Energy Provisions of Senate Tax Bill

The Senate-passed version of H.R. 1, the “Big Beautiful Bill Act,” significantly reshapes the clean energy landscape by rolling back several key tax incentives established under the 2022 Inflation Reduction Act, while also introducing new restrictions, phaseouts, and targeted incentives. The bill:

• Includes a phase-out of many clean energy tax credits introduced through the 2022 Inflation Reduction Act. Some provisions will take effect by the end of 2025; the bill terminates what it described as “green new deal subsidies,” including the previously-owned clean vehicle credit (up to $3,000) and the clean vehicle credit (up to $7,500), the residential clean energy credit (30% of the cost of the clean energy property), and the energy efficient commercial building deduction, among others.
• Provides a more flexible termination plan than in the House bill for the Clean Electricity Tax Credit so long as a covered wind or solar project begins construction within a year of the law’s enactment or comes online before the end of 2027.
• Introduces a new requirement for clean energy projects to prove that they do not use components from any prohibited foreign entities to qualify for the Clean Electricity Tax Credit. These Foreign Entity of Concern restrictions primarily seek to prevent Chinese companies from claiming the credits and to reduce reliance on such entities in clean energy supply chains.
• Introduces a new excise tax on wind (up to 50%) and solar (up to 30%) projects that violate the material assistance cost ratio for materials sourced from prohibited foreign entities, depending on when construction begins and when a project comes into service.
• Adds a new provision to expand the definition of “advanced nuclear facilities” in the tax code to include facilities that have received a Construction Permit from the Nuclear Regulatory Commission, in accordance with policy in recent Executive Orders on the nuclear industry.
• Introduces a new tax credit for metallurgical coal production, a critical mineral commonly used for steel production, through the Advanced Manufacturing Production Credit at 2.5%.