- Latest text is a lot worse for solar and wind – functionally kills the credits immediately and permanently.
- Penalizes future wind and solar development far beyond the life of the credits: Imposes a new punitive tax on all new wind or solar (including for homeowners) beginning construction after date of enactment and placed in service after 2027 based on the FEOC supply chain requirements–even though no PTC/ITC available for projects placed in service after 2027.
- Vehicle credit terminations moved up to September 30.
- Harsher treatment for solar and wind:
- 48E/45Y phaseout timeline based on beginning of construction is replaced with a placed in service by 2027 requirement on solar and wind for projects that begin construction after date of enactment
- Material assistance requirement applies to facilities that begin construction after June 16, rather than December 2025
- Restores eligibility for residential solar leases
- New excise tax. For projects that are not eligible for 45Y/48E under the new bill, a new excise tax is imposed on all solar and wind facilities (not only those that would have qualified for 45Y/48E) that begin construction before 2036. That is, after the credit is gone, the supply chain requirements are still imposed as a penalty on both utility-scale wind/solar and rooftop/smaller systems. (see p. 558)
- The tax is equal to 30% (wind) or 50% (solar) times the percentage points by which a facility fails the material assistance cost ratio times the facility's total manufactured component cost. The threshold that this failure is measured against increases from 37.5% to 60% by 2030.
- Aside from the substantive supply chain feasibility dynamics, the material assistance cost ratio calculation requires specific information that is subject to significant uncertainty or discretion.
- Treasury is given wide discretion to define which components and costs have to be assessed, contrary to prior SFC draft’s attempt to provide some certainty based on definitions in existing law and guidance. Whether taxpayers can rely on the existing domestic content safe harbor tables, without which cost calculations are difficult or impossible, depends on guidance.
- Material assistance is still measured by determining whether costs are attributable to a prohibited foreign entity, which involves attenuated supplier information that is difficult to obtain, such as whether a supplier’s owners, debtholders, or contractual counterparties have Chinese ownership in their organizational structure.
- This could be a tax equal to up to 11% of the total cost for a wind facility and 18% for solar, on top of losing the existing tax credits.
- Accelerated credit termination changes (relative to prior SFC draft):
- September 30, 2025: 30D, 45W, and 25E vehicles acquired after
- December 31, 2025: 25C property placed in service after, 25D expenditures made after (consumer credits)
- June 30, 2026: 30C (EV charging) property placed in service after, 45L energy efficient homes acquired after, 179D energy efficient commercial building property that begins construction after
- 2029: 45Z fuel sold after 2029 (moved up two years from SFC draft)
- Overall stricter requirements on FEOC: Some minor FEOC changes that align with industry asks to make language more precise; at the same time, meaningful tightening including higher percentages for storage and significant discretion for Treasury to create new rules that will upset market certainty
- Specifically gives Treasury authority to add any item to “eligible components” and “manufactured products” for the purposes of calculating the material assistance ratio, creating market uncertainty
- Gives Treasury discretion to raise critical minerals material assistance percentages based on a number of broad qualitative factors including national security and supply chain
- Directs Treasury to create anti-circumvention rules that are specifically targeted to prevent stockpiling and to determine whether beginning of construction has “in fact” occurred, putting normal business practices in question
- “Stackability” (integrated components rule) restored with restriction that it must be within same manufacturing facility and the integrated component must be at least 65% domestically produced
- New subsidy for production of metallurgical coal (coal suitable for steel production - even if that steel production occurs outside of the U.S.).
- FEOC material assistance threshold can be raised for critical minerals at any time through Treasury guidance (does not need to be final rules)
- Discrete changes for specific industries and taxpayers:
- Fuel cells do not need to meet the zero greenhouse gas emission rate requirement to be eligible
- New discrete benefits for small agribiodiesel (40A credit stacked on top of 45Z)
- Walks-back change to 45Q inflation adjustment that had been introduced in previous text, increasing value of the credit in practice
- 45V facilities must begin construction by end of 2027 (have two years longer)
- Other notable changes (relative to prior SFC draft):
- Reverts to House feedstock requirement for 45Z requiring feedstock be from U.S., Mexico, or Canada
- Direct pay statutory exception for domestic content is restored (a benefit to direct pay entities)
- Adds advanced nuclear energy communities category for 45Y only