Green Energy Bill: Deadlines, Surviving Credits, and Foreign Limits

The One Big Beautiful Bill Act, signed by President Trump on July 4, 2025, is the green energy bill that rewrote the clean energy tax credit framework created by the 2022 Inflation Reduction Act. It sets hard deadlines for wind and solar credits, ends consumer credits for electric vehicles and residential clean energy, preserves credits for nuclear, energy storage, geothermal, hydropower, and carbon capture, and layers on new restrictions for projects tied to foreign adversaries.¹

Wind and Solar Face Hard Deadlines

The biggest change hits the technology-neutral clean electricity production credit (Section 45Y) and the clean electricity investment credit (Section 48E). Wind and solar are carved out of those credits and must meet one of two deadlines to remain eligible: begin construction on or before July 4, 2026, or be placed in service by December 31, 2027. Energy storage co-located at a wind or solar facility is exempt from the placed-in-service deadline.¹

Under the original IRA design, these credits had no fixed termination date so long as national emissions targets were being missed. The Senate version, negotiated with Republican Senators Joni Ernst, Chuck Grassley, John Curtis, and Lisa Murkowski, dropped a proposed excise tax on wind and solar and added the “begin construction” option that the House bill lacked.²

What “Beginning Construction” Now Means

Because the July 4, 2026 date turns on when a project “begins construction,” the meaning of that phrase has become the central compliance question. On July 7, 2025, President Trump issued an executive order directing Treasury to tighten enforcement and narrow the safe harbors that had let developers qualify by spending as little as five percent of total project cost.³

Treasury followed on August 19, 2025 with IRS Notice 2025-42. It eliminated the five percent safe harbor for all wind projects and for solar projects larger than 1.5 megawatts. Those projects could establish start of construction only through the “physical work test”: actual physical work of a significant nature, not spending on equipment or planning. Small solar of 1.5 megawatts or less kept the five percent option. The notice also replaced the “continuous efforts” pathway with a requirement of continuous physical work.⁴⁵

On June 6, 2026, the U.S. District Court for the District of Columbia vacated Notice 2025-42 in full, calling it arbitrary and capricious under the Administrative Procedure Act. The court found that the IRS had inadequately justified removing the five percent safe harbor, had singled out wind and solar despite the statute being technology-neutral, and had ignored the reliance interests of an industry that had used the five percent method since 2013. The ruling restored both the five percent safe harbor and the continuous efforts test. A government appeal, or a stay pending appeal, could reinstate the restrictions during litigation.⁶⁷

Consumer Credits That Ended

Homeowners and car buyers lost several credits on accelerated timelines.

Electric vehicle credits under Sections 30D (new), 25E (used), and 45W (commercial) ended for vehicles acquired after September 30, 2025. Buyers who signed binding contracts and made payments before that date can still claim the credit even if delivery came later.⁸
The residential clean energy credit (Section 25D), the 30 percent credit for rooftop solar, battery storage, and geothermal heat pumps, ended for systems installed after December 31, 2025.⁹
The energy efficient home improvement credit (Section 25C) for heat pumps, insulation, windows, and energy audits also ended after December 31, 2025.⁹
The alternative fuel refueling property credit (Section 30C), the new energy efficient home credit (Section 45L), and the commercial buildings deduction (Section 179D) terminate for property placed in service or acquired after June 30, 2026.⁹

Credits That Survive

The clean electricity credits remain available for several technologies as long as construction begins by the end of 2033. These include energy storage, nuclear, hydropower, marine and hydrokinetic energy, qualified fuel cell property, and other zero-emission generation. Geothermal heat pump property keeps eligibility for projects beginning construction through 2034. A phase-out period then runs through roughly 2035 or 2036, following the original IRA schedule.¹⁰¹¹

The law also adds a new energy community bonus for advanced nuclear facilities, worth an extra 10 percent for plants sited in metropolitan areas with significant nuclear employment history. Publicly traded partnership treatment was expanded to include nuclear, hydropower, and geothermal generation and storage, plus hydrogen transportation and carbon capture.¹²

Carbon Capture Gets a Boost

Section 45Q for carbon oxide sequestration was expanded. The law equalizes the credit for permanent geologic storage and for utilization (including enhanced oil recovery), setting both at $85 per metric ton for point-source capture and $180 per metric ton for direct air capture. Enhanced oil recovery previously received a lower credit than dedicated storage. The construction-start deadline for 45Q projects stays at January 1, 2033.¹³¹⁴

Clean Fuels and Hydrogen

The clean fuel production credit (Section 45Z) was extended through the end of 2029, with relaxed lifecycle greenhouse gas rules and a new requirement that eligible feedstocks come from North America. The clean hydrogen credit (Section 45V) was shortened: projects must begin construction by the end of 2027, five years earlier than the original IRA deadline.¹¹

New Foreign Entity Restrictions

Beginning in 2026, “prohibited foreign entities” cannot claim or receive transferred credits under Sections 45Y, 48E, and 45X. Projects that begin construction after December 31, 2025 are also ineligible if they receive “material assistance” from a prohibited foreign entity.¹

“Specified foreign entity” covers entities designated as foreign entities of concern under the 2021 National Defense Authorization Act, Chinese military companies operating in the United States, and foreign-controlled entities. “Foreign-influenced entity” reaches further, capturing domestic companies where a specified foreign entity holds 25 percent or more ownership from a single source (or 40 percent in aggregate), controls officer appointments, holds 15 percent or more of the entity’s debt, or exercises “effective control” over production through contracts.¹⁵

