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The residential solar ITC (Section 25D) expired December 31, 2025. Rhode Island homeowners who buy solar with cash or a loan get $0 from the IRS. But there is a legal, congressionally-designed path to still access the 30% credit — through third-party ownership under Section 48/48E. In RI, you can stack this with the REG program ($0.27/kWh for 15–20 years) for an unmatched combination.
30%
ITC Rate (Section 48)
$9,900
Example ITC (11 kW)
Jul 4, 2026
Construction Deadline
$0.27/kWh
REG Revenue
A 64-year-old tax code provision — not a loophole
Section 48 of the Internal Revenue Code has existed since 1962. It provides an Investment Tax Credit (ITC) to the owner of qualifying energy property — solar panels, wind turbines, battery storage, and other energy systems. The critical word in the statute is “owner.”
For decades, two parallel pathways existed for solar tax credits. Section 25D let individual homeowners claim the ITC on their personal tax return when they purchased solar with cash or a loan. Section 48 let businesses and financing companies claim the ITC when they owned solar systems — including systems installed on residential rooftops through leases and PPAs.
On July 4, 2025, the OBBBA (One Big Beautiful Bill Act) eliminated Section 25D. The homeowner pathway is dead. But Section 48 — the business/TPO pathway — remains active for projects beginning construction before July 4, 2026.
Why Rhode Island is uniquely positioned for Section 48 + REG stacking
Rhode Island's REG (Renewable Energy Growth) program pays $0.27/kWh guaranteed for 15–20 years. TPO-owned systems can enroll in REG. Combined with the Section 48 ITC (30%) and MACRS depreciation, a TPO in RI receives three revenue/benefit streams: ITC + MACRS + REG. This triple stack makes RI one of the most attractive TPO markets in the country and enables some of the lowest PPA rates in New England.
This is not a loophole. Congress designed it this way.
Section 48 was created to encourage capital deployment into energy infrastructure. Financing companies invest billions in solar systems, claim the ITC as intended by the tax code, and pass savings to homeowners through lower monthly payments. This mechanism has been reviewed and upheld by the IRS, Treasury, and Congress for over six decades.
Section 48E, created by the Inflation Reduction Act (August 2022), extended the investment tax credit with technology-neutral rules. Together, Sections 48 and 48E provide the legal framework that allows third-party solar financing to continue delivering federal tax benefits — even after Section 25D's expiration.
Two different tax code sections, two different claimants, two very different outcomes in 2026.
| Feature | Section 25D (DEAD) | Section 48/48E (ACTIVE) |
|---|---|---|
| Tax code section | Section 25D | Section 48 / 48E |
| Who claims the credit | Homeowner (on personal return) | System owner / TPO (financing company) |
| IRS form used | Form 5695 | Form 3468 |
| Credit rate | 30% (was) | 30% (still active) |
| Current status | EXPIRED Dec 31, 2025 | ACTIVE through July 4, 2026 |
| Applies to | Cash or loan purchases | Lease, PPA, or TPO models |
| MACRS depreciation | Not available to homeowners | 5-year accelerated + 20% bonus (2026) |
| Domestic content bonus | N/A (credit is dead) | +10% with FEOC-compliant panels |
| Energy community bonus | N/A (credit is dead) | +10% if project in qualifying area |
| Net effect for homeowner | $0 federal benefit | Lower monthly payment via TPO savings |
Tax code section
25D
Section 25D
48/48E
Section 48 / 48E
Who claims the credit
25D
Homeowner (on personal return)
48/48E
System owner / TPO (financing company)
IRS form used
25D
Form 5695
48/48E
Form 3468
Credit rate
25D
30% (was)
48/48E
30% (still active)
Current status
25D
EXPIRED Dec 31, 2025
48/48E
ACTIVE through July 4, 2026
Applies to
25D
Cash or loan purchases
48/48E
Lease, PPA, or TPO models
MACRS depreciation
25D
Not available to homeowners
48/48E
5-year accelerated + 20% bonus (2026)
Domestic content bonus
25D
N/A (credit is dead)
48/48E
+10% with FEOC-compliant panels
Energy community bonus
25D
N/A (credit is dead)
48/48E
+10% if project in qualifying area
Net effect for homeowner
25D
$0 federal benefit
48/48E
Lower monthly payment via TPO savings
A step-by-step breakdown of how Section 48 tax benefits translate into real savings on your monthly bill.
A third-party owner (financing company) purchases a solar system — for example, an 11 kW system at $3.00/W costs approximately $33,000. The TPO owns the panels, inverter, and racking. They contract with an installer (like NuWatt) to mount the system on your roof.
