This article is the second installment in our 2025 Domestic Content Series. After outlining how the bonus works in Part 1, here we compare how the rules apply to projects using the Investment Tax Credit (ITC) versus the Production Tax Credit (PTC). The distinction is critical for developers and investors, as it often determines whether a project qualifies for the full ten percent boost or only a smaller increase.
The domestic content bonus is one of the most important levers in solar project finance today. But not all projects access it in the same way. The rules differ depending on whether a project claims the Investment Tax Credit (ITC) or the Production Tax Credit (PTC), and the distinctions matter.
By 2025, developers, EPCs, and investors are treating these differences as central to project modeling. Understanding how the bonus interacts with ITC versus PTC credits helps explain why some projects qualify for the full benefit while others see a smaller bump.
ITC Projects and the Domestic Content Bonus
The ITC framework ties the size of the domestic content bonus to both project characteristics and labor standards.
Projects that meet domestic content requirements can raise their credit rate by ten percentage points if they also satisfy at least one of these conditions:
- The project is smaller than 1 MW AC
- The project began construction before January 29, 2023
- The project complies with prevailing wage and apprenticeship standards (PWA)
If none of these apply, a qualifying project only receives a two percentage point increase. For a utility-scale project, the difference between two percent and ten percent translates into millions of dollars.
This is why labor compliance is now built into nearly every large project plan. Missing it doesn’t just risk reputational harm; it directly reduces the value of the tax credit.
PTC Projects and the Domestic Content Bonus
The PTC rules are more straightforward. If a project meets domestic content requirements, the credit amount increases by ten percent. No size thresholds or labor rules apply.
This simplicity has made the PTC more attractive for certain developers. Even though the ITC and PTC are mutually exclusive, the PTC path offers certainty on how the domestic content bonus will apply, especially for projects where construction timing or labor standards are less clear.
Why Developers Care About the Distinction
Developers are making strategic choices between ITC and PTC in part because of how the domestic content bonus is structured.
Distributed generation developers often lean toward the ITC, since many of their projects are under 1 MW and automatically qualify for the full ten percentage point increase. For utility-scale developers, the ITC remains attractive, but only if prevailing wage and apprenticeship compliance is built in. Otherwise, the smaller two percent bump makes the PTC more appealing.
Investors care about the distinction as well. A 500 kW rooftop project may model easily under the ITC with domestic content assumed. A 200 MW solar farm faces a more complex calculation, and the decision between ITC and PTC may turn on the relative certainty of the domestic content bonus.
Example: ITC vs. PTC
Consider two scenarios:
- A 500 kW rooftop C&I system using U.S.-made racking and inverters. Because it is under 1 MW, it qualifies for the full ten percentage point ITC bonus. The credit rises from 30 to 40 percent.
- A 200 MW ground-mount project that misses PWA compliance but sources domestic equipment. Under the ITC, the bonus is only two percentage points. If the developer chooses the PTC instead, the bonus is a ten percent increase in the per-kWh credit amount.
Both projects qualify, but the relative value depends heavily on which credit path they follow.
Frequently Asked Questions
Why is the ITC domestic content bonus sometimes only two percent?
Projects over 1 MW that do not meet labor standards only qualify for a smaller increase. This design was intentional, to incentivize both domestic sourcing and labor compliance.
Does the PTC always give the full ten percent?
Yes. As long as the project meets domestic content requirements, the PTC adds ten percent to the credit amount, with no additional conditions.
Can developers switch between ITC and PTC based on the bonus?
Yes, but the decision has to be made at the project planning stage. Developers evaluate which credit pathway creates the most value overall, not just from domestic conten
Looking Ahead
The domestic content bonus is structured differently for ITC and PTC projects, and those distinctions matter more in 2025 as financing assumptions harden. For small projects and those that meet labor rules, the ITC delivers the full bonus. For projects that cannot, the PTC offers a simpler path to the ten percent increase.
The right module partner makes qualifying for IRA incentives easier. Mission Solar Energy builds high-quality, American-assembled panels that align with domestic content and performance goals.
Talk with our team about solutions for your next project.
Disclaimer: This article is for informational purposes only. Mission Solar Energy does not provide tax or legal advice. For guidance on qualifying for federal credits, consult with a tax professional or legal advisor.