Article
“Beautiful Bill” brings significant changes to the Inflation Reduction Act
May 23, 2025 · Authored by Jiyoon Choi, Beckett Woodworth
On May 22, 2025, the House passed an amendment to H.R. 1 (the “One, Big, Beautiful Bill”), which brings significant changes to the Inflation Reduction Act (IRA). The bill would end technology-neutral production and investment tax credits (45Y and 48E) just months after they begin, accelerate the sunset of the zero-emission nuclear credit (45U), curtail transferability, require new foreign entity of concern (FEOC) compliance (45Y, 48E and 45X) and disallow credits for third-party-leased rooftop solar almost immediately.
If enacted as written, eligible clean energy projects must start construction within 60 days of enactment (or, for nuclear, by Dec. 31, 2028) to remain eligible for tax credits under the IRA regime. This significantly differs from the original House bill, passed out of committee on May 12, 2025, that would have phased out the 45Y and 48E tax credits beginning for projects placed in service after 2028. Review the May 12 version of the Republican tax plan.
Below is a list of key changes to the IRA credits in the May 22 amendment:
| Credit | Current law | May 12 version | May 22 H.R. 1 Amendment |
| 45Y: Technology-neutral production tax credit (PTC) | Available for 10 years to projects placed in service after 2024, and no statutory sunset | Phaseouts for facilities placed in service after 2028 |
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| 48E: Technology-neutral investment tax credit (ITC) (including energy storage) | Available for 10 years to projects placed in service after 2024, and no statutory sunset | Phaseouts for facilities placed in service after 2028 |
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| 25D: Leased residential solar/wind | Projects are eligible when the project owner leases equipment | Residential clean energy credit expensed after Dec. 31, 2025 | Credit denied where property is leased to a third party (prevents certain third-party residential leasing structures) |
| 45J: Advanced nuclear facilities | Credit available for advanced nuclear facilities | Not applicable | Advanced nuclear facilities and eligible upgrades will be eligible only if construction begins before the end of 2028 |
| 45U: Zero-emission nuclear | Expires for production after Dec. 31, 2028 | Not applicable | Pulled back one year to Dec. 31, 2031 |
| Foreign entities of concern | Section 30D imposed FEOC restrictions on certain materials (i.e., credits not allowed to special-purpose entities (SPEs), foreign-influenced entities or make payments to prohibited foreign entities) | 48E, 45Y and 45X projects that begin construction in 2026 or later must comply with FEOC restrictions | Unchanged |
| 6418: Transferability | Most energy credits can be transferred to unrelated taxpayers | Removal of tax credit transferability under section 6418 on most credits from the tax years beginning after enactment |
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| 6417: Direct pay (elective payment) | Applicable entities may receive a direct payment for eligible energy projects, with phaseouts beginning in 2024 | Unchanged | Unchanged |
Legislative developments are moving quickly: the House-passed Republican tax plan still awaits Senate action, so none of its provisions are final. If enacted, the bill would substantially reshape energy and infrastructure-related tax credits. Baker Tilly specialists can help you assess the potential effects on your current projects, document the beginning of construction dates and lock into the existing IRA framework before any changes take hold.
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The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
