08 Jul 2025
The One Big Beautiful Bill Upends Inflation Reduction Act Energy Initiatives
Both the House and Senate versions of the One Big Beautiful Bill Act (OBBBA), passed by the House on May 22, 2025, and the Senate on July 1, 2025, phase out tax credits for wind, solar, and electric vehicle (EV) projects, rolling back incentives established under the 2022 Inflation Reduction Act (IRA). This move has been criticized for potentially undermining the U.S. renewable energy industry and increasing electricity costs for consumers. The House bill terminates the Clean Electricity Production Credit (Section 45Y) and Investment Tax Credit (Section 48E) for projects not beginning construction within 60 days of enactment or not operational by December 31, 2028, and eliminates EV credits after 2025. The Senate bill terminates the Clean Electricity Production Credit (Section 45Y) and Investment Tax Credit (Section 48E) for wind and solar projects that begin construction 12 months after enactment (approximately July 1, 2026) and are placed in service after December 31, 2027, while maintaining credits for nuclear, hydropower, geothermal, and energy storage facilities until 2033, with a later phase-down as under current law. The Senate also terminates EV credits for vehicles acquired after September 30, 2025. Critics warn that the rollback of IRA incentives could significantly reduce clean energy capacity, lead to substantial job losses, and increase household electricity costs.
Related Content
- Overview of Senate Tax Measures for Budget Reconciliation
Learn how the Senate's version of the One Big Beautiful Bill introduces several provisions or variations on the House bill. The bill raises the state and local tax (SALT) deduction cap to $40,000 (for married-filing-jointly filers, with phase-out after $500,000 modified AGI, and a $10,000 floor), allows use of Section 529 accounts for private and home schooling, and imposes an excise tax up to 21% on the net investment income of “applicable educational institutions.” - Unpacking The Inflation Reduction Act's Energy Tax Credits
See how the IRA significantly boosted investment in wind and solar energy projects through a combination of long-term tax incentives, expanded eligibility, and financing flexibility. The IRA extended the investment tax credit (ITC), allowing renewable energy projects to claim up to a 30% credit on qualifying investments. This extension provided certainty for investors and developers, encouraging the initiation of new projects. Similarly, the IRA extended the production tax credit (PTC), offering a per kilowatt-hour credit for electricity generated from qualified renewable sources.
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- Federal Tax Legislation. In a 51-50 vote, Vice President J.D. Vance breaking the tie, the Senate approved its version of the One Big Beautiful Bill Act (OBBBA), HR 1, and the bill is on its way back to the House for consideration. Federal Tax Legislation Tracker (2025).
- Business Entities. IRS provides various prescribed rates for federal income tax purposes for July 2025 (the current month). Rul. 2025-13.
- Business Entities. IRS provides guidance on the corporate bond monthly yield curve. Notice 2025-35.
- Tax Practice, Procedure, and Controversy. Brokers of digital assets such as cryptocurrency and nonfungible tokens will have another year to comply with new tax reporting requirements before facing penalties, IRS extending transition relief to the sale of digital assets through 2026. Notice 2025-33.
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