Trump Signs Bill Slashing Clean Energy Tax Credits
Ramifications of the “One Big Beautiful Bill” - Spotlight on Clean Energy Tax Credits
H.R. 1 the “One Big Beautiful Bill Act” was signed into law on July 4, 2025 by President Donald Trump; however, the ramifications of these tax changes will play out over the next few weeks, months, and even years. As expected, the final version of the bill enacted significant cuts to green tax credits created in the Inflation Reduction Act (IRA) in 2022, putting 53-59% of new clean power generating capacity at risk over the next decade.
Wind and solar targeted:
Wind and solar projects that begin construction after July 4, 2026, will only qualify for credits if they are placed into service by 2028. Previously, projects would have qualified for some level of tax credits until 2032. Projects that begin before the 12-month deadline will follow the normal timeline. This credit phase-out does not apply to energy storage technologies.
“Material assistance” from Prohibited Foreign Entities: The bill also bars projects from qualifying for tax credits if they receive a certain level of assistance from prohibited foreign entities (PFEs); such as, China, Russia, North Korea, and Iran or entities in the Xinjiang Uyghur Autonomous Region that use forced labor. The level of assistance that projects may accept from PFEs decreases each year. These provisions may negatively impact energy storage technology projects as they largely rely on Chinese products.
Executive crackdown:
Following the passage of the bill, President Trump issued an executive order (EO) that aims to crack down even further on the slim opportunities for clean energy tax credits. The EO calls on the Treasury Department to narrow the definition of “under construction” for projects heading into 2026, going against negotiations made in the Senate to appease Republican moderates. The EO also calls on the Interior Department to end any policies that favor wind and solar projects.
Impacts to individuals:
As the cut back to clean energy tax credits goes into effect, the Rhodium Group has estimated national average household energy bills will increase by $78-192 and increase total industrial energy expenditures by $7-11 billion in 2035. Other detrimental cuts that will affect individuals include Medicaid, food aid programs, and immigration.
For a summary of all the tax provisions in the OBBBA, see this memo from KL Gates.
What We Are Watching This Week
On Tuesday, the House of Financial Services Committee will hold a hearing titled, “Dodd-Frank Turns 15: Lessons Learned and the Road Ahead.” Tune into the hearing at 10am here. View the agenda for the meeting here.