The 2025 policy landscape for solar shifted fast. With the One Big Beautiful Bill Act (OBBBA) signed on July 4, 2025, and the IRS’s Notice 2025-42 issued in August, wind and solar projects now face accelerated phase-outs and tighter “beginning of construction” rules under Sections 48E/45Y. For schools, municipalities, and businesses interested in installing solar, that means the window to capture a full 30% Investment Tax Credit (ITC), plus applicable adders, is still open but timelines are compressed and documentation needs to be dialed in.

The new ground rules

In August 2025, the U.S. Treasury issued Notice 2025-42, updating the rules for how developers can demonstrate they’ve “begun construction” to qualify for the ITC for solar projects. Key takeaways include:

• The ITC timeline for solar is now shorter. To remain eligible under the new law, solar projects must begin construction by July 4, 2026 or be placed in service by December 31, 2027. Projects must meet one of these deadlines to maintain eligibility.
• “5% safe harbor” was largely eliminated. The IRS’s Notice 2025-42 removes the traditional 5% spend safe harbor for most projects—except solar projects ≤1.5 MWac or roughly 2 MWdc, which may still use it. For larger systems, the physical work test is now the only path to “begin construction.”
• Policy shift driven by executive action. The Treasury guidance implements Executive Order 14315 (July 7, 2025), which directed agencies to tighten eligibility and restrict broad safe harbors.

So what does this all mean? If you’re planning a commercial-scale solar project above 1.5 MWac, you’ll need visible, qualifying physical work underway before July 4, 2026 or you’ll need a construction and procurement plan that gets you to in-service by Dec 31, 2027.

What DSD recommends now

These are planning milestones, not federal deadlines, but they reflect the practical lead times we see across design, procurement, interconnection, and construction under today’s rules:

• Engage with DSD by December 31, 2025 to kick off site/roof assessments, interval-data analysis, and interconnection strategy.
• Target contract execution by March 31, 2026 so procurement and qualifying physical work can begin ahead of the July 4, 2026 threshold or so the project can be placed in service by Dec 31, 2027.

These steps give you workable buffers against supply-chain variability and utility timelines while aligning with federal milestones. (For ≤1.5 MWac systems, safe-harboring is still possible, but the economics and logistics need careful modeling under current guidance.)

What you need to secure the 30% solar ITC by year-end

To qualify for the 30% solar ITC, organizations must provide essential documentation and allow developers like DSD to move projects forward efficiently. At a minimum, you’ll need:

• Two utility bills (to verify rate class and non-kilowatt charges), plus 15-minute interval data where available.
• A single line diagram of your facility (electrical) and other key building drawings. For instance, a roof plan that shows possible obstructions.
• Confirmation that the structural and tie-in points are open for solar installation.

For systems 1.5 MWac or under, safe harbor modules remain an option through July 4, 2026 but for larger projects, DSD will evaluate whether a co-location strategy of multiple 1.5MWac systems is viable or simply rely on physical work test compliance. For new safe harbor solar projects, there is a four-year window for project completion from the start of construction to secure the 30% solar ITC and any additional ITC adders (as available).

Market dynamics: Four states to watch

While federal deadlines dominate the conversation, state-specific programs and energy market conditions remain important factors for project economics. Here’s where we see the strongest opportunities in 2025 and beyond:

California

California continues to present strong opportunities because of its high electricity rates. However, the transition from NEM 2.0 to NEM 3.0 has lowered export compensation for solar, making storage far more valuable. Solar-plus-storage systems now offer the best pathway to maximizing savings, especially for customers with significant load flexibility. Although state-level incentives have tightened, the combination of high rates and battery benefits ensures California solar economics make it a viable market.

New York

In New York, project economics vary significantly depending on location. In Con Edison territory, in New York City and Westchester, high electricity rates and the state’s Value Stack compensation model create attractive returns for projects, especially community solar. Upstate, opportunities are driven by the MW Block program, which provides upfront incentives that make behind-the-meter projects viable. By contrast, Long Island projects are focused on behind-the-meter and community solar structures that rely heavily on additional community credit. Long Island is expensive to develop in, but energy rates are also high, so it remains relevant in specific cases. 

New Jersey

New Jersey maintains its strength thanks to the SuSi program, which provides long-term, fixed-price SREC values. Even though New Jersey’s electricity rates are not as high as California’s, the SuSi program bridges the gap, ensuring that commercial and industrial projects remain financially compelling. With the ITC layered in, many systems across the state continue to deliver meaningful cost savings and strong returns.

Maryland

Finally, Maryland offers a robust combination of relatively high utility rates, valuable Tier 1 RECs, and an active community solar program. These conditions make both rooftop and ground-mount projects attractive options for most customers. While canopy projects are often cost-prohibitive in Maryland, other configurations deliver solid economics and align well with the state’s strong renewable energy policies.

Each of these four states has its own policy nuances and utility-specific hurdles, but represent core solar markets where DSD can deliver the most value for our customers with the right strategy. They provide compelling opportunities for schools, municipalities, and businesses to capture the ITC before it phases down. Our team has the experience, licensing, and financing structures to navigate complexity and bring projects to completion on time, which is especially important given the compressed federal timelines ahead.

Get started with DSD today

Time may be running out to capture the full benefits of the federal ITC, but solar’s value doesn’t disappear when the credit does. The focus shifts from upfront tax savings to lifetime energy savings. With utility rates steadily rising, and the risk of sudden spikes from natural disasters, installing solar today not only locks in incentives, it hedges against tomorrow’s costs and secures long-term stability for your organization.

As market conditions evolve, working with experienced developers like DSD, who have the expertise, financing capabilities, and track record to help public entities and businesses navigate these complexities, will help to ensure projects don’t leave incentives on the table.

Contact DSD to explore your options and take advantage of the ITC before it’s too late.