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1. Clean Energy Tax Credits (45Y and 48E)
Let’s start with one of the most powerful tools supporting the rapid deployment of new energy generation and a modern, reliable, and affordable electricity grid for American homes and businesses: the IRA’s clean electricity tax credits.
The Production Tax Credit (PTC) (45Y) is a technology-neutral tax credit that subsidizes the production of zero-emission energy sources like solar, wind, nuclear, hydropower, and geothermal. For every kilowatt hour (kWh) of clean energy generated, the producer gets a base credit of 2.6¢/kWh if they meet certain criteria. Similarly, the Investment Tax Credit (ITC) (48E) provides a credit of 30 percent (or more) of the investment into these same zero-emission energy generation technology projects, including energy storage.
1a. Summary of Senate Text
First, let’s look at the Technology-Neutral Energy Investment Tax Credit (ITC). This bill aggressively phases out the ITC for wind and solar beginning in 2026, at which time wind and solar projects will only get 60 percent of the value of the credit. In 2027, that percentage will drop to 20 percent of the value of the credit, and by 2028, the credit will be completely phased out. This slashing of energy credits for wind and solar will gut the booming clean energy industry and would take the majority of planned projects off the table, raising energy prices and increasing stress on the grid. This will also cut energy supply at a time of significant electricity demand growth.
- For hydropower, nuclear, and geothermal, the credit will remain available at 100 percent of the credit value through 2033, 75 percent of the value in 2034, 50 percent of the value in 2035, and 0 percent in 2036.
- This proposal also restricts access to the credit for prohibited foreign entities. No credit will be given to a facility beginning construction after 2025 that includes any material assistance from a prohibited foreign entity, and no credits given after enactment if the taxpayer is a prohibited foreign entity.
- This bill would deny credit for taxpayers who rent or lease the property to a third party, except for geothermal heat pumps.
Now, let’s examine the Technology-Neutral Energy Production Tax Credit (PTC). This provision phases out PTC for wind and solar, beginning in 2026, at which time wind and solar technologies will only get 60 percent of the value of the credit. In 2027, that percentage will drop to 20 percent of the value of the credit, and by 2028, the credit will be completely phased out.
- For hydropower, nuclear, and geothermal, the credit will remain available at 100 percent of the credit value through 2033, 75 percent of the value in 2034, 50 percent of the value in 2035, and 0 percent in 2036.
- This bill would deny the credit for wind and solar leasing to residential customers.
- Just like the ITC, this provision restricts access to the credit for prohibited foreign entities. No credit will be given to a facility beginning construction after 2025 that includes any material assistance from a prohibited foreign entity, and no credits given after enactment if the taxpayer is a prohibited foreign entity
1b. Changes from House Version
The House version phases out the energy tax credits for projects not placed in service before the end of 2028 or that begin construction after 60 days of enactment, with full repeal occurring in 2032.
By contrast, the Senate bill proposes an aggressive phase-down for wind and solar projects—only being able to take advantage of 60% of the credit in 2026 and 20 percent in 2027. Ultimately, the credits for wind and solar will be phased out in 2028. In the Senate version, the credits for hydropower, geothermal, and nuclear are extended to 2035, with a diminished credit value after 2033. Unlike the House version, this bill text does not mention transferability except that it won't be allowed for transfers to specified foreign entities.
1c. Key Impacts
The aggressive phase down will take the majority of planned or proposed projects off the table—effectively terminating the credits and crushing the booming manufacturing and clean energy industries for communities across the United States. Repealing the clean energy tax credits would worsen the affordability crisis, raise energy bills, harm grid reliability, kill jobs, and inflame the climate crisis.
- Skyrocketing energy prices: The Senate’s proposed repeal of the clean energy tax credits would raise American household energy bills. It could increase annual energy bills up to $140-$220 per household across the country in 2040, and over $500 per year in some states.
- Kill good-paying jobs: Full repeal of the 45Y and 48E clean energy tax credits alone would result in roughly 100,000 fewer full-time jobs across the country by 2040. The Senate bill could approach those levels of job loss.
- Repealing clean energy tax credits would harm grid reliability: These tax credits are enhancing grid reliability in the face of increased electricity demand and extreme weather. Clean energy is the fastest, cheapest way to add new power to the grid. In fact, clean energy accounted for 93 percent of the new energy capacity added to the U.S. grid last year.
