Recently, the U.S. House of Representatives introduced a bill titled “The One, Big, Beautiful Bill,” which proposes to advance the expiration date of the 30% tax credit for residential solar installations to December 31, 2025, nearly a decade earlier than the originally planned end date.
The Republican-led House Ways and Means Committee has proposed to repeal Section 25D on page 221 of the bill, which would mean an abrupt end to the residential solar tax credit by the end of this year, completely overturning the previous plan to terminate it on December 31, 2034. Meanwhile, the tax credit for utility-scale solar projects will remain in place until 2028 but will be gradually reduced thereafter, dropping to 80% in 2029, 60% in 2030, 40% in 2031, and zeroing out in 2032, earlier than the deadlines stipulated in current law.
The original plan was to implement a phased-out mechanism for the residential solar tax credit, but the accelerated timeline proposed in the new bill has caught the solar industry off guard. Aaron Nichols of Exact Solar stated bluntly, “If Congress abruptly eliminates the tax credit without a reasonable transition period, it will cause significant industry disruption in the short term.”
This highly anticipated tax credit policy, known as the Investment Tax Credit (ITC), is a core component of President Biden’s landmark Inflation Reduction Act, aimed at providing U.S. homeowners with a 30% tax credit on the total cost of residential solar installations.
According to the legislative process, the House Ways and Means Committee will revise and vote on the bill before submitting it to the full House for a vote. If passed, the bill will be forwarded to the Senate, which must decide whether to amend, reject, or pass it by July 4. Notably, the bill also proposes to repeal tax credits for electric vehicles and energy efficiency improvements.
In response, Abigail Ross Hopper, President and CEO of the Solar Energy Industries Association (SEIA), issued a statement saying, “As billions of dollars in investments pour into states that strongly supported President Trump, this proposed legislation will undoubtedly destroy the most successful localized industrial development in U.S. history.”
Charlie Hadlow, President and COO of EnergySage, also pointed out that repealing the 25D tax credit will not only hinder the sustainable development of American households and small businesses but also run counter to President Trump’s advocacy for a domestic energy strategy. This tax credit plays a crucial role in promoting the construction of a reliable and affordable domestic electricity supply system.
Industry insiders generally worry that if this proposal is ultimately enacted, it will inevitably drive up energy costs for homeowners, lead to significant job losses, bring the solar industry to a standstill, and deal a heavy blow to numerous small businesses.
At the same time, amidst soaring energy demand, this move will also make it more difficult for the United States to build a more resilient power grid and weaken its competitive edge against China in the clean energy sector, making the achievement of carbon reduction goals increasingly elusive.
The most unreasonable aspect of this budget proposal is that the negative impacts of the policy adjustment will primarily be concentrated in “red states” with high Republican support, which happen to be the regions where the solar industry has thrived in recent years.
