What the One Big Beautiful Bill means for energy tax incentives — and how you can act now

The House-passed version of the One Big Beautiful Bill (OBBB) proposes significant changes to U.S. energy policy, including significant rollbacks to clean energy incentives established under the Inflation Reduction Act. As passed by the House, the bill could accelerate phaseouts or outright repeal many energy-related credits.

Below are the proposed changes, plus how you can act now on energy incentives.

Proposed changes to energy tax credits

The current draft of the OBBB includes the following changes to energy tax incentives:

• Renewable and clean energy credits: Section 45Y (Clean Energy Production Credit) and Section 48E (Clean Electricity Investment Credit) would see accelerated phaseouts and tight deadlines. In the House-approved bill, eligible projects must begin construction within 60 days of enactment and be operational by December 31, 2028, to qualify.
• Manufacturing and industrial credits: The bill phases out advanced manufacturing credits (Section 45X), with wind energy components becoming ineligible after 2027 and other components after 2031.
• Transportation and vehicle credits: Section 25E, 30C, 30D and 45W tax credits would be eliminated for vehicles and equipment placed in service after December 31, 2025. This includes credits for new, previously owned and commercial electric vehicles, as well as alternative fuel vehicle refueling property.
• Residential energy efficiency credits: Section 25C (Energy Efficient Home Improvement Credit) and 25D (Residential Clean Energy Credit) would be repealed for systems placed in service after December 31, 2025. The Section 48 energy credit would also prohibit a credit for certain third-party owned leased wind and solar property if the lessee would be eligible for the section 25D credit if it owned the property.
• Residential developer credit: The Section 45L credit for new energy-efficient homes would be eliminated for homes acquired after 2025, unless construction began before May 12, 2025. In that case, taxpayers receive an extra year to sell or lease the homes and claim the credit.
• Transferability: Section 6418, which allows the transfer of many clean energy credits to unrelated parties, would be eliminated for clean fuel production and advanced manufacturing production credits, potentially affecting how these clean energy projects are financed.
• Foreign entity of concern (FEOC) rules: Phased in over several years, the bill would add new rules to limit certain foreign entities and companies receiving assistance from foreign entities to receive some green credits.

A big deal — but not a done deal

The House-approved bill signals the direction of U.S. energy policy, but the details aren’t set in stone. The legislation only narrowly passed the House and faces an uncertain future in the Senate. Some Republican senators, especially those from states benefiting from clean energy investments, have expressed concerns about the deep cuts to energy-related tax credits.

The Senate is likely to introduce revisions to the One Big Beautiful Bill to address these concerns. Potential changes could include extended phaseout schedules or more targeted adjustments, compared to the broad eliminations passed by the House.

Senate Republicans have set a goal to finalize the OBBB by July 4. However, negotiations could extend to August. In addition to clean energy tax credits and Medicaid reforms, the bill includes measures to raise the debt ceiling. According to the U.S. Treasury Department, the government could hit its borrowing limit and risk default by August if Congress fails to act — adding urgency to the negotiations.

What should you do now?

If your project is already underway or starting soon and meets current eligibility criteria, you may still qualify under the existing laws, especially if the project is placed in service before December 31, 2025. Keep detailed records of construction start dates, contracts and milestones to document eligibility.

Once passed, the OBBB will likely impose new deadlines and construction requirements for remaining tax credits. When possible, aim for in-service dates before December 31, 2025, to clear any potential new cutoff dates.

Take a hard look at timelines

Although the legislation isn’t final, it’s clear that energy tax incentives could change. That means developers and owners should evaluate timelines now. Completing or locking in contracts before the end of 2025 could mean the difference between earning a substantial tax credit — or not. Explore our e-book, the 2025 energy tax incentives guide, to understand all the energy tax incentives that are currently available and how to act on them.

How Wipfli can help

Having trouble staying on top of developments and what they mean for your future? Let us take the lead. Our energy and tax professionals can help you evaluate projects against current and proposed eligibility criteria so you can make informed, tax-advantaged decisions. Contact us today to discuss how potential changes may affect your timelines or compliance — so you can stay a step ahead.