Nadia Gallimore, Outreach Associate | June 3, 2025
This resource is educational only. Taxpayers may consider consulting a tax professional.
On Thursday, May 22nd, the House of Representatives advanced a major tax reform package on a largely party-line basis 215-214, with two Republicans joining Democrats in opposition. Dubbed the “One Big Beautiful Bill,” this legislation is central to President Trump’s agenda, targeting tax reform and energy policy. If enacted into law, many of the energy tax credits that were extended and expanded in the Inflation Reduction Act (IRA) in 2022 would be rolled back. The original version of the legislation reported out of the House Ways and Means Committee proposed less aggressive phaseouts of the credits, but these timelines were accelerated as the bill moved through subsequent consideration in the House.
1. Timelines: The legislation would eliminate many of the existing energy tax credits in 2025, including the tech-neutral investment and production tax credits, along with those for residential energy efficiency and clean energy, clean hydrogen, and electric vehicles. A limited number of tax credits, including nuclear, geothermal, carbon capture, and biofuels, would be phased out on a slower timeline. See the table below and CEBN’s detailed summary here.
2. Safe Harbor Rules Adjusted: Under existing law, taxpayers can claim energy credits through safe harbor rules triggered through “commence construction.” These guardrails would be adjusted to a much more stringent “placed in service” threshold, with the exceptions of the nuclear, geothermal, and carbon capture credits. Timelines would be particularly aggressive for the tech-neutral credits, requiring that projects commence construction within 60 days of enactment and be placed in service by Dec. 31, 2028.
3. Foreign Entities of Concern Restrictions: Beginning in 2026, the bill would place stringent restrictions on tax credits for projects involving “foreign entities of concern.” Some of the restrictions would be very challenging to comply with—for example, requiring project owners to determine if any major shareholders have a grandparent or derive personal income from one of the countries of concern. Industry stakeholders generally view these provisions as unworkable, introducing extreme compliance risk and administrative burdens.
4. Transferability Curtailed: The provision known as “transferability,” which currently enables entities without a financial stake in a project to buy energy credits from project developers, would be eliminated after 2027 for the carbon capture, clean fuels, and advanced manufacturing credits (Sec. 45Q, 45X, and 45Z). Notably, the “direct pay” provision, which enables non-tax paying entities to leverage tax credits, is untouched, though this mechanism becomes nearly irrelevant if the credits are rapidly eliminated.
The bill would also restore immediate expensing for the Section 174 tax deduction for domestic research and development (R&D) expenses for five years. This tax deduction previously enabled immediate expensing for nearly 70 years until changes made in the 2017 Tax Cuts and Jobs Act went into effect as of 2022. From then on, businesses were required to start amortizing R&D expenses over a period of five years, creating significant tax liabilities for many high-tech companies and startups. Under the “One Big Beautiful Bill,” domestic R&D would be eligible for immediate expensing from Jan. 1, 2025-Dec. 31, 2029, while foreign R&D would remain on a 15-year schedule.
The “One Big Beautiful Bill” also includes a title passed by the House Committee on Energy and Commerce that would repeal elements of the Light Duty/Heavy Duty Vehicle Standards, Greenhouse Gas Reduction Fund (GGRF), and parts of the Loan Programs Office (LPO) in the Department of Energy. These programs help support innovative technologies, so removing these resources could stall industry growth for years to come.
The Senate is now taking up consideration of the package and resolving differences with the House, with the goal of enacting a final version before July 4. The Senate has an opportunity to significantly rewrite components of the bill before it becomes law. Republicans currently have a simple majority in the Senate with 53 seats, so compromises will need to be made to secure enough votes. Four GOP Senators have publicly voiced their concerns about rolling back energy tax credits, and others have expressed more nuanced interest in changes.
The Clean Energy Business Network (CEBN) has been consistently engaging Members of Congress and their staff through dial-in and fly-in meetings with businesses in our network. We will continue to advocate for the protection of energy tax credits and restoration of Sec. 174, and convey the significant impacts of these provisions on small businesses. Without the long-term business certainty these credits and incentives provide many businesses will face layoffs, closures, or cancelled projects. Learn more about CEBN’s congressional engagement so far in 2025.
Below are some open opportunities to learn more and weigh in on the tax package:
See the full text of the legislation. We will continue to update this page with the latest developments on the bill and its impact on energy tax credits.
