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Politics

The House’s 11th Hour Cuts to Clean Energy Tax Credits, Explained

The House passed its version of the budget bill early Thursday morning, with even deeper cuts to clean energy added overnight.

The House floor.
Heatmap Illustration/Getty Images

Trump’s tax bill passed the House early Thursday morning, after a marathon session in the Rules Committee that began early Wednesday morning and stretched late into the night. The final floor vote came down to the slimmest of margins, 215 yeas to 214 nays, with House Freedom Caucus Chair Andy Harris voting “present.”

The clean energy tax credits, already on life support, barely made it out alive.

The text that now heads to the Senate retains many of the provisions that came out of the Ways and Means Committee last week, but would terminate some of the tax credits even more rapidly to appease Republican hardliners.

It still eliminates the electric vehicle tax credits after this year, except for vehicles produced by automakers that have sold fewer than 200,000 tax credit-qualified cars, which will be eligible for one additional year. It still terminates tax credits for residential energy efficiency, rooftop solar, and new, energy-efficient homes. And it still ends the clean hydrogen tax credit at the end of this year.

But for the clean electricity subsidies, the revised text nixes the previously proposed three-year phase-down schedule and bluntly cuts off any project that doesn’t break ground within 60 days of the bill’s passage — basically the same deal handed to the hydrogen industry.

The only concession to the many objections to the bill from the clean energy industry appears to be some carve outs for nuclear plants.

Here’s a rundown of everything that changed.

New deadlines for clean electricity production and investment tax credits

The revised text demands that clean power projects start construction within 60 days of the bill’s final passage in order to qualify for the production and investment tax credits, 45Y and 48E. Projects that are able to hit that deadline would also have to meet a second one — they would have to start operating before 2029.

But there’s an exception for advanced nuclear facilities, which would only have to start construction by 2029 to be eligible for the credits and would have no deadline to begin sending power to the grid.

The amended text also speeds up material sourcing requirements that prohibit clean power projects from using anything made in China. Under the earlier iteration, power companies would have had a full year to reorganize their supply chains — a timeline that industry experts already said was unworkable. The revised bill imposes the restriction starting January 1 of next year.

In summary, if you are developing a wind farm and want to qualify for tax credits, you now face an almost impossibly short eligibility timeline. You would have to start construction within two months of the reconciliation package passing, eliminate Chinese goods from your supply chain before the end of the year, and then get your project hooked up to the grid and operating by the end of 2028.

When that 60-day clock starts will depend on how long it takes the Senate to pass its version of the reconciliation bill and both houses to approve the final text, which could take weeks or months. Regardless, these new time restrictions would likely “TANK real projects in active development right now, killing jobs and costing investment,” as industry group Advanced Energy United’s managing director Harry Godfrey posted on social media Wednesday night. Godfrey went on to name six projects in Republican districts, including solar farms, solar on schools, and a long-duration storage installation, that would be affected.

To the few clean energy developers that can hit all of these deadlines, House Republicans have offered a small reward. The revised bill appears to retain transferability, the ability for developers to sell their clean energy tax credits to other companies and thereby access more capital more quickly and easily than they otherwise would. There is some confusion among energy experts, however, about exactly how this provision would apply, with Politico Pro reporting Thursday morning that only nuclear would be able to use it. Regardless, the 60-day deadline to start construction makes this mostly moot.

New attacks on solar leasing schemes

A new section of text takes aim at companies like Sunrun that lease solar installations to homeowners and businesses. Under current law, Sunrun typically claims the commercial investment tax credit (48E) for solar installations on customers' roofs. But the change would prohibit any company that leases solar or wind installations to a third party from claiming the tax credits for those projects.

Some reprieve for existing nuclear

Under the Way and Means version of the budget bill, the tax credit for electricity produced by existing nuclear plants would have phased down over three years before terminating in 2032. The revised bill nixes the phase-out, keeping the full amount of the credit in place until 2032, which is just one year earlier than the phase-out timeline in the Inflation Reduction Act.

The revised bill also allows nuclear plant owners to take advantage of transferability for as long as the credit is in effect — a provision that nuclear industry advocates told me was essential to keeping existing plants online.

Advanced manufacturing, carbon capture, and clean fuels

The text does not make any amendments to the Ways and Means bill’s changes to the carbon capture (45Q), clean fuels (45Z), and advanced manufacturing (45X) projects. These projects would still not be able to use transferability past 2027.

The clean fuels credit would still be extended for four years, through the end of 2031, and come with looser carbon accounting rules. The clean manufacturing credit would still be cut short by a year, with wind manufacturers losing their eligibility even earlier, in 2028.

What’s next

These provisions are not yet law, and there are a number of Republican Senators who have subtly, though publicly disagreed with the approach the House has taken to paring back the tax credits. Regarding the short timeline the Ways and Means Committee had proposed for claiming the tax credits, Kevin Cramer of North Dakota told Politico, “we’ll have to change that.” Shelley Moore Capito of West Virginia said she expected the “blanket” repeal of the tax credits to change, noting “there has been job creation around these tax credits.” And four Republicans led by Alaska’s Lisa Murkowski also sent a letter to party leadership back in April arguing to maintain the tax credits.

The House appeared to have its clean energy holdouts too, however. But as my colleague Matthew Zeitlin wrote on Wednesday, “at no point have these members ever seriously threatened to vote against the bill” in support of the tax credits, and at the end of the day their concerns were mostly ignored.

The Senate is about to take a week-long recess, and won’t be back in session until June 2. How long until the one big, beautiful bill becomes law, nobody knows. But we’ll soon see how hard the energy transition’s defenders are actually willing to fight.

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