View Larger Image

The July 4, 2026 ITC Deadline Has Passed: What Texas Commercial Property Owners Need to Know Now

By Adam Glick, Solar Sherpa, NATiVE Solar

Updated September 2026. The July 4, 2026 construction-start deadline has passed. This article has been rewritten to explain where commercial solar tax credits stand now, what changed in June 2026, and what options remain for Texas projects.

More current NATiVE resources on this topic:

The July 4, 2026 construction-start deadline for the Section 48E Investment Tax Credit (ITC) has come and gone. For Texas commercial property owners, that doesn’t mean the federal credit is off the table. It means the rules for any new commercial solar project now come down to one date: December 31, 2027. Here’s where things stand as of September 2026, and what we’d suggest thinking through with your team and tax advisor.

Where Commercial Solar Tax Credits Stand Now (September 2026)

Projects that began construction on or before July 4, 2026 generally have a four-year runway under the continuity safe harbor, meaning a placed-in-service target of December 31, 2030.
Projects that did not begin construction by July 4, 2026 can still qualify for the Section 48E credit, but only if the solar system is placed in service by December 31, 2027.
Solar projects placed in service after December 31, 2027 that missed the construction-start deadline are not eligible for the Section 48E credit.
Battery energy storage is treated differently. Storage is carved out of the accelerated solar and wind termination and keeps a longer credit runway.
New sourcing rules apply. Projects beginning construction in 2026 or later must also meet “prohibited foreign entity” (often called FEOC) material assistance requirements to claim the credit.

Eligibility varies by project, ownership structure, and tax situation. Nothing here is tax advice. Please confirm your specific situation with a qualified tax professional.

Quick Background: How We Got Here

The Inflation Reduction Act (2022) originally extended clean energy tax credits into the 2030s. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, accelerated the end of those credits for solar and wind. Under the new law, the Section 48E credit does not apply to solar facilities placed in service after December 31, 2027, unless construction began on or before July 4, 2026.

That created the two-path structure we covered when this article was first published in May 2026: start construction by July 4, 2026 and get a longer runway, or skip the construction-start deadline and finish the project by the end of 2027.

What Changed in June 2026: The 5% Safe Harbor Was Restored (For Now)

When we first published this article, the IRS had eliminated the 5% Safe Harbor for solar projects larger than 1.5 MW (AC) through Notice 2025-42, leaving the Physical Work Test as the only way for larger projects to establish that construction had begun.

On June 6, 2026, a federal district court in Washington, D.C. vacated Notice 2025-42 in full, finding the IRS had not adequately justified the change. The practical effect: both the Physical Work Test and the 5% Safe Harbor became available again for establishing beginning of construction, regardless of project size, with roughly four weeks remaining before the deadline.

Two caveats matter here:

An appeal or revised IRS guidance was widely expected. Tax practitioners cautioned that the ruling might not be the final word. If your project relied on the restored 5% Safe Harbor to meet the July 4 deadline, make sure your tax counsel is tracking the current status of the case and any new guidance.
Documentation is still everything. Whichever method your project relied on, contemporaneous records (contracts, invoices, payment records, delivery receipts, photos of physical work) are what support your position if the IRS asks.

If Your Project Began Construction Before July 4, 2026

If you established beginning of construction on or before July 4, 2026, your project generally needs to maintain continuous construction and be placed in service within four calendar years to rely on the continuity safe harbor, which works out to December 31, 2030. If a project runs past that window, continuity is evaluated on facts and circumstances, and certain disruptions outside the owner’s control (severe weather, permitting delays, interconnection queues, supply chain problems) have historically been treated as excusable.

For most Texas commercial projects, a four-year window is ample. The practical focus now is keeping the project moving and keeping the paperwork clean.

If Your Project Missed July 4: The December 31, 2027 Path

For new projects, the question is no longer “when does construction start?” It’s “can this system be placed in service by December 31, 2027?” As of late September 2026, that’s roughly 15 months away.

“Placed in service” generally means the system is complete and available for its intended use, which in practice ties closely to utility permission to operate. For Texas commercial solar, the timeline drivers are usually:

Interconnection and utility approvals, which vary widely by utility and system size
Permitting and AHJ review
Equipment lead times, now complicated by FEOC sourcing requirements (see below)
Structural and electrical upgrades (roof work, switchgear, service upgrades)
Construction scheduling across a market where many owners are chasing the same deadline

Smaller rooftop commercial systems with straightforward interconnection may be able to meet a late-2027 in-service date if they move soon. Larger or more complex projects (ground mounts, multi-building sites, projects needing significant electrical upgrades) face a tighter path. The honest answer depends on your site, your utility, and when you start.

New for 2026: FEOC / Prohibited Foreign Entity Rules

The OBBBA also added “material assistance from a prohibited foreign entity” restrictions to the Section 48E credit. These apply to projects that begin construction after December 31, 2025, so they affect essentially every new project pursuing the 2027 path.

