After extended negotiations between the House and Senate, the One Big Beautiful Bill Act was passed and signed by President Trump on July 4, 2025. As expected, the act brings sweeping changes to clean-energy tax credits provided under the Inflation Reduction Act of 2022. The sectors facing the largest impacts are wind and solar, which stand to lose substantial tax support for future project development and investment.
The act modifies Section 45Y Clean Electricity Production Credits (PTC) and Section 48E Clean Electricity Investment Credits (ITC) of the Inflation Reduction Act. Both PTC and ITC were previously set to be phased out in 2032 or once domestic greenhouse gas emissions from electricity production were reduced to 25 percent of the amount emitted in 2022. Now, in order to qualify for credits, wind and solar facilities must start construction before July 4, 2026, and be placed in service before December 31, 2027. For those facilities that begin construction before July 4, 2026, service must begin within four years of the start of construction as normal.
Among the changes to both the PTC and ITC are newly implemented restrictions to Foreign Entities of Concern (FEOCs), which apply broadly to clean-energy tax credits available under the Inflation Reduction Act. Credits available under 45Y and 48E are restricted from wind and solar facilities that receive material assistance from Specified Foreign Entities after December 31, 2025, or to taxpayers that are Specified Foreign Entities or Foreign Influenced Entities. The added supply chain restrictions will prohibit facilities from receiving credits if they are operating with assistance from foreign governments that are deemed to be US adversaries, such as China. Projects that have a licensing or similar agreement with a FEOC will be prohibited from receiving the PTC or ITC.
Certain development projects and facilities involving clean-energy technologies are not affected by the act. Projects involving nuclear reactors, hydroelectric dams, geothermal plants, and battery storage remain eligible for the PTC or ITC. Tax incentives and credits for these projects and facilities will remain available until 2036.
Additional changes to the availability of clean-energy tax credits should be expected in the coming weeks following President Trump’s executive order issued on July 7, 2025, “Ending Market Distorting Subsidies for Unreliable, Foreign Controlled Energy Sources.” The executive order directs the Secretary of the Treasury to take any action deemed necessary and appropriate to enforce the termination of the clean-energy PTC and the ITC for wind and solar facilities, including issuing revised guidance to safeguard against the circumvention of policies related to the “beginning of construction.”
The executive order additionally instructs the Secretary of the Interior to review and eliminate regulations, guidance, policies, and practices under the Department of the Interior’s jurisdiction that provide preferential treatment to wind and solar facilities. Both the Secretary of the Treasury and the Secretary of the Interior must present their findings and actions taken to implement the act within 45 days of the executive order.
Attorneys at Barclay Damon will continue to monitor any updates to this act and its impact on clean-energy tax credits.
If you have any questions regarding the content of this alert, please contact Danielle Katz, counsel, at dkatz@barclaydamon.com; Matt Moses, Project Development Practice Area co-chair, at mmoses@barclaydamon.com; or another member of the firm’s Energy, Regulatory, and Tax Practice Areas.