes the economics for projects that previously relied on federal support to pencil out in emerging capacity markets.

Still, in certain jurisdictions such as ERCOT and CAISO, standalone batteries may continue to generate attractive returns based on capacity payments and local reliability premiums. The tax credit helps improve those margins. But with or without it, storage will remain a key part of the grid’s future, especially for developers with access to clean, verified supply chains.

Depreciation rules and construction strategies: What to do before the deadline

In addition to the repeal of federal tax credits, the OBBBA also targets accelerated depreciation rules that have long favored energy property investment. Section 70509 of the bill instructs the Treasury to eliminate the special cost recovery schedules that currently allow for five-year Modified Accelerated Cost Recovery System (MACRS) treatment of solar assets and related improvements.

Once these changes take effect, newly placed energy systems will default to longer recovery periods. This will reduce after-tax internal rates of return (IRRs) by an estimated two to four percentage points for typical rooftop solar installations. For many developers, the difference could tip a project from viable to marginal, especially in markets with lower utility rates or constrained rent premiums.

Although the effective date of the depreciation change will be determined by future Treasury regulations, any project completed before publication of those rules will retain the accelerated schedule. That provides a limited window to secure this remaining benefit for eligible assets.

To meet the deadline, construction teams should consider the following actions:

• Shift qualifying equipment payments into 2025 to meet the § 25D “paid” criteria
• Accelerate site mobilization for storage, solar or wind projects that expect long lead times
• Review purchase agreements for pass-through clauses that protect against misstatements by suppliers, especially related to domestic content

Under the OBBBA, supplier errors can result in IRS penalties under § 6662(m) and new certification-related fines. That makes contract language just as important as installation schedules.

Timing is also critical for EV charging infrastructure. Chargers must be fully energized by June 30, 2026, to qualify under § 30C. That includes all inspections, utility interconnections and signoffs. Developers should begin coordination with local AHJs and utility providers now, not next quarter, to ensure that energization occurs before the cutoff.

If you have a construction project that intersects with any of these deadlines, our Construction Services team can help with timeline modeling, tax-impact analysis and supplier contract review.

Contact a James Moore professional today to protect your clean energy investments and preserve project profitability under the OBBBA.

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