In short, a project must show that a minimum share of its manufactured-product costs is not attributable to prohibited foreign entities. That threshold starts at 40% for solar facilities and 55% for energy storage beginning construction in 2026, and it increases in later years. Treasury and the IRS issued interim guidance (Notice 2026-15) in February 2026, with further guidance expected.

What this means in practice: equipment selection and supplier documentation are now part of tax-credit eligibility, not just engineering and price decisions. Ask any installer you’re evaluating how they source and document FEOC compliance.

Battery Storage Still Has a Longer Runway

Energy storage technology is expressly excepted from the accelerated solar and wind termination. Storage remains eligible for the Section 48E credit on a longer phase-down schedule, and storage placed in service at a solar facility can retain its own eligibility even if the solar portion does not qualify. FEOC material assistance rules still apply to storage projects beginning construction in 2026 or later.

For many commercial sites, that makes battery energy storage a stronger part of the conversation than it was a year ago, particularly for demand charge mitigation, backup power, and energy resilience.

What Still Works Without the Solar ITC

If your project can’t realistically be placed in service by the end of 2027, commercial solar may still make sense. The financial case is different, not necessarily gone. Factors that remain in play include:

100% bonus depreciation, which the OBBBA permanently restored for qualified property acquired after January 19, 2025. Depreciation class-life rules for solar also changed under the OBBBA, so confirm how depreciation applies to your project with your tax advisor.
Texas property tax exemption for solar and storage under Tax Code §11.27, which requires a filing many owners miss. See our guide: the one-page form many Texas solar owners forget to file.
Utility and local incentives, which vary by territory. Austin Energy customers, for example, should review Austin Energy’s 2026 commercial solar incentives.
Rising Texas commercial electricity costs and demand charges, which solar + storage may help reduce exposure to over the life of the system.

When the ITC and bonus depreciation both apply, federal tax benefits can offset a substantial share of project cost for qualifying commercial taxpayers. The exact figure depends heavily on your tax position, so model it with your controller or tax advisor rather than relying on a rule of thumb.

What Texas Commercial Property Owners Should Do Now

If you began construction before July 4, 2026: Keep construction continuous, keep your documentation organized, and confirm with tax counsel whether anything in the June court ruling or later guidance affects your position.
If you’re evaluating a new project: Get a realistic, site-specific timeline to placed-in-service before assuming the 2027 credit. Interconnection and equipment lead times are usually the deciding factors.
Ask about FEOC compliance early: Equipment sourcing now affects credit eligibility. Make sure documentation is part of the procurement plan from day one.
Consider storage on its own merits: Battery storage keeps a longer credit runway and can support demand charge mitigation and resilience whether or not the solar portion qualifies.
Model the project both ways: Build one financial case with the ITC and one without, so a schedule slip doesn’t upend the decision.

At NATiVE Solar, we’ve been engineering and building commercial solar and storage projects in Texas since 2007. We’re not in the business of manufacturing urgency, but we can help you figure out quickly whether a December 2027 in-service date is realistic for your site. If you’re weighing a commercial solar or solar + storage project, start a conversation with our team about your goals, timeline, and site conditions.

Frequently Asked Questions

Did the commercial solar tax credit end on July 4, 2026?

No. July 4, 2026 was the deadline to begin construction and secure a longer placed-in-service window. Solar projects that missed it can still qualify for the Section 48E credit if they are placed in service by December 31, 2027. Eligibility depends on the project and taxpayer.

Is the 5% Safe Harbor available for projects over 1.5 MW?

A federal court vacated IRS Notice 2025-42 on June 6, 2026, which restored the 5% Safe Harbor as a method for establishing beginning of construction regardless of project size. The ruling could be affected by an appeal or new IRS guidance, so check current status with your tax counsel. For new projects, the July 4, 2026 construction-start deadline has already passed.

What happens to solar projects placed in service after 2027?

Solar projects that did not begin construction by July 4, 2026 and are placed in service after December 31, 2027 are not eligible for the Section 48E credit. Other benefits, such as bonus depreciation and the Texas property tax exemption, may still apply.

Does the 2027 deadline apply to battery storage?

No. Energy storage is excepted from the accelerated solar and wind termination and keeps a longer credit runway, though FEOC material assistance rules apply to storage projects beginning construction in 2026 or later.

What are the FEOC rules for commercial solar?

Projects beginning construction in 2026 or later must show that a minimum percentage of manufactured-product costs is not attributable to prohibited foreign entities in order to claim the Section 48E credit. Treasury issued interim guidance in Notice 2026-15 (February 2026). Equipment sourcing and documentation now directly affect credit eligibility.

Related NATiVE Solar Resources

This article is for general information only and is not tax, legal, or financial advice. Tax credit eligibility depends on project specifics, ownership structure, and current IRS guidance, which continues to evolve. Consult a qualified tax professional before making decisions. Originally published May 6, 2026; updated September 2026.

Sources: IRS Notice 2025-42 · Holland & Knight on the June 2026 ruling · Troutman Pepper Locke on Notice 2026-15 (FEOC) · Olson Partners on the 2027 termination