Commercial solar tax credit: the deadline explained

Did construction on your commercial solar project begin on or before July 4, 2026? That date decides whether a December 31, 2027 cutoff applies to the 2026 commercial solar tax credit. If construction began after July 4, 2026, the credit does not apply to solar property placed in service after December 31, 2027.^1,2 A project started now is later-start.

As of October 25, 2026, that is what the statute and the Internal Revenue Service (IRS) instructions say. The date alone won’t make a project eligible, though. Credit rate, equipment sourcing and tax-year rules apply on top of it.¹

The credit at issue is the federal Clean Electricity Investment Credit, section 48E of the Internal Revenue Code. We don’t quote a project price or work out a tax benefit here. The homeowner credit works differently, and a separate guide covers it.

Which deadline applies to your project?

Congress sorted commercial solar projects by the day construction began. For a solar facility whose construction began after July 4, 2026, the credit does not apply to property placed in service after December 31, 2027. A facility whose construction began on or before July 4 is outside that cutoff.^1,2

The IRS’s start-of-construction guidance also looks for continuous work after the start, so the start date is only part of the file.³ Two provisions give the full rule. Section 48E(e)(4) says the section does not apply to qualified property placed in service after December 31, 2027 that is part of a solar facility. A separate effective-date clause, section 70513(g)(5) of Public Law 119-21, says that amendment applies to “facilities the construction of which begins after the date which is 12 months after the date of enactment.” The law was enacted July 4, 2025, so that date is July 4, 2026.² The tax code section alone doesn’t show the start-date condition.

The foreign-entity rules run on a different date, so a project can sit in two groups at once. The table shows how the start date lines up with both rules.

Projects that did start on time have a second clock. Treasury and the IRS say taxpayers may rely on a continuity safe harbor for section 48E: the facility is placed in service no more than four calendar years after the calendar year during which construction began.³ For a 2026 start, that is the end of 2030. A certified public accountant (CPA) should confirm the safe harbor fits the project.

In practice: if you can’t produce dated records showing a start by July 4, plan to finish by December 31, 2027. The IRS describes two start tests, physical work of a significant nature and paying or incurring 5 percent or more of the total cost of the facility.³ A signed proposal is neither.

Can a business still claim an earlier construction start?

Possibly, if dated records show a start on or before July 4, 2026. With IRS Notice 2025-42 vacated, the earlier guidance describing both the physical work test and the 5 percent safe harbor is what remains, unless new guidance or an appeal changes that.^3,5,6 The claim needs dated, project-specific evidence, such as invoices, payments and records of physical work.

Whether the work or spending counts as beginning construction is a tax-professional call under the guidance in force. The rules for proving a start were in court this year. In Oregon Environmental Council v. Internal Revenue Service, a federal district court vacated IRS Notice 2025-42 on June 6, 2026 and sent it back to the IRS.⁵ That notice had kept the cost-based 5 percent safe harbor only for solar facilities with a maximum net output of 1.5 megawatts of alternating current (AC) or less.⁷ The court described the result as leaving most solar projects with only the physical work test.⁵ Before the notice, the IRS described both tests as ways to show a start.³ Clifford Chance’s briefing says the vacatur gives developers an opportunity to revisit their start-of-construction methods, including the 5 percent test.⁶

The government had 60 days from the judgment to appeal, and that window closed on August 5, 2026.⁶ The same briefing, dated September 4, 2026, said the government could still ask for an extension until that day and had not yet filed a notice of appeal.⁶ CourtListener’s copy of the docket, refreshed October 12, 2026, lists nothing after the June 6 order, though that site warns its docket data can lag.⁸ Neither source covers anything after those dates. The court vacated the notice. It did not change the statute, and the briefing says Treasury and the IRS can still issue new start-of-construction guidance that addresses the court’s reasoning.⁶ Check the court docket and the IRS site for new notices before you finalize a start-date position.

A signed contract is the usual mistake. The IRS describes the two start tests as physical work of a significant nature or paying or incurring 5 percent or more of the total cost, and a contract is neither on its own.³ Get your tax professional’s conclusion in writing before you describe the project as “started.”

For that review, gather:

• dated invoices and proof of payment
• purchase agreements and work orders
• records of physical work, on site or off site
• anything that ties each cost to this specific project

File the written conclusion with the project records, along with how continuity applies and whether later project changes affect the answer.

What credit rate applies?

