INSIGHT

Clean energy tax credits for businesses: What changed under OBBBA and what to do now 

Erika Farr, Andre Shevchuck • October 31, 2025

Services: IRA Tax Credit Solutions

---

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, dramatically changed integral parts of the Inflation Reduction Act of 2022 (IRA). The OBBBA has provided repeal of certain tax credits, introduced complexities in claiming credits for certain entities, and eliminated credit eligibility for certain clean energy technologies.  

Here’s what you need to know and how to capture these benefits under the new law. 

Terminated Tax Credits 

Under the OBBBA, several clean energy and vehicle-related tax credits are scheduled for full termination over the coming year: 

• Ending September 30, 2025: 
  • Section 25E: Previously Owned Clean Vehicle Credit 
  • Section 30D: Clean Vehicle Credit 
  • Section 45W: Credit for Qualified Commercial Clean Vehicles 

• Ending December 31, 2025: 
  • Section 25C: Energy Efficient Home Improvement Credit 
  • Section 25D: Residential Clean Energy Credit 

• Ending June 30, 2026: 
  • Section 30C: Alternative Fuel Vehicle Refueling Property Credit (for property placed in service after this date) 
  • Section 45L: New Energy Efficient Home Credit (for homes acquired after this date) 
  • Section 179D: Energy Efficient Commercial Buildings Deduction (for property beginning construction after this date) 

The credits still available  

The good news? Pre-IRA and several technology neutral tax credits are still available.  

Pre-IRA Tax Credits: 

Section 45 Production Tax Credit (PTC) – A per-kilowatt-hour credit for electricity produced and sold over a 10-year period, with base rates of 0.3 cents per kWh increasing to 1.5 cents per kWh when certain labor requirements are satisfied. 

Section 48 Investment Tax Credit (ITC) – A credit worth 6% to 30% of your qualified solar facility investment, depending on several factors including facility size and whether prevailing wage and apprenticeship requirements are met. 

Both credits are generally available for projects beginning construction before January 1, 2025, and remain transferrable in applicable years. 

Clean Energy Credits Available under the OBBBA 

Section 45Y – Clean Electricity Production Tax Credit – Similar to the Section 45 PTC above, this is a per-kilowatt-hour credit for electricity produced, at a qualified facility, with base rates of 0.3 cents per kWh with certain credit increases available if applicable requirements are satisfied 

• Wind and Solar Termination: Facilities beginning construction after July 4, 2026 are ineligible for the credit if placed in service after December 31, 2027. Projects started before this date remain eligible. 

• Phaseout for property other than Solar and Wind: 
  • 100% credit for facilities with construction beginning in 2033; 
  • 75% in 2034 
  • 50% in 2035 
  • 0% credit for facilities with construction beginning after December 31, 2035 

• Bonus Credit: A new 10% bonus applies to advanced nuclear facilities located in metropolitan areas with ≥0.17% nuclear-related employment (current or post-2009). 
• Transferability & Direct Pay: Still allowed under Sections 6418 and 6417, but transfers to SFEs are prohibited. 
• FEOC Restrictions (see below): Facilities starting construction after December 31, 2025 are disqualified if they receive material assistance from a prohibited foreign entity (“PFE”) or are under specified foreign entity (“SFE”) control after July 4, 2025. 

Section 48E – Clean Electricity Investment Tax Credit – Similar to the Section 48 ITC above, this is an investment credit equal to the applicable percentage of the qualified investment (qualified facility or energy storage technology). 

• Wind and Solar Termination: Same deadlines as Section 45Y. Energy storage technologies are exempt from the placed-in-service cutoff. 
• Phaseout for Other Technologies: Follows the schedule provided under Section 45Y above. 
• Domestic Content Alignment: Requirements updated to align with Section 45Y for projects starting after June 16, 2025. 
• Transferability & Direct Pay: Maintained under Sections 6418 and 6417; transfers to SFEs prohibited. 
• FEOC Restrictions (see below): Same as Section 45Y. 

Section 45Q – Carbon Oxide Sequestration Credit – Available to taxpayers capturing qualified carbon oxide. 

• Base credit changes for different uses: Base credit raised to $17/ton for general use and $36/ton for direct air capture, matching geological storage rates for equipment placed in service after July 4, 2025. 
• Timeline Unchanged: Projects with construction beginning before January 1, 2033 remain eligible. 
• Transferability & Direct Pay: Section 45Q credits continue to be eligible for transfer and direct pay, however, transfers to SFEs are prohibited. 
• FEOC Restrictions (see below): Taxpayers cannot be SFEs or foreign influenced entities (“FIE”) after July 4, 2025. 

Section 45U – Zero-Emission Nuclear Power Production Credit – Credit available for the production of electricity produced at a qualified nuclear power facility. 

• Available for  zero-emission nuclear power production facilities through December 31, 2032. 
• Transferability & Direct Pay: Section 45U credits continue to be eligible for transfer and direct pay. 
• FEOC Restrictions (see below): SFE restrictions begin after July 4, 2024, and FIE restrictions begin two years after July 4, 2025. 

Section 45V – Clean Hydrogen Production 

• Delayed Phaseout: Credit ends for facilities starting construction after December 31, 2027. 
• Transferability & Direct Pay: Section 45V Credits continue to be eligible for transfer and direct pay. 
• No FEOC Restrictions (see below): Notably exempt from FEOC rules. 

Section 45X – Advanced Manufacturing Production Tax Credit – Credit available for manufacturing certain clean energy technologies as provided in Section 45X(b). 

