Introduction
On May 22, 2025, the U.S. House of Representatives advanced its version of the legislation now known as "The One, Big, Beautiful Bill" (the "Bill") by approving tax provisions which, among other things, would substantially scale back various energy tax incentives included within the Inflation Reduction Act.
Now that the Bill has passed House, the next step is consideration in the Senate, where a number of changes are likely to occur. Republicans control the Senate 53-47, and with Senator Rand Paul a definite no vote and Senator Ron Johnson a likely no, Republicans have very little margin for error. A number of Republicans are not on the same page as their House colleagues and have different priorities, ranging from the amount of spending to cut, the effective and sunset dates of various provisions and the desire to make the extension of existing tax provisions permanent. Timing for both the House and the Senate passing the same bill and sending it to the President remains fluid, but the more likely scenario points to passage around the August timeframe as opposed to July 4.
EV and Home-Based Efficiency Credits
As anticipated, the Bill 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 credit for charging infrastructure under Section 30C. The Bill similarly provides for the repeal of the Energy Efficiency Home Improvement Credit under Section 25C and Residential Clean Energy Credit under Section 25D. The repeal of these EV and home-based efficiency credits would generally be effective for property placed in service after December 31, 2025, except for the new EV credit under Section 30D, which would become effective for EVs placed in service after December 31, 2026.
Commercial Energy Projects
The Bill makes substantial changes to existing investment and production credits. The practical effect of the proposed change in law would be to essentially repeal 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 projects that are not already shovel ready. Specifically, the 48E and 45Y credits would be terminated for facilities the construction of which does not commence within 60 days after the Bill is enacted or which are not placed into service on or before December 31, 2028. The 45X credit would not apply to wind energy components sold after December 31, 2027, and all other eligible components, including applicable critical minerals, sold after December 31, 2031.
The Clean Hydrogen Production Tax Credit under IRC 45V would be terminated for facilities that begin construction after December 31, 2025. However, the Clean Fuel Production Credit under Section 45Z, a production tax credit for the production of low-carbon transportation fuels, including hydrogen, would be extended from December 31, 2027, until December 31, 2031.
Transfer of Credits
For energy credits that survive, transferability would be terminated well in advance of termination of the underlying credits.
The Senate will take a different approach to the energy tax incentives, with at least four Senators drawing a line on the House bill going too far. In particular, the Senators are concerned with preserving incentives for nuclear and hydrogen and providing businesses/projects with certainty moving forward by ensuring reasonable sunset dates to allow eligibility for facilities/projects placed into service to qualify for the various incentives.
With the Senate's consideration on the horizon, it is crucial for businesses, investors, and stakeholders to stay informed and engaged. The attorneys and government relations professionals at Buchanan Ingersoll & Rooney PC will continue to monitor, provide additional analysis, as well as provide personalized guidance on navigating the complexities of the proposed tax provisions. Our government relations professionals are actively working to advance our clients' goals with respect to this legislation.
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.