These changes jeopardize billions of dollars of existing investments. Saving the 45Y and 48E tax credits would cut climate pollution by 300 to 400 million tons compared to no tax credits in 2035. That’s 29-46 percent lower than a scenario without clean energy tax credits. After a year marked by devastating, billion-dollar climate disasters, floods, and fires, it’s more important than ever that we address climate head-on.
2. Electric Vehicle Credits (45W, 30D, 30C, 25E)
The IRA’s electric vehicle (EV) tax credits have been rapidly accelerating America’s clean auto industry and job growth, while making EVs more financially accessible for some families. Households and commercial companies can receive tax credits for purchasing new electric vehicles (up to $7,500) and used electric vehicles (up to $4,000), as well as for chargers and installation.
2a. Summary of Senate Text
This proposal would end EV tax credits for new (30D) and used (25E) EVs, commercial clean vehicles (45W), and fueling infrastructure (30C). This bill distinguishes between heavy-duty commercial vehicles (considered under commercial vehicle requirements) and light-duty commercial vehicles (considered under personal vehicle requirements).
2b. Changes from House Version
The Senate timelines would eliminate the credits faster than the House bill proposal. It fully repeals vehicle credits within 90 to 180 days after enactment, and vehicle charging credits within one year after enactment.
- The used EV tax credit is eliminated at the end of 2025 in the House version. In the Senate version, it’s within 90 days of passage.
- The new EV tax credit is eliminated at the end of 2025 in the House version, and within 180 days in the Senate version. In the House bill, drivers can get a tax credit for qualified vehicles from manufacturers who have not yet hit the 200,000 EV cap through December 31, 2026. There is no such provision in the Senate bill.
- The new clean commercial vehicle credit is eliminated at the end of 2025 in the House version. In the Senate version, they are terminated for vehicles acquired more than 180 days after enactment. For vehicles acquired after June 16, 2025, there is no guarantee for credit with a written binding contract, like in the House bill. Instead, the bill imposes additional requirements for light-duty vehicles acquired beginning June 16th.
- Vehicle charging infrastructure is eliminated at the end of 2025 in the House version, and it is eliminated a year after bill enactment in the Senate version.
2c. Key Impacts
- Fully repealing the IRA’s EV tax credits would drive a wrecking ball through the American-made EV industry, leading to the potential cancellation of as much as 100 percent of all planned construction and expansion of American EV assembly capacity. That’s according to the latest analysis from Princeton University’s ZERO Lab, assuming that the EPA’s tailpipe emissions regulations are repealed alongside the 30D and 45W tax credits. The same analysis finds that roughly 8.3 million fewer EVs and plug-in hybrids could be driving on American roads in 2030.
- For households, new and used electric vehicles would become less financially accessible, meaning consumers would have fewer transportation options.
- Repealing the EV tax credits would cause major job losses, according to the CEO of the Ford Motor Company, and benefit China, according to General Motors.
3. Manufacturing Credits (45X and 48C)
The Advanced Energy Manufacturing Production Credit (45X) provides an incentive to manufacturing facilities that produce clean energy components or systems in the U.S. Facilities that produce solar, wind, advanced batteries, and certain critical minerals are rewarded for re-shoring supply chains in America. The Advanced Manufacturing Investment Credit (48C) incentivizes investment in advanced energy projects such as clean energy manufacturing and recycling, critical mineral processing, and industrial decarbonization projects. The 48C tax credit supports the development of a domestic supply chain for these clean energy projects.
3a. Summary of Senate Text
Advanced Energy Manufacturing Production Credit (45X):
The Senate proposal will phase out credits for producing critical minerals by 2034, while wind component manufacturing credits would end in 2027. There are significant restrictions on the type of battery components that would be eligible for the credit, although the timeline for phasing out the credits for solar energy, battery, and inverters remains the same. The credits would also be weighed down with so many restrictions on eligible components that they are functionally useless.
Advanced Manufacturing Investment Credit (48C):
Under the IRA, if a project certified to receive a credit failed to place their project within service after two years, the credit funds they received would be returned to the 48C program and eligible for reissuance. The Senate text restricts those returned funds from being reissued.
