Senate Finance Committee revises House energy tax provisions in One Big Beautiful Bill

Automotive Incentives

§§ 25E(g); 112001; 70501

Termination of previously- owned clean vehicle credit. (Current law: expires end of 2032)

Terminates for vehicles acquired after end of 2025.

Terminates for vehicles acquired 90-days after enactment.

Both proposals are similar and accelerate expiration of the credit by approximately 7 years.

§§ 30D; 112002; 70502

Termination of clean vehicle credit. (Current law: expires for vehicles placed in service after December 31, 2032)

Terminates the credit for vehicles acquired after 2026 (2025 for vehicles made by OEMs with 200,00 or more 30D eligible clean vehicle sales since 2009) with a grandfather for vehicles acquired pursuant to written binding contract before May 12, 2025 and placed in service before 2033.

Terminates for vehicles acquired 180-days after enactment. No binding contract grandfathering.

House bill provides an additional year of 30D eligibility (2026) for a select group of OEMS (not including Tesla, GM, Ford, Toyota, which have hit 200,000) that satisfy final assembly in North America and other 30D requirements.

§§ 45W(g); 112003; 70503

Termination of qualified commercial clean vehicles credit. (Current law: expires for commercial vehicles placed in service after December 31, 2032)

Terminates the credit for vehicles acquired after 2025 with grandfather for vehicles acquired pursuant to written binding contract before May 12, 2025 and placed in service before 2033.

Terminates for vehicles acquired 180-days after enactment, new 30D (FEOC, Formula) restrictions for all vehicles, and 30D MSRP limit for under 14,000 lbs. GVW, for vehicles acquired after June 15, 2025. No binding contract grandfather.

SFC addition of 30D requirements to 45W (except for AGI limits) effective June 16, 2025, will effectively kill 45W credit eligibility, including for lease vehicles, for many OEMs that do not satisfy North America final assembly, ‘FEOC’ or battery component and minerals formula requirements in 30D.

§§ 30C(i); 112004; 70504

Termination of alternative fuel vehicle refueling property credit. (Current law: Expires at end of 2032)

Terminates for property placed in service after December 2025.

Terminates for property placed in service after the date that is 12-months after the date of enactment

SFC bill would provide roughly another 6 months for taxpayers to claim this credit.

Residential Incentives

§§ 25C(i); 112005; 70505

Termination of energy efficient home improvement credit. (Current law: expires at end of 2032)

Terminates for property placed in service after 2025.

Terminates for property placed in service after the date which is 180 days after the date of enactment.

Both proposals are similar and accelerate expiration of the credit by approximately 7 years.

§§ 25D(h); 112006; 70506

Termination of residential clean energy credit. (Current law: expires at end of 2034)

Terminates for property placed in service after 2025.

Terminates for expenditures made after the date which is 180 days after the date of enactment.

Both proposals are similar and accelerate expiration of the credit by approximately 9 years.

§§ 179D(h); 70507 (Senate)

Termination of energy efficient commercial buildings deduction.

None

The provision terminates the deduction with respect to property constructed after the date that is 12-months after enactment.

Only Senate terminates deduction, effective 12 months after enactment.

§§ 45L(h); 112007; 70508

Termination of new energy efficient home credit. (Current law: expires at end of 2032.)

Terminates for homes acquired after December 31, 2025

(December 31, 2026 if construction commenced before May 12, 2025)

Terminates for homes acquired after the date which is 12 months after the date of enactment.              

Proposals are similar; House accelerates expiration of the credit by 7 years; Senate accelerates expiration by over 6 years.

Sections 45Y, 48, and 48E Energy Production & Storage Incentives

§§ 168(e); 70509 (Senate)

Termination of cost recovery for qualified clean energy facilities, property and technology. (Current law has 5-year recovery)

None

The provision terminates the special recovery period for these types of property for property placed in service after date of enactment.

Absent bonus depreciation election, Senate provision would materially lengthen the tax depreciation period for energy property.

