Introduction
The United States Congress has cast its vote in favor of “The One Big, Beautiful Bill” (OBBB), a sweeping tax reform initiative designed to overhaul the U.S. tax code. This legislation encompasses a myriad of tax provisions, including the permanence of several existing measures, the repeal and modification of various others, and the introduction of new tax provisions. After extensive deliberations and negotiations among Republican lawmakers over the past several months, a consensus was ultimately reached on a version that garnered the necessary support to pass both the House of Representatives and the Senate. President Donald J. Trump is poised to sign the OBBB into law imminently.
Once the OBBB is signed by the President, the next step will be implementation. Action will turn to the rulemaking process, where the Department of Treasury will propose and finalize regulations related to the tax provisions.
The following is a high-level summary of certain key energy tax provisions within the OBBB:
EV and Home-Based Efficiency Credits
The OBBB provides for the repeal of the electric vehicle (EV) credits attributable to new EVs under Section 30D, previously owned EVs under Section 25E, commercial EVs under Section 45W, as well as the credit for charging infrastructure under Section 30C. The repeal of EV credits would generally be effective for EVs acquired after September 30, 2025, and the repeal for charging infrastructure would apply for property placed in service after June 30, 2026. The OBBB similarly provides for the repeal of the Energy Efficiency Home Improvement Credit under Section 25C and the Residential Clean Energy Credit under Section 25D. The repeal of the 25C credit applies to property placed in service after December 31, 2025, and the repeal of the 25D credit applies to expenses incurred after December 31, 2025. Finally, the New Energy Efficient Home Credit under Section 45L is repealed with respect to qualified homes acquired after June 30, 2026.
Commercial Energy Projects
The OBBB includes the early termination of the clean electricity investment credit under Section 48E [replacing the Section 48 ITC as of January 1, 2025] and the clean electricity production credit under Section 45Y (replacing the PTC under Section 45 as of January 1, 2025) for solar and wind production facilities, not including energy storage technology. Specifically, the 48E and 45Y credits are terminated and do not apply to such facilities that are placed in service after December 31, 2027. Importantly, however, this accelerated placed-in-service requirement does not apply to solar and wind production facilities the construction of which begins within 12 months after enactment of the OBBB. Further, the 48E and 45Y credits would not apply to solar and wind facilities, including energy storage technology, the construction of which begins after December 31, 2025, if the construction of such property includes any material assistance from a prohibited foreign entity.
The Advanced Manufacturing Production Credit under Section 45X will no longer apply to wind energy components produced and sold after December 31, 2027, and certain integrated components produced and sold after December 31, 2026. The OBBB eliminates the 45X credit if a taxpayer is a prohibited foreign entity or if the production of components occurs with material assistance from a prohibited foreign entity.
The Clean Hydrogen Production Tax Credit under Section 45V is terminated for facilities the construction of which begins after December 31, 2027.
The Clean Fuel Production Credit under Section 45Z, a production tax credit for the production of low-carbon transportation fuels produced at a qualifying facility and sold by the taxpayer, including hydrogen, would be extended from December 31, 2027 until December 31, 2029, subject to restrictions on foreign sourced feedstock and provided that the taxpayer is not a prohibited foreign person.
The OBBB did not impose material restrictions upon eligibility for the Section 45Q Carbon Oxide Sequestration Credit or the Section 45U Zero-Emission Nuclear Power Production Credit, provided that the taxpayer is not a prohibited foreign person.
Accelerated Depreciation for Energy Property
The OBBB eliminates the five-year MACRS designation for energy property under Section 168(e)(3)(B)(vi) with respect to solar, wind and energy storage technology facilities under Section 48, the construction of which began after December 31, 2024.
Transfer of Credits
Importantly, the OBBB does not terminate rights to transfer energy credits under Section 6418, except with respect to transfers to prohibited foreign
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
