Newly enacted US tax legislation called the One Big Beautiful Bill Act (OBBBA) brings sweeping changes to renewable energy incentives in the United States. The act reshapes timelines, eligibility, and other key compliance considerations regarding the federal tax credit opportunities available within the renewable energy industry.
While the final bill contained more favorable renewable energy tax provisions compared to earlier versions of the bill, there will be significant impacts to domestic and foreign investment, given new restrictions and construction deadlines. Most notably, tax credits currently available for wind and solar generation projects were predominantly scaled back, while other asset types such as fuel cells, advanced nuclear facilities, and geothermal projects gained some additional opportunities for federal credits under the OBBBA. For the renewable energy sector, the OBBBA significantly redefines federal tax credit opportunities, which means tax and accounting leaders must understand these changes to adapt their planning and forecasts immediately. In addition, highlighted below are the status of certain existing provisions that have been the subject of discussion and potential elimination, including the transferability of tax credits.
At a glance, here are the tax-related renewable energy insights accounting and tax department leaders should know:
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OBBBA and Renewable Energy: Tax Impacts of US Legislation Enacted in July 2025 |
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| Key Provision | What Changed: A Quick Take | Impacts and Actions Needed |
| Wind & Solar Credits | Accelerated phase-out. New projects must start construction by July 4, 2026, or be placed in service by Dec. 31, 2027. | Urgent: Fast-track development, update financial models, rigorously document "beginning construction." |
| Foreign Entity Restrictions | Limits on credits for projects with foreign ownership/control (effective 2025/2026). | High Risk: Implement strong due diligence on ownership, vendors, and supply chain to avoid credit loss. |
| Credit Transferability | Preserved for eligible credits. | Leverage: Continue using credit sales for liquidity/financing. |
| Fuel Cell Eligibility | Fixed 30% ITC regardless of emissions (for projects after 2025). | Evaluate: Re-assess project ROI for fuel cells; greater modeling predictability. |
| Other Clean Energy | Geothermal, hydro, storage largely retain IRA timelines (to 2033). | Monitor: Less urgency, but track specific guidance for these technologies. |
| Domestic Manufacturing | New incentives for metallurgical coal; wind component PTCs limited by FEOC; higher ITC for semiconductors. | Optimize: Explore domestic sourcing to benefit from new/enhanced credits. |
| Nuclear Energy | New 10% community adder. Section 45U PTC maintained through 2032. | Integrate: Update models with new adder; capitalize on existing PTC. |
| Alternative Fuels | Section 45Z PTC extended (to 2029); new US/Canada/Mexico feedstock rule. | Adjust: Factor feedstock rules into supply chain/project viability. |
| Other Accelerated Phase-Outs | Various credits for EVs, home efficiency, and builders end by late 2025/mid-2026. Domestic content bonus now 45% minimum. | Replan: Critical to reassess capital planning and tax assumptions to avoid lost value. |
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Accelerated Phase-out of Wind and Solar Tax Credits
The OBBBA dramatically shortens the window for wind and solar projects to qualify for Investment Tax Credits (ITCs) and Production Tax Credits (PTCs). Previously, the Inflation Reduction Act (IRA) allowed qualifying projects to begin construction through 2032-2035, depending on the industry, and still maintain eligibility for ITCs and PTCs. The OBBBA accelerates these timelines – a wind or solar facility must now begin construction by July 4, 2026 or be placed in service by December 31, 2027 to qualify under Section 48E and 45Y (see footnote at end of article for section descriptions). If a project meets the begin-construction deadline, it will not be subject to the 2027 placed-in-service cutoff and can still claim ITCs and PTCs under the normal continuity safe harbor (for up to four years from the start of construction). This exception effectively gives projects started by mid-2026 until late 2030 to enter service. Projects that miss this deadline will not be eligible for ITCs or PTCs. This accelerated timeline means that accounting leaders planning wind or solar installations must fast-track development or risk losing valuable credits. Projects under construction as of the end of 2024 will be largely unaffected as they remain eligible under previous rules.
Credits for Other Clean Energy Sources
In contrast, other clean energy technologies such as geothermal, hydropower, and energy storage will largely retain eligibility under the IRA's original framework. These projects can begin construction as late as 2033 for full credit, with subsequent phase down (75% credit in 2034, 50% in 2035, and 0% thereafter). Additionally, energy storage co-located with wind or solar projects is treated akin to independent technology and thus exempt from the December 31, 2027 placed-in-service deadline.