Section 48E sets a base rate of 6 percent of the qualified investment and an alternative rate of 30 percent.⁹ The alternative rate goes to a facility under one megawatt AC, a facility that meets the prevailing-wage and apprenticeship requirements, or one whose construction began before January 29, 2023.^10,3

That last date is 60 days after Treasury published guidance on those requirements, per the statute and the IRS.^10,3 The IRS also lists two add-ons of up to 10 percentage points each.¹¹ The table shows how the pieces stack, as of October 25, 2026.

The statute measures the one-megawatt threshold in alternating current and says less than one megawatt, not the panels’ direct-current nameplate.¹⁰ A project near that line needs a tax professional’s read on how maximum net output is determined for the facility. Each add-on has its own conditions, and neither belongs in a financial model until you have site and sourcing evidence. To build that model, see how to model a commercial building’s return.

How do foreign-entity rules affect your equipment order?

Under the statute, a qualified facility does not include one whose construction begins after December 31, 2025 if that construction includes material assistance from a prohibited foreign entity (PFE).⁴ Industry people call this the foreign entity of concern, or FEOC, rule.

The statute defines material assistance through a “material assistance cost ratio,” which compares the direct costs of the manufactured products in the facility with the direct costs of those made by a prohibited foreign entity, against a threshold percentage that depends on the year construction begins.¹³ A module brand label is not the test the statute describes.

Two restrictions apply. One covers the taxpayer: no credit is determined for a year if the taxpayer is a specified foreign entity or a foreign-influenced entity, a rule that applies to taxable years beginning after July 4, 2025.^14,2 The other covers the equipment: material assistance in building the facility, for construction that begins after December 31, 2025.⁴

IRS Notice 2026-15 describes three interim safe harbors for working out material assistance: identification, cost percentage and certification, the last built on signed supplier statements.¹⁵ The notice says a taxpayer may rely on a supplier certification unless the taxpayer knows or has reason to know that it is inaccurate.¹⁵ For facilities that begin construction after December 31, 2025, taxpayers may rely on its section 4 safe harbors until 60 days after Treasury publishes safe-harbor tables, and on its sections 3 and 5.01 rules until 60 days after proposed regulations appear in the Federal Register.¹⁶ Taxpayers using a safe harbor must attach a statement to Form 3468.¹⁶ Check the IRS site for new tables or regulations before you file.

Settle four things with your tax professional and procurement lead before equipment orders go out:

• which equipment and supplier records the chosen method requires
• which supplier certifications you need, and who collects them
• how the team approves a substitution once the order is placed
• who watches for new guidance before the credit is claimed

The statute says a supplier certification must be signed under penalties of perjury and kept by both the supplier and the taxpayer for at least six years.¹³ A vendor saying equipment is “FEOC compliant” is not that record. Keep the signed documents in the tax file.

What does “placed in service” require?

IRS Publication 946, the depreciation guide, says property is placed in service when it is ready and available for a specific use, even if you aren’t using it yet.¹⁷ Whether a system counts as ready before the inspection closes or the utility grants permission to operate is a call for your tax professional.

For a grid-connected system, the utility’s permission to operate is a practical part of the schedule. Baltimore Gas and Electric (BGE) publishes instructions that show why. The developer can test the system once the switchgear is energized but can’t begin commercial operation until BGE grants Permission to Operate (PTO).¹⁸ The table walks through the steps for a primary-service project.

1. 1Energize switchgearAbout 30 workdays after equipment is delivered, set up and inspected by BGE
2. 2Submit completion packageAbout 3 to 5 days
3. 3BGE review20 business days once the package is complete
4. 4Start commercial operationAbout 1 day to 1 month

Adding the upper ends gives roughly three and a half months for these utility stages after equipment is delivered and set up. Earlier design, procurement and construction take additional time.^18,19 Confirm the steps for your own meter with your utility, and see commercial solar interconnection for the wider process. Pepco and Dominion customers should get their own utility’s requirements in writing.

Local permits are separate. In Howard County, the Department of Inspections, Licenses, and Permits (DILP) handles inspection of residential and commercial buildings, and its Let’s Get Started page lists commercial permit requirements and an electrical permit application.²⁰ Other counties and DC run their own offices.