§§ 45U(e); 112012; 70510

Modifications of zero-emission nuclear power production credit

Advances existing phase-out by one year with a placed in service deadline of end of 2031. New credit exclusions related to ‘foreign entities of concern’ are added.

No change to effective date. Taxpayer must certify that no fuel used has been produced in a covered nation (China, Russia etc.) Exception for fuel acquired by the taxpayer pursuant to a binding written contract in effect before January 1, 2023. These changes are effective for taxable years beginning after December 31, 2027.

Both House and Senate bills are more generous to existing nuclear facilities in largely preserving 45U.

§§ 45V(c)(3); 112013; 70511

Termination of clean hydrogen production credit. (Current credit: Begin construction deadline of December 31, 2032.)

Terminates credit if construction has not begun by the end of 2025.

Terminates credit if construction has not begun by the end of 2025

Both accelerate expiration of the credit by 7 years. No foreign entity of concern restriction added to 45V.

§§ 45Y(d); 112008; 70512

Phase-out and restrictions on clean electricity production credit. (Current law expires when GHG emissions from the U.S. power sector are 20% or less of those in 2022.)

Except for nuclear, the Section 45Y PTC expires for projects (1) the construction of which have not begun within 60 days after enactment, or (2) which have not been placed in service by December 31, 2028.

Advanced nuclear facilities (as defined in section 45J(d)(2)) or expansion of existing facilities with Nuclear Regulatory Commission approved reactor design receive full credit if construction (on facility/expansion) begins by December 31, 2028.

Credit is disallowed for solar or wind facilities leased to a third party during such taxable year, where the lessee would qualify for a credit under section 25D if the lessee owned such property.

For electricity produced by wind or solar technology – 100% credit for projects that begin construction by end of 2025, 60% by end of 2026, 20% by end of 2027, zero after. All other technologies (including storage) continue at 100% if begun construction by 2033, then 75% credit for beginning construction in 2034, 50% for 2035 and zero thereafter.

New ‘FEOC’ / ‘Prohibited Foreign Entity’ restrictions added, specifically:

1. no credit allowed for a facility that commences construction after December 31, 2025 that includes in excess of threshold of material assistance from a prohibited foreign entity; and

2. no credit is allowed for taxable years beginning after enactment if the taxpayer is a prohibited foreign entity (PFE).

House provision is seen as largely terminating PTC for future wind and solar projects. Senate bill still allows partial credit for projects that begin construction by end of 2026 and 2027.

§§ 48(a); 112015; 70513

Phase-out of investment tax credit for certain energy property

Accelerates the phase-out for geothermal heating/cooling property by allowing 30% credit for property that begins construction by the end of 2029, and reducing this percentage to 26% in 2030, 22% for construction begun in 2031, and zero thereafter. New credit exclusions related to ‘foreign entities of concern’ are added. Repeals transferability for projects that haven’t begun construction within 2 years of enactment, except for certain geothermal projects.

None

The Senate bill does not include any phase out for any property which would still qualify for a section 48 investment tax credit; transferability for such credits is also not repealed.

§§48E(e); 112009; 70513

Phase-out and restrictions on clean electricity investment credit.

Except for nuclear, the section 48E ITC is not applicable to any project (1) the construction of which begins after the date which is 60 days after the date of the enactment, or which is placed in service after December 31, 2028.

For an advanced nuclear facility (as defined in section 45J(d)(2)) the phase out is instead for any such facility the construction of which begins after December 31, 2028.

In the case of any nuclear facility the reactor design for which is approved by the Nuclear Regulatory Commission the phase out is for any such facility the expansion of which begins after December 31, 2028.

A special restriction was added that denies the credit to a taxpayer that rents or leases a solar or wind facility to a third party during such taxable year, and where the lessee would qualify for a credit under section 25D with respect to such property if the lessee owned such property.

New credit exclusions related to ‘foreign entities of concern’ are added.

Transferability is repealed for facilities which construction begins two years after the date of enactment.

For electricity produced by wind or solar technology – 100% credit for projects that begin construction by end of 2025, 60% by end of 2026, 20% by end of 2027, zero after. All other technologies (including storage) continue at 100% if begun construction by 2033, then 75% credit for beginning construction in 2034, 50% for 2035 and zero thereafter.

