Navigating the New Clean Energy Tax Credit Rules
If you’re considering solar in the next 3-5 years, the time to act is now. Maximize ITC benefits and avoid FEOC compliance pitfalls.
What to Know
Critical action deadline: December 31, 2025
Spend at least 5% (more on this below) of your project cost before year-end and you can:
- Avoid Foreign Entity of Concern (FEOC) compliance entirely
- Sidestep significant legal and documentation costs
- Lock in ITC eligibility for projects <1.5MW
- Buy yourself 4 years to place the project in service
Other critical deadlines at a glance
July 4, 2026: Begin construction (5% safe harbor for projects <1.5MW ac or begin physical work for projects >1.5MW ac) to secure 4-year window to place in service
December 31, 2027: If you don’t meet the critera above before July 4, 2026, place the project in service by this date regardless of size
Safe harbor guidance
Safe harbor can be achieved with at least 5% of total project cost paid and procured before July 4, 2026 (to secure 2025 ITC eligibility for <1.5MW size projects) and before Dec 31, 2025 (to avoid FEOC compliance burdens for any size project).
- Spend slightly more than 5% to be fully “audit-proof,” and protect the project from non-compliance if the total project value increase after contract is signed.
- Funds must be used for actual procurement (typically solar modules), not just for signing contracts.
- Modules are procured and stored at approved warehouses within 105 days of payment. The warehousing has to be paid for by the developer or owner, but does not have to be their own warehouse. Deposits must be non-refundable, and storage fees covered by the developer.
- Each procurement should be fully traceable through paid purchase orders, warehouse tracking, and a clear chain of custody to ensure IRS audit compliance.
Supply chain diligence
If you can’t avoid FEOC, ensure your equipment suppliers provide proper documentation and warranties on the origin of components. This is increasingly important for institutional tax equity.
Contractual protections are essential
With EPC backlogs growing, include liquidated damages and timeline guarantees in your contracts to avoid being deprioritized for larger projects.
Determine priority projects
Map out all projects planned for 2025-2030 and their sizes. Determine which projects are most impacted if they don’t leverage the ITC. For the most impacted projects greater than 1.5 MW ac, prioritize incurring 5% of costs by 12/31/2025 to avoid FEOC compliance and begin physical work by 7/4/2026. For projects smaller than 1.5 MW ac, prioritize incurring the 5% cost to avoid FEOC and secure the four-year timeline to place in service.
Webinar Replay
We just wrapped up an essential conversation between VECKTA Co-Founder Dan Roberts and Marc Palmer, CEO of Conductor Solar, breaking down what the new tax landscape really means for your projects. The recording is ready, and there’s one date you need to circle: December 31, 2025.
In this 35-minute webinar, you’ll learn about:
• Physical work test vs. 5% safe harbor: which applies to your project?
• How to navigate FEOC requirements (or avoid them altogether)
• Why EPC backlogs are building—and what it means for your timeline
• Contractual protections you need when locking in your deployment partner
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