Work backward from December 31, 2027

Build the schedule from the end date with your engineering, procurement and construction (EPC) contractor and your tax professional. Give each of these lines an owner and a target date:

1. Tax timing. The start-date and continuity write-up, or confirmation of the later-start completion requirement. Owner: the tax professional.
2. Utility feasibility. Application status, study requirements and any utility work. Owner: the utility coordinator and design lead.
3. Building readiness. Site access, structural review and prerequisite building work. Owner: the property owner and design lead.
4. Equipment sourcing. Supplier records and a substitution-review process. Owner: procurement, with the tax professional.
5. Permits and inspections. Approvals and inspection closeout records. Owner: the contractor and the permitting authority.
6. Commissioning and authorization. Test records and an accepted completion package. Owner: the commissioning lead and the utility.
7. Tax-file closeout. Service-date evidence, eligible basis and credit documents. Owner: the property owner and tax professional.

Leave room for a failed inspection or an incomplete utility submission. Either can push a late-2027 finish into 2028.

Here’s a hypothetical. A business signs a proposal in November 2026, and its tax professional finds no earlier construction start. Under the statute, the credit would not apply to solar property placed in service after December 31, 2027.²¹ The signature doesn’t move that date. Inspection closeout, commissioning and utility authorization set how soon the system can be ready for service, so ask for a schedule that includes all three.

Soleil’s utility-scale solar page lists engineering, procurement, construction, interconnection, commissioning and long-term operations and maintenance. Prerequisite building work belongs in the proposal as its own line, so responsibilities are clear.

Does commercial battery storage share the solar cutoff?

Not under section 48E(e)(4). The statute says that termination paragraph does not apply to energy storage technology placed in service at a solar facility.²² Storage still has its own sourcing rules, so the two assets need separate treatment in the tax analysis.²

The material-assistance restriction reaches storage whose construction begins after December 31, 2025.² The exception covers the storage technology only. The statute does not say it extends the solar property’s deadline, and it does not make every battery purchase eligible. For the equipment and planning side, see commercial battery storage in Maryland.

Can a nonprofit use the credit through elective pay?

It can. The tax code lists the section 48E credit among those eligible for elective payment, and the entities that can elect it include organizations exempt from federal income tax and state or local governments.²³ The IRS also says the credit is eligible for transfer.¹¹

Before filing, an entity that intends to elect payment or transfer must complete a pre-filing registration for each facility.²⁴ Whether a particular nonprofit or project qualifies depends on ownership, eligibility and filing steps, so the organization’s CPA should review them first.

How do the credit and depreciation interact?

The credit and depreciation are separate calculations, and one affects the other. Section 50(c) reduces the property’s tax basis when a credit is claimed. For the clean electricity credit, only half of the credit amount counts toward that reduction.²⁵

Depreciation rules changed in 2025. The IRS’s 2025 instructions for Form 4562 say Section 70509 of Public Law 119-21 removed solar or wind energy property from the definition of 5-year property under section 168(e)(3)(B)(vi), and that this applies to property beginning construction after December 31, 2024.²⁶ The same section of the tax code separately lists, as 5-year property, “any qualified property” under section 48E that is a qualified investment, along with energy storage technology.²⁷ How the Modified Accelerated Cost Recovery System (MACRS), the recovery period and any special depreciation allowance apply to a specific system is a question for the CPA.

Have your CPA put eligible basis, the credit and the depreciation deductions side by side in writing, with state tax treatment included. Keep that analysis apart from the production forecast and the electricity-bill model.

What should you bring to a first proposal conversation?

Records first, then questions. Bring any earlier-start paperwork and your tax questions to the first scope discussion, and expect the contractor to name the utility and building dependencies. Agree on who owns each open item before a completion date becomes part of the financial decision.

1. Gather electricity bills, the meter location and any interconnection correspondence.
2. Document ownership and site-control arrangements for the CPA and the designer.
3. Pull any earlier-start records for a separate tax review.
4. Request a scope that names who handles permits, utility work, commissioning and equipment sourcing.
5. Get the schedule assumptions in writing, including how delays or equipment changes get reported.

For a commercial project scope discussion, Request a proposal or call (301) 953-4140.

Solar savings and incentive eligibility depend on your roof, your usage, your utility, and your tax situation. Incentive programs change and some have limited funding. We are not tax advisors — we will review your bill with you and tell you what you may qualify for. Confirm any tax credit with a qualified tax professional.

Program rules decide who qualifies. Ask any installer whether it is on the program’s contractor list.

