Inflation Reduction Act tax credits

Opportunities still exist for clean energy tax credits

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The Inflation Reduction Act of 2022 dramatically expanded the available tax credits, tax incentives, and other funding opportunities related to the green energy sector. The One, Big, Beautiful Bill (OBBB) — enacted on July 4, 2025 — introduced sweeping changes to those credits, including accelerated phaseouts for electric vehicle, refueling, and wind and solar project credits.

However, the OBBB delayed the implementation of certain provisions — meaning that, with careful planning, taxpayers can still take advantage of available credits. The monetization options remain unchanged, and the benefits of qualifying activities are still available to nonprofits, governments, and other tax-exempt organizations. Commercial taxpayers also retain the option to either use energy tax credits directly or transfer them to another taxpayer.

As the regulatory environment for clean energy credits continues to evolve, staying informed about current and forthcoming legislation is essential. Understanding the nuances of eligibility and compliance — especially with shifting phaseout schedules and new stipulations introduced by the OBBB — can make a significant difference in a project's financial outcome. Taxpayers should remain vigilant about timelines, documentation, and any connections to foreign entities that could affect credit eligibility. Proactive planning and collaboration with specialists can help organizations adapt quickly and maximize opportunities in this dynamic landscape.

Curious about how your organization can still benefit from Inflation Reduction Act energy tax credits and incentives, as well as monetization options? Our multidisciplined team of tax specialists closely monitors the latest developments to keep you informed.

Clean energy tax credits: Key topics

“Beginning of construction” and “placed in service” dates

With the enactment of the OBBB, timing and documentation around when a project may establish “beginning of construction” and “placed in service” dates have become even more critical for wind and solar energy projects. To qualify for the PTC or ITC, these projects must now be placed in service before the end of 2027, unless construction began within one year of the OBBB’s enactment.

Foreign entity restrictions

The OBBB introduces new limitations on energy tax credits depending on the degree of connection to specified foreign entities or foreign-influenced entities. Projects beginning construction after 2025 that receive material assistance from a prohibited foreign entity will no longer be eligible for tax credits. In addition, entities that are themselves classified under either designation are also denied eligibility. The OBBB also restricts the transfer of credits to specified foreign entities.

Carbon oxide sequestration credit

Qualifying facilities can claim an expanded tax credit for the capture and use or storage of carbon oxide. The credit offers enhanced incentives for facilities that capture carbon either as part of an industrial facility or through direct air capture. The foreign entity restrictions introduced by the OBBB apply to this credit, making it unavailable for any tax year beginning after July 4, 2025, if the taxpayer is classified as a specified foreign entity or a foreign-influenced entity. Under current law, the credit amounts vary depending on how the captured carbon is stored or used; the OBBB’s changes create parity across these amounts.

Electricity generated from wind and solar

The IRA introduced expanded and new tax credits for electricity production from wind and solar. In 2025, two new credits — Section 48E and 45Y — took effect, replacing and modernizing the structure of earlier credits under Sections 45 and 48. However, the OBBB accelerates the termination of these credits to Dec. 31, 2027. A safe harbor is available for projects that begin construction within one year of the OBBB’s enactment. Additionally, energy storage technology at solar and wind facilities is exempt from the early termination.

Electricity generated from other renewable resources

The IRA tax credits for electricity production extend to resources such as biomass and biogas, as well as energy storage technologies. In 2025, two new credits — Sections 48E and 45Y — took effect, replacing and modernizing the structure of earlier credits under Sections 45 and 48. Unlike their predecessors, the new credits are technology-neutral and require zero greenhouse gas emissions, rather than focusing on the specific resource used. While the OBBB accelerates the phaseout of credits for wind and solar projects, other technologies that meet the emissions criteria under 48E and 45Y aren’t affected by the early termination.

Energy-efficient homes and commercial buildings

The IRA expanded tax incentives for energy-efficient building upgrades and the construction of energy-efficient homes. Under the OBBB, these credits are now subject to early termination. The residential clean energy credit (Section 25D) and the energy-efficient home improvement credit (Section 25C) will end on Dec. 31, 2025. The energy-efficient home credit (Section 45L) and the energy-efficient commercial buildings deduction (Section 179D) will end on June 30, 2026.

Monetization strategies

The IRA enhanced the cash benefit of clean energy tax credits by introducing two monetization options. The first allows for the nontaxable sale of credits for cash, a useful strategy when projected tax credits are likely to exceed an entity’s current and near-term tax liability. The second, a direct payment option, enables tax-exempt entities to receive the cash benefit of credits in the absence of traditional tax liabilities. The OBBB doesn’t alter these monetization options broadly, but it does restrict the transfer or sale of credits to specified foreign entities.

Tax credits for fuel production and use

The IRA created a new tax credit for the production of “qualified clean hydrogen” and updated the credit framework for certain transportation fuels. Under the OBBB, eligibility for the clean hydrogen production credit (Section 45V) is now limited to facilities that begin construction before Jan. 1, 2028. The clean fuel production credit (Section 45Z) is extended by two years, making it available for transportation fuel sold through 2029. Beginning in the 2026 tax year, additional technical amendments will apply, including restrictions on fuel produced from feedstock sourced or grown outside of the United States, Canada, and Mexico.

Electric vehicle and refueling credits

Several EV-related tax credits are subject to early termination under the OBBB. The commercial clean vehicle credit (Section 45W), the clean vehicle credit (Section 30D), and the previously owned vehicle credit ( Section 25E) will end for vehicles acquired after Sept. 30, 2025. The alternative fuel vehicle refueling property credit (Section 30C), applicable to EV charging stations, will expire for property placed in service after June 30, 2026.

Tax credits for manufacturers

The IRA introduced two tax credits for manufacturers of clean energy components: the Advanced Manufacturing Production Credit (Section 45X) and the Qualifying Advanced Energy Project Credit (Section 48C). Section 48C is also available to many other manufacturers that install equipment to reduce greenhouse gas emissions. The OBBB modifies the phaseout schedule for Section 45X and adds limitations related to foreign entities and wind components produced and sold after 2027. It also changes how unused Section 48C credit allocations are handled — they’ll no longer return to the allocation pool if the associated projects miss their placed-in-service deadlines.