The bill also eliminates ITC and PTC eligibility for small-scale renewable systems, in particular residential solar water heating and small wind energy property leased to third parties. The final version of the bill preserved eligibility for residential solar electric property under Sections 48E and 45Y.
Why this matters: The compressed construction window directly affects project timing, financial models, and capital allocation. CFOs must immediately assess project pipelines and advance start dates or risk forfeiting millions in credits that may have been previously assumed in financial forecasts.
FEOC Restrictions: Foreign Ownership and Supply Chain Risks
One of the most consequential aspects of the OBBBA is the introduction of Foreign Entities of Concern (FEOC) restrictions across nearly all clean energy credits. This policy is aimed at reducing reliance on foreign-controlled companies – particularly those linked to China, Russia, Iran, or North Korea.
Under the new FEOC regulations, it is important to be aware of the three main restrictions:
- Ownership/Investment Prohibition: If a project is directly owned by a Specified Foreign Entity (SFE) or Foreign-Influenced Entity (FIE), no domestic clean energy credits can be earned. Practically, this means developers must ensure no disqualifying foreign ownership within partnership or equity structures. As FIEs are also included, companies will need to be wary of any foreign concentrations of debt, equity, or contractual influence within ownership structures. This rule is effective 2025 onward and thus requires immediate consideration.
- Effective Control Rule: Beginning in 2025, even if a foreign entity isn't an owner, if an agreement grants any SFE effective control over a project or critical components of a project, credits are disallowed. The law also imposes a 10-year credit recapture for projects whereby, if, within 10 years of placing an asset in service, the company makes payments to a SFE under a contract providing effective control, 100% of the ITC could be recaptured. This recapture provision will apply to any tax year beginning in 2027.
- Material Assistance: All Section 48E or 45Y eligible projects (including wind and solar projects) that begin construction after Dec. 31, 2025 will be subject to new FEOC material assistance limitations, which are applicable when the ratio of a project's costs paid to FEOCs divided by the project's total costs exceeds a designated percentage (FEOCMAT). If exceeded, the project will not be eligible for either ITCs or PTCs. Until 60 days after more detailed guidance is issued concerning the calculation of FEOCMAT, companies can rely on the domestic content guidance contained in IRS Notice 2025-08. The OBBBA may further restrict entities located in specific foreign countries from obtaining ITCs/PTCs directly or indirectly, investing in projects resulting in these credits, or contracting with the entities obtaining the credits.
Why this matters: These restrictions introduce financial and compliance risk. CFOs will need to implement diligence controls to track ownership, vendor contracts, and supply chain exposure, which may create a heavy administrative burden in the effort to prove compliance. Missteps could trigger ITC/PTC disqualification or future recapture—creating volatile tax and cash flow implications. Projects now face disqualification risk if cost thresholds are breached. Accounting and finance leaders must coordinate more closely than ever with engineering, procurement, and construction departments to ensure vendors don't inadvertently disqualify projects by exceeding FEOC-sourced cost ratios.
Executive Order Tightens Enforcement on Wind, Solar Subsidies
On July 7, 2025, the US President issued an executive order (EO) that requires certain federal agencies to produce guidance governing the enforcement of the termination of federal subsidies for wind and solar projects introduced in the OBBBA. The guidance is expected to include clarifications around how to determine when a wind or solar project has started construction, the determination of which has several implications for a project's eligibility for federal incentives. This EO explicitly instructs the Treasury Department to "strictly enforce the termination" of ITCs for wind and solar facilities under the OBBBA timelines. The push for more rigorous enforcement means developers may no longer rely on generous interpretations of "beginning construction" to secure ITCs. The EO also directs the Department of the Interior to review and revise any regulations, guidance, policies, and practices that provide preferential treatment to wind and solar facilities compared to traditional dispatchable energy sources (i.e., fossil fuels) within 45 days of the OBBBA's enactment.
Why this matters: With stricter IRS enforcement, finance leaders must ensure documentation of "beginning construction" meets evolving standards. Past assumptions about safe harbor, including the estimates of when physical work of a significant nature (PWSN) reaches the threshold for "begin construction" may no longer hold. Under the revised standards, minimal site work or the purchase of equipment will no longer be enough to substantiate that construction has begun, which raises risk for projects slated to qualify for credits based on loose interpretations.
