On May 22, 2025, the U.S. House of Representatives passed a new version of H.R. 1, “The One, Big, Beautiful Bill” that would effectively repeal the Inflation Reduction Act’s (IRA’s) clean energy tax credits almost immediately. While the legislation will now be considered by the U.S. Senate—and could change substantially there—industry participants should be aware of the House’s position as the bill moves through the reconciliation process.
The version of the bill includes provisions that would do the following:
- Clean energy tax credits. Terminate completely the Section 45Y Clean Energy Production Credit and the Section 48E Clean Electricity Investment Credit for any qualified facilities that don’t begin construction within 60 days following the enactment of the bill and that are placed in service after the end of 2028. The original bill would have phased out each credit in a graduated manner and allowed construction to begin within two years of enactment. Notably, Nuclear is exempted from the 60-day start of construction requirement.
- Nuclear. Extend the 45U tax credit for qualified nuclear facilities at full value through 2031 (as opposed to a three-year phase down proposed in the earlier version of the bill).
- Transferability. Restore transferability for the duration of many IRA credits including sections 45Y, 48E, and 45U (qualified nuclear facilities), rather than repeal transferability after 2027, as was proposed in the original bill. Section 45X Advanced Manufacturing Production Credits, 45Z Clean Fuel Production Credits, and 45Q Credits for Carbon Dioxide Sequestration would be subject to transferability limitations after 2027.
- FEOCs. Restrict credits relating to Foreign Entities of Concern (FEOCs) beginning January 1, 2026; prior drafts were slated to go into effect on January 1, 2027. These FEOC provisions would prevent energy tax credits from being claimed by any entity that is deemed to be controlled or influenced by an enumerated adversarial foreign country, including China, Iran, North Korea, and Russia. Most important for the renewable energy industry, however, the credits would be disallowed by the owner of a renewable energy project if the business receives “material assistance” from an FEOC, which includes component parts, design, or intellectual property for the facility. Given China’s dominance in raw materials, processing, and manufacturing of clean energy facility components, it would be difficult for renewable energy companies to comply with the provisions as drafted.
- Residential solar. Eliminate the tax credit for leased residential solar installations for tax years after the bill’s passage.
The amended bill passed the House on May 22 by a narrow, party-line vote and is likely to change significantly. A summary of the clean energy tax credit changes in the new bill follows.
What this means to you
Now is a good time for renewable energy companies to (1) audit project pipelines to identify projects with the highest potential to be placed in service prior to 2028, (2) carefully consider the potential diminishing lead time to secure safe harbored clean energy equipment, and (3) shore up relationships with EPC contractors, suppliers, lenders, investors, and other stakeholders critical for project execution.
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