The One, Big, Beautiful Bill Amends Renewable Energy Tax Credits - Summary of Key Changes

On July 4, 2025, President Trump signed H.R. 1 -- The One, Big, Beautiful Bill Act (the “Act”) into law. The Act makes significant changes to the clean energy tax credits previously available under the Inflation Reduction Act of 2022.  The following is a high-level summary of the more significant changes.

Solar and Wind (Section 45Y and 48E technology-neutral credits):

• The Act accelerates the phase-out of tax credits for wind and solar projects beginning construction after July 5, 2026 (within 12 months of enactment of the Act). These projects must be placed in service by the end of 2027 in order to claim the credit.
• Solar and wind projects that begin construction before July 5, 2026 will not be subject to the accelerated placed-in-service deadline, although such projects should still be completed within four calendar years to satisfy the continuity safe harbor. However, projects beginning construction after December 31, 2025 will be subject to the Material Assistance restrictions for costs attributable to Prohibited Foreign Entities (as further discussed below).

Other Technologies (Sections 45Y and 48E technology-neutral credits):

• For technologies other than solar and wind, the project must begin construction before 2033 to claim the full credit. The credit phases down in 2034 and 2035,and is eliminated in 2036.
• Projects beginning construction after December 31, 2025 will be subject to the Material Assistance restrictions for costs attributable to Prohibited Foreign Entities.

Advanced Manufacturing Credit (Section 45X):

• The Act ends the credit for wind energy components with reduced credits for such components sold after 2027.
• The Act ends the credit for metallurgical coal produced after 2029.
• The credit for other applicable minerals other than metallurgical coal is phased out. Production during 2031 receives 75% of the credit; 2032, 50%; 2033, 25% and no credit in 2034 or after.
• The Material Assistance restrictions apply for taxable years beginning after July 4, 2025.

Prohibited Foreign Entity (PFE)/Material Assistance from a PFE:

• “Prohibited Foreign Entity” (“PFE”) means (i) a specified foreign entity, or (ii) a foreign-influenced entity.
  • A specified foreign entity (“SFE”) includes the following:
    • An entity designated as a foreign terrorist organization by the Secretary of State under Section 219 of the Immigration and Nationality Act (8 U.S.C. 1189);
    • An entity included on the list of specially designated nationals and blocked persons maintained by the Office of Foreign Assets Control (OFAC);
    • An entity alleged by the Attorney General to have been involved in activities for which a conviction was obtained under certain national security laws;
    • An entity identified as a Chinese military company operating in the United States pursuant to 1260H of the 2021 NDAA;
    • An entity included on the Uyghur Forced Labor Prevention Act list;
    • Certain Chinese battery manufacturers; or
    • A foreign controlled entity (“FCE”).
      • An FCE includes the following:
        • the government (including any level of government below the national level) of a covered nation (i.e. North Korea, Russia, China and Iran);
        • an agency or instrumentality of a government as listed above;
        • a person who is a citizen or national of a covered nation, if such person is not a citizen, national, or lawful permanent resident of the United States;
        • an entity or a qualified business unit (as defined in section 989(a)) incorporated or organized under the laws of, or having its principal place of business in, a covered nation; or
        • an entity, including subsidiaries, controlled by any of the above.
    • A foreign-influenced entity (“FIE”) means an entity:
      • With respect to the current taxable year in which:
        1. a specified foreign entity has the direct authority to appoint a covered officer;
        2. a single specified foreign entity owns at least 25% of such entity;
        3. one or more specified foreign entities own in the aggregate at least 40% of such entity; or
        4. at least 15% of the debt of such entity has been issued to one or more specified foreign entities.
      • Or, with respect to the prior taxable year, in which the entity made a payment to a specified foreign entity pursuant to a contract, agreement, or other arrangement which entitles such specified foreign entity (or an entity related to such specified foreign entity) to exercise effective control over such entity.
        • Effective control generally means authority over key aspects of the production of eligible components, energy generation in a qualified facility, or energy storage which are not included in the measures of control through authority, ownership, or debt.
        • For licensing agreements, effective control generally includes directing the sourcing of components, subcomponents, or applicable critical minerals, direct the operation or production, utilize intellectual property or receive royalties, or any license agreement entered into, or modified after taxable years beginning after the date of enactment of the Act. There is an exception for the bona fide sale of intellectual property.
  • Material Assistance from a PFE:
    • The Material Assistance rules limit the availability of tax credits (Sections 45X, 45Y and 48E) if the taxpayer received material assistance from a PFE.
    • “Material Assistance” means a material assistance cost ratio less than the threshold amounts listed by year in the Act for each type of tax credit.
    • The “material assistance cost ratio” is the quotient of a fraction (expressed as a percentage), the numerator of which is total costs to the taxpayer (Total Costs) minus total costs to the taxpayer for all products/components mined, produced or manufactured by a prohibited foreign entity (Total PFE Costs), and the denominator of which is Total Costs. Costs include the costs of all manufactured products (including components) incorporated into the qualified facility upon completion of construction. Expressed in summary as a formula, the cost ratio is determined as follows:

TOTAL COSTS – TOTAL PFE COSTS = MATERIAL ASSISTANCE COST RATIO 
               TOTAL COSTS

Transferability (Section 6418):

• The Act leaves transferability in place, but prohibits the transfer of credits to SFEs.

Accelerated Depreciation for Energy Property:

• The Act eliminates the five-year MACRS designation for energy property under Section 168(e)(3)(B)(vi), including with respect to solar, wind and energy storage technology facilities under Section 48, the construction of which began after December 31, 2024.