Schools across the country are going solar because of the significant cost-savings, student learning opportunities, and energy independence. However, an important deadline is coming up soon that will affect schools’ ability to utilize the Clean Electricity Investment Tax Credit (ITC) (Section 48E) to reduce the cost of solar. 

The best opportunity to access the tax credit is to meet the requirements for Beginning of Construction (BOC) prior to the IRS deadline of July 4, 2026.  These requirements apply to any new solar project, whether your school is planning to own the solar array and use elective pay to access the tax credit or work with a third-party who purchases the array and claims the tax credit.

Here’s what you need to know – and what you can do about it.

Act quickly to take advantage of the solar tax credit

The Clean Electricity Investment Tax Credit (ITC) remains available for any solar project that is placed in service by December 31, 2027.  Solar projects that meet the Beginning of Construction (BOC) requirements before July 4, 2026 have four years for the solar project to be placed in service.  New solar projects that begin construction after July 4, 2026 can still qualify for the tax credit if they are placed in service by the end of 2027 and meet the Prohibited Foreign Entities rules. 

Any school district considering a solar project should act immediately to meet the Independence Day deadline. Below is a sample action timeline of next steps.

Sample Action Timeline to Meet the July 4, 2026 Investment Tax Credit Deadline 

How Prohibited Foreign Entities (PFE) affect new solar projects

Solar projects that begin construction in 2026 must meet new federal requirements that fall under the Prohibited Foreign Entities (PFE) rules, which prohibit clean energy projects from being supported by Foreign Entities Of Concern (FEOC): China, Russia, North Korea, and Iran. If your project uses equipment or financing tied to these foreign entities, you could lose the tax credit, face penalties, or trigger multi‑year audits.

Here is a big-picture view of what school leaders should know if they are considering new solar projects this year. Schools that purchase and own the solar array will need to know where their outstanding debt is issued, who has effective control of their projects, and where their materials are sourced. Schools will need to work with their solar developer to ensure compliance with the materials assistance rules and will need to request certifications or proof that they are purchasing components from FEOC-compliant sources.  

Here are a few important Prohibited Foreign Entity (PFE) rules that make a solar project ineligible for the tax credit: 

• A Prohibited Foreign Entity (PFE) or Foreign-Influenced Entity (FIE) exercises “effective control” over key assets or production (including via contracts).

  • “Effective control” can be contractual, not just ownership. Licensing IP, long‑term O&M, or software contracts can create foreign influence if they give a foreign party the right to control production timing or quantities.

  • Starting in  2028, certain payments that grant effective control within 10 years of in‑service dates can trigger full credit recapture. Accuracy‑related penalties and extended lookbacks apply if certifications are false.

• A Foreign Influenced Entity (FIE) has 15% or more of an entity’s outstanding debt is issued in Specified Foreign Entities (SFE) 
• The project’s supply chain relies too heavily on PFEs via the Material Assistance Cost Ratio (MACR test)

The landscape is changing quickly. Further definitions and rules are expected to be released by the U.S. Department of the Treasury later this year.  Many companies are still mapping their supply chains to ensure they can meet these requirements. Reach out to Generation180 or other partners for support, if you need help understanding if your project could get flagged for PFE. Check out this summary of Prohibited Foreign Entity tests produced by our friends at Undaunted K12. 

Action checklist for planning new solar projects

Wherever you are in the planning process, you can use the action checklist below when planning your new solar project. 

• Confirm project financing path. If you plan to use Elective Pay, register (required) and document compliance steps.
• Require supplier disclosure and written certifications about origins of key components (including PV modules, batteries, inverters, racking, electrical equipment).
• Insist on traceability clauses and audit rights in procurement contracts and prioritize suppliers that are willing to provide independent verification.
• Track costs and documentation carefully to meet Safe Harbor requirements. Keep records for at least six years.
• Engage legal and technical advisors early. PFE rules are complex and evolving; outside counsel or consultants can help interpret MACR calculations and draft contract language.
• Prioritize equipment from suppliers with transparent supply chains or U.S.-based manufacturing where feasible.
• Train procurement and facilities staff to flag contracts with long‑term IP licenses, O&M, or production‑control clauses that could create “effective control.”

Time is of the essence if you plan to take advantage of the solar energy tax credit. Meeting the July 4, 2026 deadline for Beginning of Construction (BOC) will give you more runway to complete your project.  Reach out to Generation180 to get support in reviewing your project, find resources to understand how to meet new requirements, and check if your solar project will save you money even without the tax credit.

Disclaimer:

The information and opinions provided in this article are for general informational purposes only. This document does not constitute legal advice, regulatory advice, or a legal opinion. Generation180 is not acting as an attorney and makes no representations regarding compliance with applicable laws, regulations, tax code, permitting, or contractual obligations. Clients should consult with qualified legal counsel and other appropriate professionals before making decisions or taking actions based on this article.