Article
How the proposed House Republican tax plan impacts the IRA and energy-related tax credits and incentives
May 13, 2025 · Authored by Robert Moczulewski, Jiyoon Choi
On May 12, 2025, the House Republicans released a tax proposal, which is an amendment of the partial tax plan released on May 9, 2025. The comprehensive 389-page document outlines numerous initiatives, including increased state and local tax deduction, adjustments to standard deductions, increased child tax credits and estate tax exemptions, tax exemptions for tips and overtime wages, revised social security benefits, and deductions for interest on certain auto loans. More importantly, the Republican tax plan proposed various changes to renewable energy-related credits and incentives.
“The One, Big, Beautiful Bill” proposes:
- Removal of tax credit transferability under Internal Revenue Code (IRC) section 6418 on most credits from the taxable years beginning after the date of enactment of this Act
- Phase-out of certain credits and earlier sunsetting of credits
| Credit | Overview |
| Section 48 | Energy credit for geothermal heat pumps
Base credit reduction for projects beginning construction (BoC):
|
| Sections 48Y and 48E | Clean electricity production credit and clean electricity investment credit
Phase-out of credits on facilities that are placed in service (PIS):
|
| Section 45U | Zero-emission nuclear power production credit
Nuclear power produced in:
|
| Section 45X | Advanced manufacturing production credit for components produced and sold in 2032 to 0% from 25% |
- Removal of EV and EV charger-related credits
| Credit | Overview |
| Section 25E | Previously-owned clean vehicles credit to be removed for vehicles PIS after Dec. 31, 2025 |
| Section 30D | Clean vehicle credit to be removed for vehicles PIS after Dec. 31, 2025 |
| Section 45W | Qualified commercial clean vehicles credit to be removed for vehicles PIS after Dec. 31, 2025 |
| Section 30C | Alternative fuel vehicle refueling property credit to be removed for refueling properties PIS after Dec. 31, 2025 |
- Removal of section 45V clean hydrogen production credit for clean hydrogen produced after Dec. 31, 2025
- Extension of section 45Z clean fuel production credit from Dec. 31, 2027 to Dec. 31, 2030
- Removal of residential renewable energy-related credits
| Credit | Overview |
| Section 25C | Energy efficient home improvement credit for improvements installed after Dec. 31, 2025 |
| Section 25D | Residential clean energy credit (residential solar, geothermal heat pump, battery storage, etc.) expensed after Dec. 31, 2025 |
| Section 45L | New energy efficient home credit after Dec. 31, 2025 |
- Restriction of credits for facilities materially assisted by prohibited foreign entities (sections 45U, 45Y, 48, 48E) or prohibition of foreign feedstocks (section 45Z)
- Removal of section 45X advanced manufacturing production credit for wind energy components produced and sold after Dec. 31, 2027
- 100% Bonus depreciation for assets acquired during Jan. 20, 2025 – Dec. 31, 2029
The proposed bill does not impact the following:
- Direct pay election for tax-exempt entities under IRC section 6417
- Advanced manufacturing investment credit under IRC section 48D
There is a long way to go
The Republican tax plan significantly impacts energy and infrastructure-related tax credits. However, the bill has a long way to go before becoming law and many proposed changes are expected.
Our specialists can help taxpayers' planning with their existing energy projects. Connect with Baker Tilly to stay ahead of the proposed legislative updates.
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Inflation Reduction Act Tax Credit Solutions
The Inflation Reduction Act (IRA) includes the largest clean energy incentive effort in U.S. history. Find out how your organization can leverage IRA energy tax credits to save as much as 50% or more on qualifying project costs.
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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.
