Educational 16 July 2025
If you’ve been on the fence about starting a solar lighting project, now’s the time to get up off it. A new federal law (the so-called “big beautiful bill”) dramatically shortens the timeline to claim the Investment Tax Credit (ITC), the federal incentive that, for years, has helped cities and businesses offset the cost of solar lighting systems.
Under the updated policy, projects must begin construction by July 4, 2026 to qualify. After that, the credit disappears—leaving those who wait without a key funding source and potentially facing a much bigger bill than anticipated. With less than 12 months to go, the pressure is on to move quickly.
In this article, we’ll explain what’s changing, why it matters for solar lighting, and what you can do—right now—to protect your project’s funding potential.
What is the ITC?
The ITC is a federal incentive that allows clean energy project owners to claim a percentage of project costs as a tax credit (or, for tax-exempt organizations, a cash refund). Initially introduced in 2005, the ITC was significantly expanded by the Inflation Reduction Act (IRA) in 2022 to accelerate clean energy adoption.
Key improvements included:
For solar lighting projects, this meant a wide range of eligible costs—including poles, panels, batteries, installation labor, and even sales tax—could qualify for a base credit of 30%, with the potential to reach 50% or more through stacked bonuses. We cover all this in detail in our earlier article.
The IRA originally gave solar projects until 2033 to begin construction and claim the ITC. But with the passage of the big, beautiful bill, that runway has been cut short. Now, projects must start by the end of 2025 to lock in the incentive.
This policy shift makes solar lighting projects more urgent. What was once a ten-year runway is now a 12-month sprint. And because eligibility hinges on when a project begins, the next question is: What counts as “starting”?
Believe it or not, the IRS actually has guidance—32 pages of it—on what constitutes beginning construction for projects utilizing the ITC. The first is the physical work test, which is exactly what it sounds like: beginning substantial construction activity, such as pouring concrete and setting poles.
But there’s also a more accessible path: the 5% safe harbor rule. Under this option, a project qualifies simply by spending or incurring at least 5% of the total project cost before July 4, 2026. Once that threshold is met, eligibility is locked in, and the project has until 2030 (four years from that date) to be completed.
What if you miss the window?
Even if your project doesn’t meet the 5% safe harbor deadline, there’s still a second chance: you can qualify by completing construction and placing the system in service by December 31, 2027. But with just 18 months remaining, that route requires speed and certainty.
It’s also worth noting that a recent executive order directs the Treasury to tighten interpretations of what counts as “starting.” Guidance may change—it has before—so the sooner you act, the more secure your project’s eligibility will be.
With the clock ticking, many cities and developers are already mobilizing to lock in ITC eligibility. That’s driving early demand for equipment, contracts, and experienced vendors, raising the risk that those who wait may find themselves shut out.
That’s especially true for solar lighting systems, which often involve long lead times. Starting now can be the difference between paying 30% less—or 30% more—for the exact same project.
Have questions about your project timeline or eligibility? Our team is here to help.
