President Trump last week signed into law the One Big Beautiful Bill Act (the "Act"). The Act made a number of changes to the clean electricity production credit under Section 45Y of the Internal Revenue Code (the "PTC"), the clean electricity investment credit under Section 48E of the Internal Revenue Code (the "ITC"), and other renewable energy tax credits. Following is a summary of several significant provisions in the Act related to the PTC, ITC, and other tax credits.
PTC and ITC Changes
- For solar and wind projects, instead of beginning to phase out
in 2032 or later, the Act instead generally provides that solar and
wind facilities are eligible for the PTC or ITC only if placed in
service by the end of 2027. There is an exception to this deadline
for projects on which construction begins before the one-year
anniversary of enactment of the Act. Any such project would, under
current beginning of construction guidance, generally still be
eligible for the PTC or ITC, as applicable, if placed in service by
the end of the fourth calendar year following the year in which
construction began. However, an Executive Order issued on July 7 by
President Trump, described here, raises the possibility that significant
changes to historical beginning of construction rules are in
store.
- The Act makes clear that energy storage technology installed
with a wind or solar facility is still eligible for the ITC, even
if the associated wind or solar facility is not eligible.
- The Act fixes a technical glitch in the Inflation Reduction Act
with respect to the domestic content adder for the ITC. For
ITC-eligible facilities the construction of which begins on or
after June 16, 2025, the manufactured products threshold remains
40%, and thereafter escalates to 55% for any qualified facility or
energy storage technology on which construction begins after
December 31, 2026.
- Qualified fuel cell property is eligible for the 30% ITC
without regard to (1) greenhouse gas emission rates and (2) whether
the construction of the property satisfies the prevailing wage and
apprenticeship requirements. However, such property is only
eligible for the 30% ITC if construction begins after December 31,
2025, which means that projects on which construction begins this
year will not be eligible for the ITC under Section 48E or the
historic investment tax credit under Section 48.
- Storage technology (for the ITC), hydropower projects, marine
and hydrokinetic projects, geothermal, nuclear fission, and other
types of PTC or ITC-eligible projects (except for wind and solar)
would still be eligible for the PTC or ITC, as applicable, if
construction begins by the end of 2033. Then credits for those
projects would be subject to phasedown for construction beginning
after 2033.
- The Act also adopts restrictions relating to prohibited foreign entities, which we will cover in a subsequent post.
Other select changes
- A number of changes were made to the Section 45X manufacturing
production tax credit, including eliminating the credit for wind
components produced and sold after December 31, 2027, introducing a
phasedown of the credit for critical minerals, adding limitations
on stacking of credits for manufacturers of multiple eligible
components, and adopting restrictions related to prohibited foreign
entities.
- The hydrogen production tax credit under Section 45V was
amended to apply only to projects on which construction starts
before January 1, 2028. Although this is earlier than the 2032
sunset date under the IRA, the final bill is an improvement on the
draft legislation that would have repealed the credit for projects
on which construction begins after this year.
- The clean transportation fuels production tax credit under Section 45Z was extended through 2029, but adjustments were made to the amount of the available credit.
Please contact one of the Foley team members identified below with any questions.
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