The TPO files IRS Form 3468 and claims the 30% Investment Tax Credit on the system cost. On a $33,000 system, that is $9,900 in federal tax credits. This goes directly to the financing company — not to you, and not to the installer. The critical word in the tax code is “owner.”
The TPO also claims Modified Accelerated Cost Recovery System (MACRS) depreciation on a 5-year schedule. In 2026, this includes a 20% first-year bonus. On our $33,000 example, MACRS provides roughly $5,200 in additional tax benefits over 5 years. This is a commercial tax benefit unavailable to individual homeowners.
The TPO receives approximately $15,100 in combined tax benefits ($9,900 ITC + ~$5,200 MACRS). These savings are baked into your lower monthly lease payment or per-kWh PPA rate. In Rhode Island, TPO arrangements can also enroll in the REG program, adding $0.27/kWh in guaranteed revenue for 15–20 years — making RI one of the strongest TPO markets in New England.
System Cost
$33,000
25 x Silfab 440W
Section 48 ITC
-$9,900
30% to TPO
MACRS (5-yr)
-$5,200
20% bonus in 2026
TPO Tax Benefits
~$15,100
Passed to you as savings
+ REG Revenue: An 11 kW system producing ~13,475 kWh/year at $0.27/kWh generates ~$3,638/year in REG payments for the TPO, totaling ~$54,573–$72,764 over 15–20 years. This is in addition to Section 48 benefits.
Three system sizes showing how Section 48 ITC and MACRS translate to real savings for Rhode Island homeowners. Based on $3.00/W average RI pricing.
Smaller homes, 600–800 sq ft roof
Average RI home, covers full usage
Large homes, EV charging, heat pump
No other New England state offers this combination for TPO solar.
Rhode Island's Renewable Energy Growth (REG) program is a performance-based incentive that pays a fixed rate per kilowatt-hour for all solar production. Unlike net metering (which provides bill credits), REG provides direct cash payments to the system owner. When a TPO owns the system, the TPO receives these payments.
Section 48 ITC
30%
One-time tax credit
MACRS Depreciation
~16%
Over 5 years (20% bonus)
REG Revenue
$0.27/kWh
15–20 years guaranteed
On an 11 kW system producing ~13,475 kWh/year, the TPO receives: $9,900 ITC + ~$5,200 MACRS + ~$3,638/year REG (for 15–20 years). This is why RI TPO providers can offer PPA rates as low as $0.12/kWh — they have three revenue streams supporting the economics.
REG enrollment timing: The REG program opens annually in April. If you want Section 48 + REG, your TPO must time the enrollment window. Signing a TPO agreement before the April 2026 enrollment ensures your system can apply for both benefits.
Not all financing captures the ITC. Here is which options benefit from Section 48 and which do not.
Fixed monthly payment for 20–25 years. The TPO owns the system and claims the 30% ITC + MACRS. You pay a predictable monthly amount that is lower than your current electric bill.
Advantages
Limitations
RI Note: TPO can enroll in the REG program at $0.27/kWh locked 15–20 years, providing guaranteed revenue that keeps lease payments low.
You pay per kilowatt-hour at a rate lower than your utility rate. The TPO owns the system, claims Section 48 ITC + MACRS, and sells you the power at a discounted rate.
Advantages
Limitations
RI Note: At $0.12–0.16/kWh vs RI Energy $0.29/kWh, you save 45–59% on solar electricity from day one.
NuWatt’s third-party ownership program. The financing company owns the system, claims Section 48 ITC + MACRS + domestic content bonus. Requires FEOC-compliant Silfab 440W panels. Coming soon to Rhode Island.
Advantages
Limitations
RI Note: Propel is not yet available in RI — currently offered in ME and TX. When it launches in RI, it will combine FEOC panels with REG enrollment for maximum TPO economics.
You take a loan at 6–8% APR (or pay cash) and own the system. Because you own it, there is NO Section 48 benefit — and Section 25D is dead. You get $0 in federal tax credits. You can claim the REF rebate ($0.65/W, max $5,000) directly.
Advantages
Limitations
RI Note: Cash buyers get the REF rebate ($3,250 on 5 kW, $5,000 on 7.7+ kW) but lose the $9,900+ ITC + $5,200+ MACRS that a TPO would capture on the same system.
Not all panels qualify for the full ITC stack. Here is what you need to know.
FEOC stands for Foreign Entity of Concern. Under guidance from the Treasury Department and IRS, solar panels manufactured by or containing critical components from FEOC-designated entities (primarily Chinese-owned companies) face restrictions on certain ITC bonuses.
