"One Big Beautiful Bill Act" Moves to Senate: House Bill Curtails Renewable Energy Tax Credits

In the early hours of May 22, 2025, the House of Representatives passed H.R.1, a massive budget reconciliation bill titled the One Big Beautiful Bill Act (the “Bill”). If enacted in its current form, the Bill would substantially limit and complicate the use of federal tax credits in financing renewable energy projects.

The Bill will be taken up by the Senate this week, where it will require only a simple majority of votes to pass. A number of Republican senators have expressed their support for renewable energy tax credits and their belief that the country would be well-served by the preservation of a more stable, predictable tax policy supporting the development of energy projects.

Accelerated Termination of Renewable Energy Tax Credits. The version of the Bill that passed the House would terminate or phase out most renewable energy tax credits on an accelerated basis. To be eligible for the Clean Electricity Investment Credit (Section 48E) or the Clean Electricity Production Credit (Section 45Y), a project must (i) have begun construction no later than 60 days after the Bill’s enactment, and (ii) be placed in service by December 31, 2028. The termination of renewable energy tax credits in the Bill is summarized in the chart at the end of this article.

Setting a hard deadline for completion in the relatively near term can create significant uncertainty about whether a project in development will, ultimately, be eligible for the credit.

FEOC Provisions. The tax credits that are not terminated at the end of this year would be subject to “foreign entity of concern” (FEOC) limitations. FEOC provisions are designed to preclude certain foreign entities and individuals associated with them from benefitting directly or indirectly from federal subsidies.

The general framework applicable to most of the remaining credits would phase in prohibitions over a two-year period that would disallow the credits to increasing numbers of U.S. taxpayers. In any tax year beginning after:

1. Enactment of the Bill, the credits would be disallowed to specified foreign entities (SFEs), which would include, among other things, certain entities or individuals that are: citizens of China, North Korea, Russia or Iran (the covered countries); any entities organized or having their principal places of business in any covered country; entities controlled by any of the foregoing; or entities controlled by certain major battery manufacturers;
   
2. The first anniversary of enactment, the prohibitions would apply to any project materially assisted by SFEs or by a potentially broader class of entities and individuals (foreign influenced entities (FIEs)) with more attenuated associations with a covered country; material assistance would include receipt of certain equipment, critical minerals, intellectual property, trade secrets or know-how from an SFE or FIE; and
   
3. The second anniversary of enactment, the credits would be denied to both SFEs and FIEs.

Transferability. The Bill also repeals transferability of the Carbon Oxide Sequestration Credit (Section 45Q) for projects that begin construction after the second anniversary of enactment. Transferability of the Advanced Manufacturing Production Tax Credit (PTC) (Section 48X) is repealed for components sold after 12/31/2027. The Clean Fuel Production Credit (Section 45Z) is repealed for fuel produced after 12/31/2027.