May 23, 2025

House of Representatives Moves to Scale Back Clean Energy Tax Credits Under IRA

Roger Aksamit, Elizabeth Crouse, Nicole Elliott, Sanaa Ghanim, Alex Lewis, Bryan Marcelino, Lee Meyercord, Mary Kate Nicholson, Joshua Odintz, Ryan Phelps, Rachel Provencher, Pooja Ravisankar, Bradley Seltzer, Amish Shah, Daniel Strickland, Courtney Wagner

Holland & Knight LLP

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Highlights

The U.S. House of Representatives passed the "One Big Beautiful Bill" on May 22, 2025, by a vote along party lines.
This Holland & Knight alert summarizes certain key proposals in the House bill as they relate to the Inflation Reduction Act's (IRA) clean energy tax credits.

The U.S. House of Representatives passed the "One Big Beautiful Bill" on May 22, 2025, by a vote along party lines. The bill will now be taken up by the U.S. Senate.

This Holland & Knight alert summarizes certain key proposals in the House bill as they relate to the Inflation Reduction Act's (IRA) clean energy tax credits. The language in blue denotes changes made by the Manager's Amendment at the House Committee on Rules.

To receive additional analysis from the team, please subscribe to our alerts. Please also check out our Inflation Reduction Act Tax Resource Library.

Technology-Neutral Tax Credits

Tax Credit	Termination Date	Transferability	Foreign Entity of Concern (FEOC) Restrictions	Other
Section 45Y (Clean Electricity Production Tax Credit) (Technology-Neutral)	For facilities with a Beginning of Construction (BOC) *after* 60 days from the date of enactment into law For facilities that BOC *within* 60 days from the date of enactment into law but are placed in service *after* Dec. 31, 2028 (See Exceptions 1 & 2 below)	Available	Yes (See discussion below)	Eliminates credit for leased property that would otherwise qualify for the residential credit under Section 25D
Section 48E (Clean Electricity Investment Tax Credit (Technology-Neutral)	For facilities that BOC *after* 60 days from the date of enactment into law For facilities that BOC *within* 60 days from the date of enactment into law but are placed in service *after* Dec. 31, 2028 (See Exception 1 below)	Available	Yes (See discussion below)	Eliminates credit for leased property that would otherwise qualify for the residential credit under Section 25D
Exception 1: Advanced nuclear facilities as defined in Section 45J that BOC *after* Dec. 31, 2028 Exception 2: Expansions of nuclear facilities that BOC *after* Dec. 31, 2028

Investment Tax Credits

Tax Credit

Termination Date

Credit Value

Transferability

FEOC Restrictions

Section 48 (Investment Tax Credit)

(Geothermal Only)

For geothermal, property that BOC after Dec. 31, 2031

If BOC before 2030 and is placed in service after 2021, the credit value is 6 percent.¹

However, if BOC:

- in 2030, 5.2 percent

- in 2031, 4.4 percent

- after 2031, zero percent

Repealed for facilities that BOC after 2 years post-enactment

Yes

(See discussion below)

Production Tax Credits

Tax Credit	Termination Date	Phase Out	Special Rules	Transferability	FEOC Restrictions
Section 45U (Zero-Emission Nuclear Power Production Credit) (Nuclear)	Eliminated one year earlier than current law; eliminated for taxable years beginning after Dec. 31, 2031	None	None	Unchanged	Yes (See discussion below)
Section 45V (Credit for Production of Clean Hydrogen (Hydrogen)	For facilities that BOC *after* Dec. 31, 2025	None	None	Unchanged	None
Section 45X (Advanced Manufacturing Production Credit (Solar, Wind, Battery Components, Critical Minerals)	For eligible components sold *after* Dec. 31, 2031, including critical minerals	Eligible components sold: - in 2030, 75 percent - in 2031, 50 percent - *after* 2031, zero percent	No credit for wind components sold *after* Dec. 31, 2027	Repealed for components sold *after* Dec. 31, 2027	Yes (See discussion below)
Section 45Z (Clean Fuel Production Credit (Clean Fuels)	For transportation fuel sold *after* Dec. 31, 2031	None	1. Fuel sold *after* Dec. 31, 2025, must be derived from feedstock produced in U.S., Canada or Mexico. 2. Indirect land use emissions are excluded for purposes of greenhouse gas (GHG) emissions rate as determined consistent with forthcoming regulations or methodology. 3. The House Committee on Ways and Means bill directs the U.S. Department of the Treasury to provide emissions for animal manure after Dec. 31, 2025.	Repealed for fuel produced *after* Dec. 31, 2027	Yes (See discussion below)