New FEOC restrictions the same as Senate Section 45Y. Does not include Section 6418 transferability restrictions.

Senate is more generous in effective date restrictions (using more generous “beginning of construction” timing without the additional “placed in service” limitations from House bill). Phase out for wind/solar significantly earlier than phase out for all other technologies. Senate also makes FEOC restrictions more workable, although still strict.

§§ 45X(b)(3); 112014; 70514

Phase-out and restrictions on advanced manufacturing production credit

Accelerates existing phase out by eliminating the credit for wind energy components sold after 2027, and eliminating the credit for all other components sold after 2031 (with phase down after 2029 for components other than critical minerals.)

Transferability is repealed for components sold after December 31, 2027. New credit exclusions related to ‘foreign entities of concern’ are added.

Existing credit schedule (full credit for component sales through end of 2029) kept in place for all 45X components except for wind components, which are terminated at end of 2027. Credit for critical minerals, which has no termination under current law, is phased down by 25% points per year after 2030. Effective after 2026, ‘integrated components’ allowance is repealed. New ‘FEOC’ restrictions applying gradually more stringent ‘material assistance’ limits on China [etc.] sourced components and minerals are effective starting after 2025.

House FEOC restrictions are seen as largely eliminating credit for most components (in particular solar and batteries). Senate FEOC restrictions are more workable and seen as preserving the value of 45X for solar, batteries and other components through the end of the decade if China supply chains can be largely avoided.

§§ 48C; 70515 (Senate)

Restriction on the extension of advanced energy project credit program

None

The provision restricts 48C awarded funds returned to the Secretary from being later reissued and is effective as

of the date of enactment.

Senate bill would codify Republican intent not to spend any additional federal dollars on 48C projects.

Clean Fuel; CO Sequestration; Nuclear; Hydrogen; Advanced Manufacturing

§§ 45Z; 111112; 70521

Extension and modification of clean fuel production credit. (Current law expiration is end of 2027.)

Extends existing credit termination to end of 2031. Provides clarifications related to emissions rate determination. Adds restrictions related to use of foreign feedstocks. New credit exclusions related to ‘foreign entities of concern’ are added. Eliminates section 6418 transferability for fuel produced after December 31, 2027.

Same extension (to 2031), foreign feedstock restrictions and similar ‘FEOC restrictions added.’ Prevents negative emissions rate for transportation fuels. Retains transferability of credits.

SFC like House bill includes an extension for 45Z, and mostly generous treatment, but SFC bill prevents negative emissions rates for transportation fuels.

§§ 45Q(f); 112011; 70522

Restrictions on carbon oxide sequestration credit. (Current law – expires for facilities construction of which does not begin before 2033)

Repeals section 6418 transferability for section 45Q credits where construction on facilities begins 2 years or more after the date of enactment of this bill. Adds new credit exclusions related to ‘foreign entities of concern’.

Increases credit value to same as dedicated sequestration ($85/tonne) for enhanced oil recovery and utilization, effective for equipment placed in service after December 31, 2022.

New ‘FEOC’ restrictions: Effective for taxable years beginning after date of enactment, Prohibited foreign entities, are ineligible for credit. Effective for taxable years that begin two years after date of enactment, foreign-influenced entities are ineligible for credit.

SFC bill includes a significant increase in credit amount for enhanced oil recovery and utilization. Both bills add ‘FEOC restrictions’ but Senate version’s are more workable.

§§ 7704(d)(1)(E); 112016; 70524

Income from hydrogen storage, carbon capture added to qualifying

income of certain publicly traded partnerships treated as corporations

Expands the activities that can be categorized as qualifying income to include the transportation or storage of liquified hydrogen or compressed hydrogen, and the generation of electricity or capture of carbon dioxide at a direct air capture or carbon capture facility, for taxable years beginning after December 31, 2025.

Similar to House             

Expands the ability of publicly traded partnerships to invest in hydrogen and carbon capture.