3b. Changes from House Version
Advanced Energy Manufacturing Production Credit (45X):
The Senate version is a slightly slower phaseout for solar components, battery components, inverters, and critical minerals, but the same timeline for wind phaseout. The rules for which batteries are eligible for the credit and how components can be integrated are also new. The Senate bill also has a slightly different set of FEOC requirements, but the outcome is the same—restricting the eligible pool of recipients so severely as to make the credit largely unworkable.
Advanced Manufacturing Investment Credit (48C):
48C was untouched in the House version.
3c. Key Impacts
The 45X Advanced Energy Manufacturing Credit has sparked a renaissance in U.S. manufacturing, especially for electric vehicles, advanced batteries, and solar energy and their supply chains. The credits have helped incentivize over $200 billion in new investment in the U.S. and positioned the U.S. to be competitive in critical 21st-century global industries. This incentive has contributed to job and manufacturing growth—most of which is in districts that Republicans represent. The GOP’s call for repeal would directly harm jobs and livelihoods of their constituents, and send American manufacturing jobs overseas.
The restrictions placed on the 45X credit will cause uncertainty for developers and investors who have already counted on receiving this credit before this artificial two-year timeline was inserted by the Senate. This proposal threatens the certainty of building these facilities and the jobs that come with them. It also means the credit will be repealed after two years, not allowing for the recycling of rescinded credits from unsuccessful projects to qualified ones.
4. Home Energy Efficiency Credits (25C, 45L, 179D)
Thanks to the IRA, households can take tax credits of 30 percent off (up to $2,000) for installing a heat pump or heat pump water heater, plus $1,200 for weatherization and insulation via the Energy Efficient Home Improvement Credit (25C). The 25C tax credit helped 2.3 million American families improve their homes and reduce their monthly energy bills in 2023. Families are saving an average of $130 a year in energy costs. By 2032, homeowners are expected to use the credit enough to cut peak electric demand by 3,400 MW.
The New Energy Efficient Home Credit (45L) provides incentives to builders of homes that meet Energy Star or Zero-Energy Ready Home standards. This credit has assisted with the construction of nearly 350,000 efficient new homes in 2024 and cut homeowner energy bills by about $450 per year.
The Energy Efficient Commercial Buildings Deduction (179D) provides a tax deduction for installing energy-efficient appliances and equipment in commercial buildings, like energy-efficient heating, lighting, and hot water. This deduction applies to building upgrades on existing properties, as well as new construction.
4a. Summary of Senate Text
This proposal eliminates the Energy Efficient Home Improvement Credit (25C) 180 days after the bill is enacted. It would also eliminate the Energy Efficient Commercial Buildings Deduction (179D) and the New Energy Efficient Home Credit (45L), within one year of enactment.
4b. Changes from House Version
The Energy Efficient Home Improvement Credit (25C) is eliminated as of the end of 2025 in the House bill, 180 days after bill enactment in the Senate bill. The New Energy Efficient Home Credit (45L) is eliminated for homes acquired after the end of 2025, unless the home construction began before May 12, 2025, in the House bill. The Senate bill eliminates the tax credit for homes acquired a year after the bill is enacted. The House bill did not include the elimination of the Energy Efficient Commercial Buildings Deduction (179D).
4c. Key Impacts
Cutting building energy efficiency credits takes money out of people’s pockets by making home energy upgrades more expensive and raises everyone’s utility bills by reducing efficiency and putting more pressure on the electric grid. Households can currently save $990 per year on utility bills if they utilize the 25C tax credit, and these credits create 240,000 jobs. By effectively terminating the Energy Efficient Home Credit for new buildings, this is a major gut punch to any builders trying to provide new homes to address the housing crisis.
5. Residential Clean Energy Tax Credits (25D)
Dating back to 2005, the Residential Clean Energy Tax Credit provides households with a 30 percent tax credit for rooftop solar, wind power, geothermal heating systems, and battery systems. In 2023, 1.2 million American families took advantage of the residential clean energy tax credit, and now 5 percent of US households have solar. And all of that small-scale solar adds up, with over 66GW installed, amounting to more than one-third of US solar capacity.
5a. Summary of Senate Text
This bill would eliminate the Residential Clean Energy Credit, which incentivizes homeowners to install solar panels, water heating, fuel cells, wind, geothermal heat pumps, and battery storage facilities 180 days after bill enactment.
