New Mexico solar companies prepare for shockwaves with federal tax credits on chopping block

Tens of thousands of New Mexicans have reaped the benefits of federal solar energy or energy efficiency tax breaks in recent years, but those opportunities may disappear after this year. And businesses relying on clean energy infrastructure and tech credits could see those vanish sooner than anticipated.

The massive budget reconciliation bill sitting before Congress, dubbed the “One Big Beautiful Bill Act,” includes provisions to limit and terminate certain clean energy tax credits and incentives on residential and commercial levels.

The bill would also cut Medicaid, require states to contribute more to the Supplemental Nutrition Assistance Program and end taxes on tips and overtime pay.

While the Senate debates the nuances of the bill — the Senate Finance Committee released its version of the legislation last week — New Mexico energy advocates and workers are worried about the potential consequences, should it move along as is.

“It makes things almost unworkable,” said Jim DesJardins, executive director of the Renewable Energy Industries Association of New Mexico, or REIA-NM.

In New Mexico, more than 22,000 residents benefited from residential clean energy or energy efficiency tax credits in tax year 2023, according to IRS data, adding up to $70 million in savings across the board.

REIA-NM is an affiliate of the national Solar Energy Industries Association, which has been lobbying to amend what SEIA President and CEO Abigail Ross Hopper calls a “threat to one of the greatest economic success stories in American history.”

“As drafted by the Senate Finance Committee, this proposal would pull the plug on homegrown solar energy and decimate the American manufacturing renaissance,” she said in a statement.

The Trump administration hopes to offset revenue losses by cutting the tax credits, which would bring down the overall cost of the tax portion of the “Big Beautiful Bill” to about $3.8 trillion, according to the Associated Press.

“The bill was designed by President Trump, his loyal aides and his closest allies in Congress to deliver fully and enthusiastically on the explicit promises he made the American people,” White House Deputy Chief of Staff Stephen Miller posted on social media.

Hopper acknowledged that the Senate committee lessened the blow on the commercial side of things, specifically for the clean energy investment credit. The credit is available for solar facilities and energy storage facilities, starting at a base rate of 6%, and is currently set to expire in 2032. The “One Big Beautiful Bill Act” aims to phase out the credit faster, by 2028, though the Senate version of the bill allows a more gradual phase-out of the credit.

The bill would also stop companies that get assistance or materials from “prohibited foreign entities” from getting the clean energy investment credit, which concerns Dylan Connelly, director of commercial and community solar development at Affordable Solar. He said China is one of the countries that companies couldn’t get components from, even if it’s something as small as a screw.

“We just don’t have the ability to build the supply chain to supply those in another way in the short term,” Connelly said.

Major slashes are proposed for the residential market, too. The bill would terminate Biden-era residential tax credits at the end of this year, as opposed to expiration dates currently set for the early 2030s.

That includes the residential clean energy credit, which covers 30% of the cost of renewable or efficient energy equipment, like solar panels. Smaller tax credit coverage is also available in 2033 and 2034.

On top of that, the bill would terminate the energy-efficient home improvement credit by 2026, which offers annual nonrefundable tax credits of up to $3,200. That includes $1,200 for energy efficiency costs, like insulating homes or buying specific energy-friendly doors and windows, and $2,000 for heat pumps, water heaters, biomass stoves or biomass boilers. It’s set to expire by 2033.

Just over 12,500 New Mexicans received returns for the residential clean energy credit, amounting to nearly $60 million total in tax year 2023, according to the IRS. Another 11,430 people got returns for the energy efficient home improvement credit, which added up to $10 million.

Nationwide, 3.4 million people got the credits in the 2023 tax year, amounting to about $8.4 billion.

The threat of the tax credits ending this year could send people rushing to get solar panels, said Neil Wenderoth, a sales manager with Affordable Solar. He said it takes two or three months from signing a contract to actually get the panels online.

“The window that we have to get people this tax credit is shrinking,” he said.

There are still state tax credits for rooftop panel installations, which cover up to 10% of the cost. For tax year 2025, nearly $29 million remains available for New Mexicans to claim.

But the extra 30% from the federal government ensured the return on buying solar panels remained under a decade, Connelly said, and losing that would mean it takes up to 17 years for buyers to make that money back.

“It’s going to be pretty devastating if this holds,” Wenderoth added.

DesJardins said he’s hopeful that some Senate Republicans could help turn the tide on the clean energy provisions in the bill. The legislation passed by just one vote in the House.

The Senate needs 51 votes to pass the bill, and the chamber has 53 Republican members. Trump has said he wants the bill on his desk by July 4, which could prove difficult, so if that doesn’t happen, the next likely timeframe for the Senate to send it over is August.

“What we’re hoping to do is convince a small group of Republican senators to take a more nuanced approach to this,” DesJardins said. “We recognize that probably what’s going to happen is we’re not going to get all these cuts restored the way they were, but we want a more nuanced, a more reasonable approach.”