In February 2026, the IRS issued Notice 2026-15 with interim guidance on calculating the “material assistance cost ratio.” Taxpayers can rely on supplier certifications signed under penalty of perjury regarding foreign-entity status until Treasury publishes formal safe harbor tables, which are required by the end of 2026. Violations carry a 20 percent accuracy-related penalty, and the statute of limitations for related deficiencies extends to six years.¹⁶ Industry participants report continuing market uncertainty pending formal rulemaking on undefined terms.¹⁷

Manufacturing Credit Changes

Section 45X, the advanced manufacturing production credit, was tightened. To claim the credit on integrated components like solar panels, a manufacturer must produce the components in the same facility, sell the final product to an unrelated party, and ensure that at least 65 percent of the product’s cost comes from domestically manufactured content.¹

Component treatment varies. Wind energy component credits end for components produced or sold after 2027. Critical mineral credits begin phasing out in 2031. Metallurgical coal was added as an eligible material at a 2.5 percent production credit running through the end of 2029.¹¹

Projected Impact on Jobs, Capacity, and Prices

Analysis by Energy Innovation projects the law could result in 760,000 lost jobs by 2030, reduce cumulative GDP by $980 billion through the budget window, and lower power generation capacity by 340 gigawatts by 2035 compared to the IRA baseline. Wholesale electricity prices are projected to rise 25 percent by 2030 and 74 percent by 2035, with consumer rates increasing between 9 and 18 percent by 2035.¹⁸

The Solar Energy Industries Association projected that removing solar incentives would eliminate 330,000 jobs, close or cancel 331 factories, and erase nearly $300 billion in local investments, with a majority of losses in states that voted for President Trump in 2024.¹⁹ Wood Mackenzie analysts expect a rush of installations through 2025 and 2026 as developers race the July 2026 deadline, then slower long-term growth: roughly 25 percent wind and solar capacity growth from 2025 to 2035, compared to 55 percent under the IRA. Offshore wind projects that have not yet reached a final investment decision are considered unlikely to move forward.²⁰

Where States Have Stepped In

With federal support pulled back, several states expanded their own clean energy programs in 2025 and 2026. Illinois signed the Clean and Reliable Grid Affordability Act in October 2025, requiring the state to procure at least 3 gigawatts of battery storage by 2030 and setting up a virtual power plant program projected to save consumers $13 billion over two decades.²¹

Virginia Governor Abigail Spanberger ordered the state to rejoin the Regional Greenhouse Gas Initiative, signed energy bills addressing solar siting, storage, and data center emissions, and created a Clean Energy Innovation Bank. New Jersey’s Board of Public Utilities approved 3 gigawatts of new community solar with a guaranteed minimum 25 percent bill discount for low-income households, and the state set a 2 gigawatt target for transmission-scale storage by 2030. Maryland passed the Utility RELIEF Act, mobilizing $200 million for clean energy and bill relief and creating a framework for 1,600 megawatts of front-of-the-meter storage. Massachusetts Governor Maura Healey directed procurement of 10 gigawatts of clean energy and 5 gigawatts of battery storage by 2035.²²²³

For developers, the practical calendar now runs through the months before July 4, 2026, when the last wind and solar projects can lock in eligibility by starting construction. The rules that govern what “starting construction” means are, at the moment, back to the pre-2025 framework after the June 2026 vacatur, but a government appeal could change that at any point.

1
Solar Energy Industries Association. Clean Energy Provisions in the Big Beautiful Bill
2
E&E News. Senate Passes Megabill After Wind, Solar Changes
3
The White House. Ending Market Distorting Subsidies for Unreliable, Foreign-Controlled Energy Sources
4
IRS. Notice 2025-42
5
Tax Law Center. Treasury Releases Much-Anticipated Beginning of Construction Guidance for Solar and Wind
6
McGuireWoods. Federal Court Vacates IRS Notice 2025-42, Restores 5% Safe Harbor for Wind and Solar Projects
7
Crux Climate. Rapid Response: Implications of Beginning of Construction Ruling for Wind and Large-Scale Solar
8
IRS. Clean Vehicle Tax Credits
9
IRS. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under the OBBB
10
RSM US. OBBBA Tax Clean Energy
11
Tax Foundation. Big Beautiful Bill Green Energy Tax Credit Changes
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Sidley Austin. The One Big Beautiful Bill Act: Navigating the New Energy Landscape
13
Global CCS Institute. U.S. Preserves and Increases 45Q Credit in One Big Beautiful Bill Act
14
U.S. Energy Information Administration. Carbon Capture Tax Credit Modifications Under the OBBBA
15
IRS. Notice 2026-15
16
IRS. Treasury, IRS Provide Guidance for Certain Energy Tax Credits Regarding Material Assistance Provided by Prohibited Foreign Entities Under the OBBB
17
Environmental and Energy Study Institute. OBBBA Clean Energy Tax Credit Briefing
18
Energy Innovation. Updated Economic Impacts of U.S. Senate-Passed One Big Beautiful Bill Act Energy Provisions
19
Inside Climate News. Inside Clean Energy: Big Beautiful Bill and Solar Power
20
Wood Mackenzie. Big Beautiful Bill and U.S. Energy
21
Union of Concerned Scientists. Illinois Passed New Clean Energy Legislation: What to Look For in 2026
22
Center for American Progress. State Climate Action in 2026
23
Solar Energy Industries Association. From Sea to Shining Sea: A Recap of 2025 State Solar Policy Wins