On May 22, 2025, the U.S. House of Representatives passed its version of the budget reconciliation bill, also known as the One Big Beautiful Bill Act. The provisions in the bill are not final: The U.S. Senate must first pass its own version of a reconciliation bill, and then the House and Senate will negotiate the differences between the two bills and each pass the final version before it can be sent to the president’s desk for signature into law. Budget reconciliation bills can be passed into law with a simple majority vote in both chambers, bypassing the Senate’s 60-vote filibuster threshold.
Changes related to clean energy tax credits
The House legislation proposes major changes to renewable energy tax credit policy, including the investment tax credit (ITC) supported by Section 48E of the Internal Revenue Code, which supports investments in commercial solar and storage assets.
Here’s how the proposed revisions to tax policy would affect the owners of new clean energy projects going forward:
Project qualification deadlines for the Investment Tax Credit
Under Section 48E of the current tax code, the owners of a qualifying clean energy asset (such as solar PV and battery storage) earn an investment tax credit typically amounting to 30% of the qualified costs of installing the system. Projects are also eligible for adders, such as those for domestic content use and location within a federally designated energy community, that add another 10% to the tax-credit value.
The House legislation would impose an accelerated deadline for projects to be eligible for the Section 48E investment tax credit. To qualify for the Section 48E ITC under the House bill, renewable energy projects would have to:
- Begin construction within 60 days of the bill’s enactment. The Solar Energy Industries Association predicts that existing IRS guidance for determining when a project has begun construction will still apply. These tests require developers to incur 5% of a project’s total cost, or begin physical work of a significant nature to be considered under construction.
- Be placed into service before January 1, 2029.
Adders
The House bill makes no changes to the domestic content, energy community, or low-to-moderate income adders to the ITC.
Transferability (sale) of clean energy tax credits
In the legislation passed last week, the House restored transferability of Section 48E investment tax credits. This is a change from the draft released by the Ways & Means Committee, which would have repealed transferability for projects not started within two years of enactment of the final reconciliation bill.
However, only projects that meet the above timelines for qualification would generate tax credits in the first place.
Transferability of certain other IRA tax credits is subject to phaseout starting in 2027.
Foreign entity of concern restrictions
The House bill would require projects qualifying for the Section 48E tax credit to comply with complex foreign entity of concern (FEOC) restrictions over a 10 year recapture period. These provisions would disallow credits for projects with material connections to or payments from prohibited foreign entities, including North Korea, China, Russia, and Iran.
The FEOC provisions would not apply to projects that begin construction before January 1st, 2026.
No credit for leased systems
The House bill would end tax-credit eligibility for projects financed by leasing arrangements in the residential sector, meaning that credits could not be claimed for an energy system that is owned by a company and leased to another user, a structure that will mostly affect residential solar, but that is also found in third-party owned community solar projects.
Next steps
The Senate will author its own version of the reconciliation legislation and is widely expected to alter the clean energy tax-credit provisions.
Evergrow will continue to monitor the tax package as it moves toward a final vote, and will update and advise stakeholders on how the final provisions will affect tax-finance and project planning.
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