House-passed tax bill would end many clean energy credits
The major tax and budget legislation advanced by the House of Representatives on May 22 (H.R. 1) makes deep cuts to tax provisions supporting the deployment of clean energy technologies. Nearly every clean energy provision is significantly reduced through a combination of early terminations and new, unworkable restrictions.
This brief summarizes key changes to the clean energy credits in the House-passed bill, with a focus on termination/phaseout dates as well as the new and highly problematic prohibited foreign entity rules.
Summary of key changes in House-passed bill
- Termination of credits: The House-passed bill terminates most clean energy-related credits after 2025, including all of the credits that go directly to consumers and households for purchases of clean vehicles, charging equipment, residential energy efficiency property (including HVAC systems and water heaters), and residential clean energy property (including residential rooftop solar). The table below compares the termination dates under current law to those under the House-passed bill.
- Repeal of Clean Electricity production tax credit (PTC) and investment tax credit (ITC): The House-passed bill repeals the major credits promoting clean energy generation and storage – the Clean Electricity Production and Investment Credit (section 45Y PTC and section 48E ITC). Changes made to the bill shortly before House passage made the phaseouts of the PTC and ITC almost immediate, with a special exception for nuclear projects.
- Unworkable “foreign entity” rules: The House-passed bill includes unworkable provisions regarding “prohibited foreign entities.” These rules are extremely overbroad, produce arbitrary results, and contain unnecessary tripwires that would effectively nullify key credits for many clean energy technologies. In so doing, they would decrease incentives to invest in U.S. manufacturing and to move supply chains away from China, which would be at odds with lawmakers’ stated goals.
- Transferability ended early for certain credits: Under existing law, many clean energy credits can be transferred to other taxpayers in exchange for cash, ensuring that a wider range of developers and projects can benefit from the credits. Transferability lowers financing costs for clean energy projects by providing an effective new way to monetize credits. However, the House-passed bill ends transferability after two years for several credits.
- No changes to “direct pay”— but availability of credits for direct pay-eligible entities is sharply reduced. The House-passed bill does not directly modify the direct pay (“elective pay”) provisions of the IRA. However, to the extent that underlying credits are terminated or restricted, direct pay-eligible entities will no longer be able to claim them.
- Modifications to Clean Fuels Credit: In contrast to the severe cuts to most clean energy credits, the House-passed bill loosens eligibility rules for the section 45Z Clean Fuels Credit while extending the credit for four additional years, running through the end of 2031 – a sharp contrast to the near-immediate termination of other credits. Under existing law, eligibility for the credit and the credit’s value are based on a fuel’s lifecycle greenhouse gas (GHG) emissions. The House bill would alter the lifecycle GHG analysis for biofuels by directing that a significant source of emissions – the indirect land use changes resulting from the use of crops as fuel feedstocks – must be ignored. This will result in more federal tax subsidies flowing to higher-emissions fuels
Changes to credit timelines in House-passed bill
| Industry | Code Sections | Current Termination Date | New Termination Date | Changes to transferability |
| Clean Generation and Storage | 45, 48 |
Facilities/property must have begun construction before 2025.
|
No change | No change |
| 48 (geothermal heat pumps) | Phased down starting in 2033; must begin construction before 1/1/35 | Phased down starting in 2030; must begin construction before 1/1/32 | Terminates transferability for property beginning construction after two years after enactment. | |
| 45Y, 48E (“technology-neutral” credits) | 45Y/48E phase out for projects beginning construction in 2034 or the second year after emissions targets are reached (whichever is later). |
Projects must begin construction no later than 60 days after bill enactment and be placed in service by the end of 2028. Exception: Nuclear facilities and nuclear expansions are eligible for 45Y and 48E credits if construction begins by the end of 2028. Leased residential solar/wind systems are ineligible for 45Y/48E credits for taxable years beginning after enactment. |
No change | |
| Existing nuclear | 45U | 12/31/32 |
12/31/31
|
No change |
| Clean Vehicles | 25E, 30C, 30D, 45W | 12/31/32 | 12/31/25 with certain transition rules for 30D and 45W2 | n/a (credits not transferable) |
| Consumer, Residential, and Homes | 25C, 25D, 45L |
12/31/32 25D phases down/out by 12/31/34. |
12/31/25 | n/a (credits not transferable) |
| Advanced Manufacturing | 45X | Credit phases out over 2030-32, except credit for critical minerals does not phase out. | No credit for wind energy components sold after 2027 (including for existing facilities). Credit terminated after 2031, including for critical minerals. | Terminates transferability for components sold after 2027 |
| Carbon Capture | 45Q | Facilities must begin construction before 1/1/33. | No change | Terminates transferability for equipment beginning construction after 2 years after date of enactment |
| Clean Hydrogen | 45V | Facilities must begin construction before 1/1/33. | Facilities must begin construction by 12/31/25. | No change |
| Fuels | 45Z | Fuel must be sold by 12/31/27. | Extended four years: Fuel must be sold by 12/31/31. | Terminates transferability for fuel produced after 2027 |
What the Bill Says About the Commercial Solar ITC
The House-passed budget bill proposes significant changes to the federal solar tax credit landscape. While the residential solar tax credit is going away at the end of 2025, the commercial ITC under Section 48E faces a phased reduction:
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2029: 80% of the full credit
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2030: 60%
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2031: 40%
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Let us Help, Schedule some time to ask how |
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As this news spreads, we expect:
- A significant surge in demand from homeowners and businesses looking to secure the credit before the cutoff
- Delays in permitting and local inspections
- Inventory shortages across inverters, panels, and electrical components
Important: Some brands are already reporting limited capacity. We recommend working only with suppliers and equipment partners who can confidently meet demand timelines.
What You Can Do Now?
Start Your Design and Quote Early
Getting started now helps you move quickly and avoid delays as demand increases.
Reserve Equipment in Advance
Early action gives you better access to inventory and pricing.
Stay Flexible and Informed
We’re tracking the bill closely. If it changes, we’ll help you adapt — but starting now puts you ahead either way.