Standard Section 48/48E credit
FEOC-compliant panels required
Project in qualifying census tract
FEOC Compliance Deadline: July 4, 2026
After this date, projects using non-FEOC panels may face additional restrictions beyond losing the domestic content bonus. If you are considering a TPO arrangement, verify that the financing company plans to use FEOC-compliant panels before signing.
Misinformation about the solar tax credit is rampant. Here are the facts.
“Section 48 is a loophole for solar companies.”
Section 48 has been part of the IRS tax code since 1962 — 64 years. It was specifically designed to encourage investment in energy property by providing an ITC to the entity that owns the qualifying system. Congress intentionally structured it so that financing companies could deploy capital into solar at scale. There is nothing hidden, creative, or exploitative about it.
“I get the 30% tax credit directly on my tax return.”
No. With a lease or PPA arrangement, the third-party owner (TPO) claims the ITC on their corporate tax return using IRS Form 3468. You benefit indirectly through lower monthly payments or a reduced per-kWh rate. If you want to claim the credit directly, you would need to purchase the system outright — but Section 25D is dead, so you would receive $0.
“RI has enough state incentives that I don’t need Section 48.”
Rhode Island has strong programs — REG ($0.27/kWh for 15–20 years), REF rebate ($0.65/W, max $5,000), ConnectedSolutions ($225/kW), and tax exemptions. But none of these replace the 30% federal ITC. A TPO that claims Section 48 ITC ($9,900 on 11 kW) plus MACRS ($5,200) plus enrolls in REG creates a stacking effect that no cash purchase can replicate in 2026.
“Solar leases are always a bad deal.”
This advice was accurate when Section 25D was alive. Homeowners could claim 30% themselves, making cash or loan purchases clearly superior. In 2026, the calculus has changed. With $0 in homeowner federal tax credits, leases and PPAs that leverage Section 48 can deliver better economics than a loan at 6–8% APR with no ITC. In Rhode Island, where RI Energy charges $0.29/kWh, a PPA at $0.12–0.16/kWh provides significant day-one savings.
“The installer claims the tax credit.”
The installer (contractor) does not claim the ITC. The credit goes to the entity that owns the qualifying energy property — the financing company or TPO. The installer is paid for labor and materials. This is a common misunderstanding that leads homeowners to ask the wrong questions during the sales process.
“I should wait for Congress to bring back Section 25D.”
The OBBBA (One Big Beautiful Bill Act), signed July 4, 2025, eliminated Section 25D with no sunset clause and no scheduled return. There is no pending legislation to restore it. Meanwhile, Section 48/48E itself has a construction deadline of July 4, 2026. Waiting risks losing access to both the homeowner credit (already gone) and the TPO credit (expiring soon).
The construction deadline for Section 48/48E is approaching. Here is the timeline every RI homeowner needs to understand.
Section 48E created with technology-neutral ITC rules. 25D extended through 2032 (at the time). REG program continues in RI.
Residential solar ITC killed immediately. RI homeowners who buy with cash or loan receive $0 from the IRS. Section 48/48E given a 1-year grace period.
The first full calendar year with no residential solar ITC. Every cash or loan solar purchase in RI gets $0 from the IRS. REF rebate ($0.65/W) and REG program continue as state-level incentives.
You are here. TPO arrangements signed now have ample time to begin construction before the deadline. RI interconnection runs 4–6 weeks. April 2026 REG enrollment approaching.
Annual REG program enrollment opens in April. TPO systems that want to stack Section 48 + REG must be positioned to apply during this window. Plan accordingly.
Projects must “begin construction” (physical work test or 5% safe harbor) before this date. After this, new TPO projects may lose the 30% ITC entirely.
Meaningful physical work begins at the project site or at a factory for components specifically designed for the project. Mounting hardware installation, foundation work, or panel manufacturing orders count. Preliminary activities (permits, surveys, engineering) do not.
The taxpayer (TPO) incurs at least 5% of the total project cost before the deadline. On a $33,000 system, that is approximately $1,650 in binding commitments. Equipment orders with non-refundable deposits typically satisfy this test. Continuous construction or continuous efforts must follow.
Practical impact: If you sign a TPO agreement and the financing company places equipment orders before July 4, 2026, the project qualifies. The system does not need to be installed by that date — it must be placed in service within 4 years of beginning construction.
10 questions we hear most from Rhode Island homeowners about the solar ITC in 2026.