Sources (27)

1. IRS, Instructions for Form 3468 (2025), Part V overview. Page last reviewed August 28, 2026; read October 25, 2026. ↩ ↩² ↩³ ↩⁴

2. Congress, Public Law 119-21, section 70513. Enacted July 4, 2025; read October 25, 2026. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸

3. IRS, Internal Revenue Bulletin 2024-34, preamble to T.D. 9998 (start-of-construction tests, continuity safe harbor, January 29, 2023 date). Published August 19, 2024; read October 25, 2026. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸ ↩⁹

4. Congress, 26 USC 48E(b)(6), Cornell LII republication. Current text, read October 25, 2026. ↩ ↩² ↩³ ↩⁴ ↩⁵

5. U.S. District Court for D.C., Oregon Environmental Council v. IRS, Memorandum Opinion, Document 50. Dated June 6, 2026; read October 25, 2026. ↩ ↩² ↩³

6. Clifford Chance, Wind and solar projects in the US: the vacatur of Notice 2025-42. Briefing dated September 4, 2026; read October 25, 2026. ↩ ↩² ↩³ ↩⁴ ↩⁵

7. IRS, Notice 2025-42, sections 3.01, 6.01 and 6.02 (Five Percent Safe Harbor kept only for solar facilities of 1.5 MW AC or less). Vacated by the court order of June 6, 2026; read October 25, 2026. ↩

8. CourtListener, docket for Oregon Environmental Council v. IRS, No. 1:25-cv-04400 (D.D.C.). Docket page refreshed October 12, 2026, last filing June 6, 2026; read October 25, 2026. ↩

9. Congress, 26 USC 48E(a)(2), Cornell LII republication. Current text, read October 25, 2026. ↩ ↩² ↩³

10. Congress, 26 USC 48E(a)(2)(A)(ii) and (a)(3)(A), Cornell LII republication. Current text, including the 2025 amendments, read October 25, 2026. ↩ ↩² ↩³ ↩⁴ ↩⁵

11. IRS, Clean Electricity Investment Credit. Page last reviewed January 5, 2026; read October 25, 2026. ↩ ↩² ↩³ ↩⁴

12. Congress, 26 USC 48E(a)(3)(B) and 26 USC 48(a)(12), Cornell LII republication. Current text, read October 25, 2026. ↩

13. Congress, 26 USC 7701(a)(52)(A), (B), (D), Cornell LII republication. Current text, including the 2025 amendments, read October 25, 2026. ↩ ↩²

14. Congress, 26 USC 48E(d)(6) and (b)(6), Cornell LII republication. Current text, read October 25, 2026. ↩

15. IRS, Notice 2026-15, section 4 and section 4.03(2)(c). Posted by the IRS February 12, 2026 (file last modified that day); read October 25, 2026. ↩ ↩²

16. IRS, Notice 2026-15, sections 8.01 and 8.02. Posted by the IRS February 12, 2026 (file last modified that day); read October 25, 2026. ↩ ↩²

17. IRS, Publication 946 (2025), How To Depreciate Property, “Placed in Service.” Page last reviewed April 30, 2026; read October 25, 2026. ↩

18. BGE, Permission to Operate Requirements for Solar Projects. Undated; current document, read October 25, 2026. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷

19. Illustrative calculation, run October 2026, with the inputs sourced at ¹⁸: 30 workdays is about 6 weeks; 3 to 5 days is about 1 week at the upper end; 20 business days is about 4 weeks; 1 day to 1 month is 1 month at the upper end. Total at the upper ends: about 11 weeks plus 1 month, or roughly 3.5 months. A planning sum only, not a BGE estimate for any project. ↩

20. Howard County, Construction Inspection Division and Let’s Get Started: Resources & Fees. Undated current pages, read October 25, 2026. The Construction Inspection Division page is the one that sends residential and commercial building inspection to the Department of Inspections, Licenses, and Permits. ↩

21. Hypothetical example applying the timing rule in IRS, Instructions for Form 3468 (2025), and 26 USC 48E(e)(4), Cornell LII republication; no actual project, price or schedule is modeled. Read October 25, 2026. ↩

22. Congress, 26 USC 48E(e)(4)(C), Cornell LII republication. Current text, read October 25, 2026. ↩

23. Congress, 26 USC 6417(b)(12) and (d)(1)(A), Cornell LII republication. Current text, read October 25, 2026. ↩

24. IRS, Instructions for Form 3468 (2025), pre-filing registration requirement. Page last reviewed August 28, 2026; read October 25, 2026. ↩

25. Congress, 26 USC 50(c)(1) and (3), Cornell LII republication. Current text, read October 25, 2026. ↩

26. IRS, Instructions for Form 4562 (2025), What’s New. Page last reviewed April 30, 2026; read October 25, 2026. ↩

27. Congress, 26 USC 168(e)(3)(B)(viii), Cornell LII republication. Current text, read October 25, 2026. ↩