Credit Transferability Preserved
Transferability of credits was originally set to be eliminated under the House's version of the bill. The final version signed into law maintains the ability for developers to sell energy tax credits for cash as introduced under the IRA.
Why this matters: This preserves a valuable liquidity mechanism. CFOs can model monetization strategies for credits that would otherwise create carryforward tax attributes and can continue to pursue cash sales or financing arrangements that recognize credit value up front.
Fuel Cells: Expanded Eligibility
Fuel cell developers received a win under the OBBBA through the removal of the requirement to determine lifecycle greenhouse gas emissions. Previously, only fuel cells with zero emissions were eligible to receive ITCs. Now, as long as fuel cells meet the technical specifications described in Section 48E, they will qualify for a fixed 30% ITC regardless of carbon emissions. Two caveats apply: 1) this change is effective for projects beginning construction after 2025, and 2) fuel cell projects cannot claim any of the bonus credits established under the Inflation Reduction Act (e.g., the domestic content, energy community, or low-income community adders).
Why this matters: This change opens new strategic investment pathways. Finance, business, and operational teams should re-evaluate project ROI models and consider fuel cell projects post-2025 as viable credit-eligible alternatives. The fixed 30% credit also introduces modeling predictability.
Other Impacts on Clean Energy Sources
Mining & Manufacturing
The OBBBA reorients support toward domestic manufacturing and strategic materials:
- Mining: The production of metallurgical coal for steelmaking will be eligible for manufacturing PTCs for tax years beginning after the enactment of the OBBBA through Dec. 31, 2029.
- Energy Component Manufacturing: The OBBBA removes production tax credits for wind energy components produced and sold after Dec. 31, 2027, and production is now subject to FEOC limitations similar to those introduced for qualified facilities and energy storage technologies.
- Semiconductor Manufacturing: Previously capped at 25%, semiconductor and semiconductor production equipment manufacturers will now be able to claim a Section 48D ITC of 35% for advanced manufacturing facilities placed in service after Dec. 31, 2025.
Nuclear Energy Support
It is expected that a greater push for domestic generation of nuclear power will emerge as a result of the OBBBA. The bill includes a new 10% community adder for advanced nuclear facilities based on nuclear power employment with no related unemployment requirement. The Section 45U Zero-Emission Nuclear Power PTC was not modified; the credit is allowed through Dec. 31, 2032.
Alternative Fuel Incentives
For alternative fuel producers, there have been some opportunities gained – the PTC allowed under Section 45Z has been extended from 2027 through the end of 2029 and the determination of the emissions rate used to calculate the emissions factor for the PTC no longer incorporates the presumed greenhouse gas impact related to indirect land use changes. Feedstocks are now required to be sourced from the US, Canada, or Mexico. Previously, only the production of the qualifying fuel had to take place domestically, with no constraints on feedstock source. Additionally, the emissions rates can't be negative unless projects source feedstock from animal manures.
Other changes to fuel production incentives include:
- The Section 40A agri-diesel PTC per-gallon increase
- The extension of the 40A PTC credit through the end of 2026
- The introduction of a possibility to "double-dip" with Section 45Z PTCs
- The ability to transfer 45Z PTCs under Code Section 6418
Other Impacts on Clean Energy Tax Credits
Beyond the flagship ITC/PTC changes, the OBBBA makes numerous adjustments to other clean energy incentives, generally accelerating phase-outs or adding constraints. Below is a summary of notable changes affecting various sectors:
- Electric Vehicle Credits available to consumers for both new and used electric vehicles will be cut short, terminating after Sept. 30, 2025.
- EV Charging Infrastructure Credits available for commercial EV charging equipment must be placed in service by June 30, 2026 to retain eligibility.
- Domestic Content Bonus Credits offered for eligible clean energy projects meeting domestic-sourcing requirements will face higher requirements, now a 45% minimum, than previously established under the IRA.
- Residential and Home Efficiency Credits will be terminated early, with credits for solar panels, home batteries, and upgrades such as insulation and efficient windows ending after Dec. 31, 2025.
- Builder Tax Credits available to builders for efficient new homes will expire for homes sold or leased after June 30, 2026.
Why this matters: With accelerated phase-outs and stricter eligibility requirements, accounting and finance leaders must reassess capital planning, procurement strategies, and tax assumptions to avoid stranded value and ensure projects remain financially viable under the revised incentive structure.
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.