5b. Changes from House Version
The Residential Clean Energy Tax Credit is eliminated as of the end of 2025 in the House bill, 180 days after bill enactment in the Senate bill.
5c. Key Impacts
Households would see higher costs for home energy upgrades and lose access to $1,250 in savings per year on utility bills. At the same time, we would be cutting a huge source of new energy capacity just as demand on the grid is increasing, which will raise energy costs for everyone. Plus, cutting the residential clean energy tax credits would kill hundreds of thousands of jobs in the home energy and rooftop solar sector.
6. Foreign Entity of Concern
The Senate Finance bill contains extreme restrictions on the clean energy tax credits through the “Foreign Entity of Concern” (FEOC) provisions. A FEOC has previously been considered an entity that is owned, controlled by, or subject to the jurisdiction of a particular nation, such as China, Russia, or North Korea. Though FEOC requirements have been imposed in the past (such as through the Bipartisan Infrastructure Law), they have not typically interfered with tax incentives.
6a. Summary of Senate Text
Imposes FEOC requirements on all major clean energy and manufacturing tax credits, including ITC, PTC, and the Advanced Manufacturing Production Credit, among others. This means that credits are not allowed for any facilities that include material assistance from a foreign entity of concern, or for any projects where the taxpayer is a prohibited foreign entity.
6b. Changes from House Version
The Senate proposal, like the House bill, makes the FEOC requirements unworkable, risking business certainty and obstructing the ability for projects to obtain and maintain finance.
6c. Key Impacts
The FEOC restrictions mean that the Senate text effectively repeals the IRA tax credits. They are overly complex and burdensome, and create so much uncertainty for developers and investors that the clean energy tax credits are not worthwhile to pursue.
7. Transferability
The transferability provisions for various energy tax credits included in the IRA make it possible for more companies and communities to access tax credits for their cost-cutting, job-creating energy projects. Through transferability, a project sponsor that may not have tax liability can sell its energy tax credit to a third party that does. This reduces the cost of the project and expands the universe of entities that can benefit from these important incentives. Furthermore, transferability has been used to benefit new clean energy technologies and manufacturing facilities, helping to grow new industries that are not reliant upon complex tax equity financing deals.
7a. Summary of Senate Text
This bill would not repeal transferability, with limited exceptions related to FEOC provisions.
7b. Changes from House Version
The House version fully repealed transferability for all applicable tax credits effective for construction beginning 2 years after the enactment of this bill, and applies to any fuel production-related credits after December 31, 2027. The Senate version leaves transferability largely intact.
7c. Key Impacts
Transferability broadens capital access, particularly for more local project developers, manufacturers, and fuel producers that have traditionally lacked access to this investment market. In fact, it’s already catalyzed more than $500 billion in private capital since 2022.
8. Other Impacts to Clean Energy in the Senate Finance Bill
- Direct Pay (aka Elective Pay) - Direct pay entities will lose their entire credit if they do not meet domestic content requirements, even where domestic content items are not reasonably available or costs would increase by more than 25 percent.
- Clean Fuels Credits (45Z) - Extends credit through 2031 but reduces the value of the credit by 20 percent for feedstocks grown abroad, and changes the calculation for lifecycle greenhouse gas emissions of fuels.
- Carbon Capture Credits (45Q) - FEOC requirements added. Enhanced oil or natural gas recovery parity and utilization parity are included. Inflation adjustment was amended. Determined by substituting 2026 for 1990 (originally 2025 for 1990).
- Hydrogen Production Tax Credit (45V) - Fully repeals the clean hydrogen credit for projects starting construction after this year, making all but a handful of new clean hydrogen projects uneconomic and ceding technological innovation and leadership to China and Europe.
- Nuclear Tax Credit (45U) - Places restriction on the credit if the taxpayer uses fuel produced in a covered nation or entity. Must certify that the fuel used qualifies with the restriction beginning in 2028.
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Environment and Public Works (EPW) Committee Analysis
The Senate Committee for Environment and Public Works (EPW) covers, among other things, any elements of the reconciliation bill related to air and water pollution, environmental policy, and public buildings. This part of the reconciliation bill repeals many federal grant programs created by the IRA.