Section 48 is the Investment Tax Credit (ITC) provision that has existed in the IRS tax code since 1962. It provides a tax credit to the owner of qualifying energy property — such as solar panels. Section 25D was the residential energy credit that allowed individual homeowners to claim the ITC on their personal tax return. Section 25D expired on December 31, 2025 (eliminated by the OBBBA). Section 48/48E remains active for projects beginning construction before July 4, 2026. The key difference: 48 goes to the system owner (the financing company in a lease/PPA), while 25D went to the homeowner.
Yes. The Renewable Energy Growth (REG) program pays $0.27/kWh for solar production, guaranteed for 15–20 years. TPO-owned systems are eligible to enroll. The TPO receives the REG payments as part of their revenue stream, which allows them to offer lower lease or PPA rates to you. This stacking of Section 48 ITC + MACRS + REG revenue is what makes Rhode Island one of the most attractive TPO markets in New England. The REG enrollment window opens annually in April — plan accordingly.
The Renewable Energy Fund (REF) rebate from Commerce RI pays $0.65/W, capped at $5,000, plus a $2,000 battery adder. For TPO-owned systems, the rebate eligibility and structure may differ from homeowner-owned systems. Some TPO providers factor the REF rebate into their pricing. Verify with your TPO provider whether they will apply for the REF rebate and how it affects your payment structure.
The IRS defines “begin construction” through two safe harbors: (1) Physical Work Test — meaningful physical work begins at the site (foundation, mounting hardware installation), or (2) Five Percent Safe Harbor — at least 5% of the total project cost has been incurred. For residential TPO systems, this typically means signing a contract and having the TPO place equipment orders before July 4, 2026. Projects must be placed in service within 4 years of beginning construction.
FEOC stands for Foreign Entity of Concern. Under the IRA and subsequent guidance, solar panels manufactured by or containing components from a Foreign Entity of Concern (primarily Chinese-owned companies) may lose eligibility for certain ITC adders, particularly the 10% domestic content bonus. FEOC-compliant panels like the Silfab 440W are manufactured without FEOC components, ensuring eligibility for the full ITC stack. The FEOC compliance deadline is July 4, 2026.
ConnectedSolutions pays $225/kW for summer demand response from battery storage. If the TPO installs a battery as part of the system, they can enroll in ConnectedSolutions. The demand response payments become part of the TPO revenue stream, further lowering your effective cost. On a 10 kWh battery, that is $2,250/year in DR payments. Some TPO providers are beginning to include battery + ConnectedSolutions as part of their RI offering.
Not yet. NuWatt Propel is currently available in Maine and Texas. Expansion to Rhode Island is planned. In the meantime, RI homeowners can access Section 48 benefits through standard solar leases and PPAs from other TPO providers. When Propel launches in RI, it will offer FEOC-compliant Silfab 440W panels and leverage the REG program for optimal economics.
Rhode Island net metering provides bill credits at 80% of retail rate for systems interconnected after April 2023 (grandfathered systems receive 1:1). The annual cap is 125% of your consumption. With a TPO-owned system, the net metering credits flow to your utility account. The TPO prices their lease or PPA knowing that excess production earns 80% retail credits. For TPO systems that also enroll in REG, the REG payment ($0.27/kWh) typically provides better economics than net metering alone.
Most lease and PPA agreements include a buyout option after a certain period (typically 5–7 years). The buyout price is usually based on fair market value at the time. By year 7–10, the fair market value of a depreciated solar system is significantly lower than the original cost. In Rhode Island, the remaining REG contract payments and ConnectedSolutions eligibility add value to the system, so buyout negotiations should account for these revenue streams.
For projects that begin construction before July 4, 2026, the 30% ITC remains available as long as the project is placed in service within 4 years. After July 4, 2026, new projects may face reduced or eliminated ITC rates depending on future legislation. There is currently no indication that Section 48 will be extended beyond this deadline under the current administration.
Comprehensive guide to solar energy in Rhode Island — costs, incentives, and timeline.
Deep dive into lease vs PPA structures, rates, and contract terms for RI.
Side-by-side financing comparison with 25-year savings projections.
Honest analysis of whether solar still works in RI without Section 25D.
City-by-city pricing, system sizes, and cost breakdowns across Rhode Island.
$0.27/kWh guaranteed 15–20 years — how REG stacks with Section 48 TPO.
Track launch timing and join the Rhode Island waitlist for NuWatt's upcoming ownership-focused offer.
Section 25D is gone. Section 48/48E is still here — and RI's REG program makes the TPO economics even stronger. Find out how much you can save with a TPO arrangement that captures the 30% ITC + REG stacking before the July 4, 2026 construction deadline.
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