• Wind Component Credit Ends: No credit for wind components sold after December 31, 2027. 
• Domestic Content Rule: Starting December 31, 2026, 65% of material costs for integrated components must originate from U.S. sources. 
• Critical Minerals Phaseout: 
  • 2031: 75% 
  • 2032: 50%
  • 2033: 25%
  • Post-2033: 0% 

• New Eligibility: Metallurgical coal added. 
• Battery Module Definition Tightened: Must include all essential equipment for functionality. 
• Transferability & Direct Pay: Maintained; transfers to SFEs prohibited. 
• FEOC Restrictions: No credits for PFEs or SFE-controlled production after July 4, 2025. 

Section 45Z – Clean Fuel Production Credit – Credit available for taxpayers producing transportation fuel at a qualified facility that meets certain emissions requirements. 

• Extended Credit Period: Deadline for eligible fuel sales moved to December 31, 2029. 
• Feedstock Origin Requirement: Must be sourced from the U.S., Mexico, or Canada after December 31, 2025. 
• Additional Changes: 
  • No dual credit under Section 6426(k) 
  • Sustainable aviation fuel loses enhanced IRA rates 
  • Lifecycle emissions simplified; negative rates and indirect land use emissions excluded 

• Transferability & Direct Pay: Preserved; transfers to SFEs prohibited. 

Section 40A – Small Agri-Biodiesel Producer Credit – Credit available for production of biodiesel mixture, biodiesel or small agri-biodiesel that meets certain requirements, 

• Extension & Increase: Valid through December 31, 2026; credit amount doubled. 
• Feedstock Origin Requirement: Must be exclusively from the U.S., Mexico, or Canada. 
• Transferability: Allowed under Section 6418. 
• FEOC Restrictions: Applies to SFEs after July 4, 2025 and FIEs two years later. 

Learn more about our IRA Tax Credit Solutions

New complications: What got harder 

While many clean energy credits survived OBBBA, claiming them became significantly more complex. Three major changes demand your attention: 

Prohibited foreign entity restrictions 

OBBBA introduced stringent rules around foreign ownership and supply chains. Your energy property is not credit-eligible if: 

• Your business is itself a prohibited foreign entity (“PFE”) (which includes specified foreign entities (“SFE”) or entities designated as foreign terrorist organizations and “foreign controlled entities”, those with certain ownership ties to China, Russia, North Korea, or Iran) 
• Your business is a foreign-influenced entity (FIE) where an SFE has some legal and financial control over an entity. 
• Your facility receives “material assistance” from PFE’s above specific thresholds 

For facilities beginning construction in 2026, up to 60% of manufactured products and components can come from prohibited foreign entities. That threshold tightens over time—dropping to 40% by 2030. This means you’ll need careful documentation of your supply chain and vendor relationships. 

Increased domestic content requirements 

To claim the 10% bonus credit for meeting domestic content thresholds, the bar just got higher. For projects beginning construction after June 16, 2025: 

• 45% domestic content for construction starting before 2026 (up from 40%) 
• 50% for construction starting in 2026 
• 55% for construction starting after 2026 

Executive order uncertainty 

A July 7, 2025 executive order directed the Treasury Department to issue guidance on “beginning of construction” rules by Aug. 21, 2025. This guidance aims to prevent what the administration views as artificial acceleration of project timelines. Until Treasury provides clarity, project developers face additional uncertainty about whether their construction commencement activities will satisfy federal requirements. 

Strategic considerations for businesses 

Given these changes, businesses considering clean energy investments should focus on three priorities: 

Move quickly on project planning. With various construction deadlines approaching, starting your evaluation process now is critical. Clean energy projects typically require significant lead time for site assessment, engineering, permitting, and financing. What might have been a two-year planning cycle now needs to happen in months. 

Document everything meticulously. The tightened timelines and new prohibited foreign entity rules mean IRS scrutiny of clean energy tax credit claims will likely intensify. Beginning of construction determinations, supply chain documentation, and prevailing wage compliance records will all face heightened examination. Contemporary documentation throughout your project timeline is no longer optional; it’s required. 

Model different scenarios. The interaction between 100% bonus depreciation (also reinstated under OBBBA), the section 163(j) business interest limitation rules, and these clean energy credits create complex planning opportunities. Some businesses may benefit from different combinations of these provisions depending on their specific tax situation, including potential Corporate Alternative Minimum Tax implications. 

Our perspective 

The OBBBA changes to clean energy tax credits represent a significant policy shift that will impact business investment decisions across industries. While the credits remain valuable, the increased complexity means that what was once a straightforward financial decision now requires sophisticated tax planning and rapid execution. 

For businesses that have been waiting for the “right time” to invest in clean energy, this is it. The alternative is watching these incentives disappear altogether. 

The reality is that many businesses won’t be able to move fast enough to meet these deadlines. But for those that can, the combination of available tax credits, energy cost savings, and sustainability goals may make 2025 and 2026 the most opportune moment to invest in clean energy property for the foreseeable future. 

What to do next 

If you’re considering a clean energy transition, start these conversations now: 

• Evaluate your current and projected energy costs and usage patterns 
• Assess potential sites and preliminary project feasibility 
• Review your organizational structure for any prohibited foreign entity issues 
• Model the tax benefits under various scenarios 
• Develop a realistic timeline to meet construction or placed-in-service deadlines 

The clock is ticking. But for businesses that act quickly and plan carefully, significant tax benefits remain available. 

Ready to explore your clean energy tax credit opportunities? 

Our team can help you navigate the complex requirements of OBBBA, model your potential tax benefits, and develop a strategy to maximize your clean energy investment. Contact BPM to discuss how these changes impact your specific situation and whether a clean energy project makes sense for your business.