Senate Releases Updated One Big Beautiful Bill Text – What It Means for Solar

Overnight Friday night, the Senate released its updated One Big Beautiful Bill (“OB3”) text, which provides substantial updates to the previously released Senate Draft text, especially regarding tax credits for solar.

Industry pundits and analysts had predicted that the Senate would moderate the industry-destructive text as late as Friday morning; however, after a call from the White House, the GOP Senate moved back to a more hardline position. 

Before we break down updated changes to the Senate text, it’s important for all homeowners who are considering going solar to act now. There is no risk for the tax credit being unavailable to homeowners who have their systems installed in 2025 and otherwise qualify for the tax credit. Both the House and Senate proposals have no retroactive element to the 25D Consumer tax credit. The best option for homeowners is to receive multiple quotes from qualified contractors, using a service like solar.com, which also wraps the performance of the system in the company’s “Tri-Guard Guarantee.”

What’s In the Updated Budget Bill for Solar?

As in prior versions, the latest draft of the One Big Beautiful Bill is voluminous and covers much more than solar. The following breakdown should not be construed as legal or tax advice and is very much focused on residential solar. 

The 25D Consumer Solar Tax Credit

With this latest draft, we’re back to a December 31, 2025 deadline to have residential solar systems installed in order for the homeowner to claim a 30% solar tax credit. This applies to residential systems purchased by the homeowner via cash or loan, not leases or PPAs. If signed into law as written, the 25D Residential Clean Energy Credit will be terminated at the end of the year, and systems installed in 2026 and beyond will not qualify for a federal tax credit.

This is a negative change from the prior Senate proposal, which called for termination of the credit 180 days after the bill is signed into law. This previous version would have given homeowners and solar contractors a little more time to complete projects, allowing for finicky winter weather and end-of-year holidays. 

Residential Lease and PPAs under 48E 

In both the House and prior Senate Finance draft, Residential Solar Leases were explicitly excluded from the 48E tax credit. In the updated draft text, those restrictions are eliminated, which allows for leased systems to qualify for the tax credit for several more years. It’s important to note that in leases and PPAs, the installation company claims the tax credit and passes the savings from that credit to the homeowner through lower lease payments.

Solar.com will update its prior article on the pros and cons of leasing to help homeowners understand whether a lease is right for them. 

48E Corporate Tax Credit 

The 48E Corporate tax credit has substantial changes from the prior Senate Finance draft as well. The original proposal was for a multi-year “glide path,” which would phase out the tax credit over time. It would also allow projects started in a tax year up to 4 years to complete, meaning deadlines were far more achievable. The updated language has no “Commence Construction” language, but reverts to a “Placed in Service” deadline of 12/31/2027. Although less impactful for residential solar, this places a significant burden on large scale projects, which have multi-year development and construction deadlines. 

Domestic Content Bonus 

This threshold jumps from 40% to 45% retroactive to June 16th. The “DomCon” bonus is only eligible for leased or systems under PPA claiming the 48E tax credit. 

Significant FEOC Restrictions 

The “Foreign Entity of Concern” (FEOC) has been present in prior House and Senate texts, but the updated Senate version goes a step further. Projects that use components from FEOC-controlled or influenced companies lose access to the tax credit (under 48E) retroactive to June 16, 2025. There is also a “material assistance” phase in, beginning in 2026. 

FEOC Excise Tax

In entirely new text, the Senate has proposed that projects that use FEOC components will receive a 50% “excise tax” effective January 2028. This will likely not affect the Residential Sector, but is a watch out as many Chinese-controlled companies will likely stop serving the US market, which puts warranty claims and after-sales support at high risk. 

Other provisions

Of less relevance to the US Residential industry, other changes were actually net positive for the solar industry, including the ability for tax credit transfers (for qualified tax credits, not consumer/25D tax credits) as well as the ability to “stack” tax credits for manufacturers who are vertically integrated. 

What happens next to the OBBB and the solar tax credits?

The Senate is expected to vote on their version of the Bill on Sunday, June 29, or it may move into early the week of July 4th. While there will likely be small changes “on the margins” of the Bill, solar.com analysts are not predicting wholesale changes to the solar topics mentioned in this article. 

The bill then moves back to the House where it will be put up for vote before going to the President. While the industry is rallying around trying to soften some of this language and make the bill more workable, given the Trump administration’s direct intervention in the Senate process, it’s unlikely to expect any GOP House or Senate member to stand up and rally for renewable energy provisions. 

With a clear end in sight for the 25D consumer tax credit for solar, anyone considering going solar should move forward today with a custom proposal from a reputable company. Additionally, homeowners should consider the risks of using components from Chinese-owned or controlled companies. Solar.com recommends REC, Q Cells, and Silfab as being the lowest risk of FEOC interruptions. 

Key Takeaways

On the positive side, the Residential sector will be able to access the full 30% tax credit for 2.5 more years through leases and PPAs. Although this mainly benefits institutional investors, a win is a win. The FEOC restrictions, while challenging, may also give the industry a chance to rally for a more graduated phase out in the next year or two as companies shift to purchasing products from US factories. 

On the other side, you see a “cliff” element of the tax credits on a very short time horizon, which will undoubtedly cause project cancellations, massive job losses, and rapidly increasing electricity prices across the country. America’s experiment in 21st Century industrial policy seems to have lasted only 2.5 years.