This is part two of a two-part blog series. Here, we discuss the impacts to the solar tax credit that businesses, municipalities, and schools can take advantage of. Part one reviewed changes to the residential solar tax credit for homeowners.
Trump’s “One Big Beautiful Bill Act” (OBBBA), or what we like to call the “Bad Budget Bill”, is more than just a budget overhaul; it also marks a sharp pivot away from the nation’s recent momentum on climate action and clean energy. Rolling back major provisions of the 2022 Inflation Reduction Act (IRA), the OBBBA eliminates or weakens many policies that were driving the U.S. clean energy transition while saving people and communities money on electricity and creating clean energy jobs.
Local governments, nonprofits, schools, businesses and rural electric cooperatives often depend on federal support to fund clean energy installations, like solar arrays on public buildings. These projects can reduce long-term energy costs, create local jobs, improve air quality, and build community resilience in the face of climate change. Even with the impacts of the OBBBA, there is still time for these entities to plan and install their solar projects. Read on to learn about the impacts of the OBBBA and what incentives currently remain.
What Did the OBBBA Change for Businesses and Communities Wanting to Go Solar?
Tax Credits – The most significant impact of the OBBBA is the early termination of the 30% solar tax credits for businesses and communities, known as the Investment (48E) and Production (45Y) Tax Credits. Previously, under the Inflation Reduction Act these tax credits would have begun to phase out in 2032, however under the OBBBA, solar projects must now be placed in service by December 31, 2027 or start construction by July 4th, 2026 to be eligible for the tax credits. As we discuss in part one of this blog series, the residential solar tax credit will expire on an accelerated timeline.
Communities and businesses still have the time needed to explore and install solar projects on community-owned buildings. Thanks to the direct/elective pay provision of the Inflation Reduction Act, tax exempt entities like municipalities, schools, and non-profits, can receive the tax credits as a direct payment. This provision remains intact following the OBBBA.
Grant and Loan Programs – Funding has been cut or zeroed out for federal grant programs supporting clean energy projects, low-income energy upgrades, and climate resilience planning. There are too many examples to mention them all, but a couple impacted programs include the Rural Energy for America Program and the USEPA Solar for All Program Funding.
What Can Communities Still Access in Illinois?
Communities, businesses, and schools still have more than two years to take advantage of the 30% federal tax credit and make their solar projects a reality. Illinois also continues to offer robust state-level support for clean energy. Here’s what else is available in addition to the federal tax credit:
Illinois Shines State Financial Incentives – This statewide program provides incentives for residential, commercial, and community solar projects through the sale of Renewable Energy Credits (RECs). These incentives can cover 25–35% of project costs and remain intact despite federal changes.
Energy Efficiency (EE) Programs – Illinois State Law directs the utilities to reduce energy use; and this is done by offering energy saving measures to utility customers. Both ComEd and Ameren Illinois continue to offer rebates and incentives for EE upgrades, from LED lighting to HVAC improvements and much more, for homes, businesses, and public facilities. This is often the first step a community or business should take in their clean energy journey.
Other Clean Energy Technologies – The Investment and Production Tax Credits can also be applied to other technologies such as geothermal, battery storage, and hydropower. Under the OBBBA, these technologies maintain the full value of the credits through 2033, with a phaseout by 2036.
Illinois Climate Bank – The Illinois Climate Bank, created by state law, offers clean energy financing solutions, like revolving loan funds and property-assessed clean energy (PACE) financing to support a community’s clean energy efforts. Their new and improved website is organized to help residents, businesses, local governments, and other entities navigate appropriate programs. Some of the Illinois Climate Bank programs have been impacted by federal funding cuts and their future is uncertain.
Local Climate and Energy Plans – Local units of government are constantly making decisions on how to use public money on local infrastructure improvements and investments. Community members and leaders should be advocating to ensure tax dollars are being spent in a climate-friendly ways; and in the case of solar the climate-friendly way is also the budget-friendly way. One way to ensure your community is being proactive on this front is to encourage the adoption of a local climate, energy, or sustainability plan. Illinois communities from the Rockford area to Carbondale have adopted such plans.
