NEW RULES ACCELERATE PHASE-OUTS, RESTRICT FOREIGN SUPPLY CHAINS, AND ALTER CLEAN ENERGY CREDIT ELIGIBILITY
Major changes to federal clean energy tax credits are expected to significantly impact Michigan’s energy, automotive, and manufacturing sectors following the enactment of the “One Big Beautiful Bill Act,” signed into law by President Donald Trump on July 4, 2025.
The legislation accelerates phase-outs of many credits established under the Inflation Reduction Act of 2022, adds restrictions related to foreign entities of concern, and alters qualification criteria for clean energy developers. With a narrow window for compliance and federal guidance, Michigan-based developers, manufacturers, and energy producers are bracing for adjustments.
Compressed Timelines for Clean Energy Credits
The law immediately affects solar, wind, electric vehicles, and residential energy efficiency projects. Tax credits for new and used electric vehicles, including commercial EVs, will now expire Sept. 30, 2025 — approximately seven years earlier than originally planned. Credits for residential clean energy and home efficiency improvements will sunset at the end of 2025. The EV charging infrastructure credit will expire June 30, 2026, affecting utilities and municipalities investing in public charging networks.
Wind and solar developers face a key deadline. Projects must begin construction by July 4, 2026, and be placed in service by the end of 2027 to retain credit eligibility under Sections 48E and 45Y. Other clean energy technologies, such as geothermal, battery storage, and hydropower, retain their full credit value until 2033, followed by a gradual phase-out through 2036.
Restrictions on Foreign Entities Complicate Supply Chains
The law introduces a set of restrictions targeting foreign entities of concern, including companies linked to China, Iran, North Korea, and Russia. These rules apply to many energy tax credits and will affect new projects beginning construction after Dec. 31, 2025.
The restrictions prohibit projects owned or controlled by foreign-influenced entities from qualifying for credits. Contracts granting operational or intellectual property control to such entities may also disqualify a project. Additionally, equipment and components must meet minimum domestic sourcing thresholds that vary by year and technology.
For Michigan, a state with a strong presence in battery manufacturing and solar component production, these restrictions add complexity to procurement and compliance. Developers will need supplier certifications and must carefully track material origins to avoid losing eligibility.
Executive Order Could Tighten Construction Eligibility
An executive order issued July 7 directs the Treasury Department to revise rules around the “begin construction” standard. The order seeks to prevent manipulation of eligibility timelines. Current rules allow projects to qualify by either meeting a physical work test or incurring 5 percent of project costs with continuous progress.
Michigan developers relying on these provisions may need to re-evaluate construction schedules and financial strategies to maintain credit eligibility.
Navigating New Solar Credit Rules? Michigan Solar Solutions Can Help
With recent federal legislation accelerating the phase-out of clean energy tax credits and tightening restrictions on foreign-sourced equipment, homeowners and developers across Michigan are facing urgent decisions. Michigan Solar Solutions has been helping residential and commercial clients go solar since 2007, and now, that guidance is more critical than ever.
From Wayne and Oakland to Kent and Ingham Counties, our team offers system design, installation, and support rooted in real-world experience with grid-tied and off-grid systems. As an award-winning Michigan Saves financing contractor, we understand how to structure solar projects for both maximum savings and compliance under changing rules.
Given the compressed timelines and sourcing requirements introduced by the One Big Beautiful Bill Act, starting the solar conversation now is essential. Request a free solar analysis or call (248) 923-3456 to speak with experts who can help protect eligibility, avoid costly delays, and make the most of Michigan’s solar opportunities before incentives expire.