Clean Vehicles and Refueling Property Tax Credits

Tax Credit	Termination Date	Exceptions
Section 25E (Previously Owned Clean Vehicles)	For vehicles acquired *after* Dec. 31, 2025	None
Section 30C (Alternative Fuel Vehicle Refueling Property Credit)	For property placed in service *after* Dec. 31, 2025	None
Section 30D (Clean Vehicle Credit)	For vehicles placed in service *after* Dec. 31, 2026	For vehicles placed in service in 2026, the credit is limited to the first 200,000 "covered vehicles" per manufacturer sold in the U.S. from 2010 to 2025.
Section 45W (Credit for Qualified Commercial Clean Vehicles)	For vehicles acquired *after* Dec. 31, 2025	For vehicles sold subject to binding contracts and that are placed in service *before* Jan. 1, 2033

Energy Efficient Homes Tax Credits

Tax Credit	Termination Date	Exceptions
Section 25C (Energy Efficient Home Improvement Credit)	For property placed in service *after* Dec. 31, 2025	None
Section 25D (Residential Clean Energy Credit)	For property placed in service *after* Dec. 31, 2025	None
Section 45L (New Energy Efficient Home Credit)	For qualified new energy efficient homes acquired *after* Dec. 31, 2025	For qualified new energy efficient homes acquired *after* Dec. 31, 2026, in the case construction of any such home began *before* May 12, 2025

FEOC Restrictions

Code Section	Specified Foreign Entity	Foreign Influenced Entity	Material Assistance From Prohibited Foreign Entity	Prohibited Payments to Prohibited Foreign Entity	No Large Licensing Agreements with Prohibited Foreign Entity
48	Tax years after enactment	Tax years beginning 2 years after enactment	N/A	N/A	N/A
45Y			Facilities / projects that BOC 60 days *after* enactment	Tax years beginning 2 years after enactment	N/A
48E					N/A
45X			Tax years beginning 2 years after enactment		Tax years beginning 2 years after enactment
45Q			N/A	N/A	N/A
45U			N/A	N/A	N/A
45Z			N/A	N/A	N/A

FEOC Definitions

"Specified Foreign Entity" (SFE) is an entity that:

meets the definition as provided in Section 9901(6) of the William Thornberry National Defense Authorization Act (NDAA) for fiscal year (FY) 2021:
- designated as a foreign terrorist organization by the U.S. Secretary of State under Section 219 of the Immigration and Nationality Act (8 U.S.C. 1189)
- included on the list of specially designated nationals and blocked persons maintained by the Treasury Department's Office of Foreign Assets Control (OFAC)
- alleged by the U.S. Attorney General to have been involved in activities for which a conviction was obtained
is identified as Chinese military company
is included on a list as a result of the Uyghur Forced Labor Prevention Act
is specified under Section 154(b) under the NDAA of FY 2024 (specifically, the entities listed in paragraphs 1-7 on page 47 of L. 118-31)
is a "foreign controlled entity." (The government of a covered nation, a citizen or resident of a covered nation, an entity or unit incorporated or organized or having its principal place of business in a covered nation, or any entity "controlled" by those described in this parenthetical.) (Where "control" = 50 percent vote or value of stock of corporation or 50 percent capital interest or beneficial interests)

"Foreign Influenced Entity" (FIE) is an entity whereby:

an SFE has direct or indirect authority to appoint a covered officer (where "covered officer" = board of director, supervisor or equivalent, or executive officer or equivalent)
an SFE owns at least 10 percent of such entity
one or more SPEs own, in aggregate, 25 percent or more of such entity
at least 25 percent of debt is held in the aggregate by one or more SFEs
makes payments in previous taxable year to SPEs (10 percent to one SFE or 25 percent in the aggregate)

"Material Assistance to a Prohibited Foreign Entity" means:

any component, subcomponent or critical mineral included in the property is made by prohibited foreign entity
any design of such property is based on any copyright, patent or know-how is held by prohibited foreign entity
does not include any "assembly part" or "constituent material" (both defined as not uniquely designed for project under Sections 45Y or 48E and an eligible component under Section 45X, and not exclusively or predominately produced by prohibited foreign entity), as long as not acquired directly from a prohibited foreign entity

"Prohibited Payments to Prohibited Foreign Entity" means an entity that:

makes a payment to a SFE in the tax year that amounts to 5 percent or more of the total of such payments made by such entity during such taxable year
makes payments to more than one SFE, in aggregate of 15 percent
where "payments" = dividends, interest, compensation for services, rentals or royalites, guarantees or other fixed, determinable and annual, or periodic amount to a prohibited foreign entity

"Licensing" means:

an eligible component under Section 45X produced subject to a license agreement with a prohibited foreign entity for which the value of such agreement is more than $1 million
where "prohibited foreign entity" = SFE + FIE

Notes

¹ Compliance with PWA requirements increases percentage 5x.

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