On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBB), which largely repeals the energy tax credits enacted under the Inflation Reduction Act. The law does this by accelerating phase-outs and expiration dates, prohibiting transfers of credits, and implementing new restrictions for companies that have associations with a foreign entity of concern (FEOC). Notably, the final legislation did not include a controversial excise tax of up to 50% for wind and 30% for solar investments that exceed a “material assistance” cost ratio for materials obtained from certain foreign entities.
Below are the key changes to the major energy tax provisions.
Clean vehicle tax credits: The law accelerates the expiration of the “clean vehicle” tax credits for electric vehicles (EVs) to 2025 and 2026 from 2032.
Residential energy efficiency credits: The law also accelerates the expiration of residential energy tax credits to 2025 and 2026.
Technology-neutral tax credits: The OBBBA phases out the §45Y and §48E clean electricity production and investment credits beginning in 2034. The production and investment credits for wind and solar is repealed unless the project is placed in service before 2028. If the wind or solar project is placed in service after 2027, construction must begin before July 4, 2026.
Foreign Entity of Concern (FEOC): The law expands the FEOC rules to restrict credit availability to taxpayers that are FEOC or receive material assistance from FEOCs.
Carbon capture: The law implements the foreign entity rules for the §45Q carbon oxide sequestration credit. It also repeals transferability for facilities that begin construction two years from the bill’s enactment.
Clean fuels: The law extends the Section 45Z clean fuel production credit through December 31, 2029, from the current expiration at the end of 2027.
Credits transfers: The law retains the ability of entities to transfer credits but prohibits transfers to prohibited FEOCs or entities that receive material assistance from prohibited FEOCs.