Energy Credits are Being Phased Out: What You Need to Know

A few years ago, Congress passed legislation widely described as the most significant climate legislation in US history. New energy credits were introduced, and existing credits were expanded to encourage long-term investment in clean energy. But with the passage of the One Big Beautiful Bill Act (OBBBA), those incentives have been scaled back, shortened, or eliminated altogether.

Let’s walk through how the energy credit landscape has changed, and what the OBBBA’s latest changes mean in practice. We’ll let you know what’s still available, what’s on its way out, and what you can expect going forward.

What were energy credits like before the OBBBA?

For decades, energy credits have been a fragmented system. Most were written with short expiration dates, and Congress routinely relied on temporary tax extenders packages — often passed late or retroactively — to keep them in place. This start-and-stop approach made long-term tax and investment planning difficult.

The Inflation Reduction Act of 2022 sought to change that. To encourage investment in new clean energy sources, the IRA:

• Created more powerful tax credits: The Investment Tax Credit (ITC) and the Production Tax Credit (PTC) were the two most noteworthy. For example, the ITC provided a 30% credit for the cost of a solar energy project.
• Allowed direct payment of credits: Certain tax-exempt entities could receive the value of energy credits as direct payments from the IRS. This ensured these entities could benefit from the credits even if they had no federal income tax liability to offset.
• Made tax credits transferable: Eligible taxpayers were permitted to transfer (read: sell) their tax credits to an unrelated part. Expanding the reach of who could benefit from the credits encouraged more investment.
• Extended certain credits’ sunset dates: The IRA extended the deadlines of key credits and even tied some sunset dates to emissions targets to encourage taxpayers to take on multi-year projects.

Together, these changes made energy credits more available and more powerful than they had been in many decades.

How did energy credits change under the OBBBA?

The OBBBA reversed direction when it came to clean energy incentives. Instead of broadening access or extending timelines, the OBBBA narrowed eligibility and shortened credit lifespans.

First, it eliminated many long-held energy credits, including:

• Section 25C: Energy Efficient Home Improvement Credit
  Terminated December 31, 2025
• Section 25D: Residential Clean Energy Credit
  Terminated December 31, 2025
• Section 25E: Previously Owned Clean Vehicle Credit
  Terminated September 30, 2025
• Section 30C: Alternative Fuel Vehicle Refueling Property Credit
  Terminates for property placed in service after June 30, 2026
• Section 30D: New Clean Vehicle Credit
  Terminated September 30, 2025
• Section 45L: New Energy Efficient Home Credit
  Terminates for homes acquired after June 30, 2026
• Section 45W: Credit for Qualified Commercial Clean Vehicles
  Terminated September 30, 2025
• Section 179D: Energy Efficient Commercial Building Deduction
  Terminates for property beginning construction after June 30, 2026

It also accelerated the phase-out deadline of other tax credits. Two noteworthy ones are the Section 45Y and Section 48E tax credits.

The Clean Electricity Production Tax Credit (Section 45Y) and the Clean Electricity Investment Tax Credit (Section 48E) are both being phased out. Wind and solar facilities that begin construction after July 4, 2026 must be placed in service by December 31, 2027 to be eligible, and facilities featuring other types of technology will phase out over a two-year period starting in 2034. Under the IRA, these credits were set to expire in 2033 or 2034 (48E and 45Y, respectively), or when greenhouse gas emissions fell below a certain threshold — whichever was later. Tying the deadline to emissions in this way would have likely given the Section 48E and 45Y credits a much longer lifespan.

Other production credits saw similar accelerated phase-outs, including the Clean Hydrogen Production Tax Credit (Section 45V) and the Advanced Manufacturing Production Tax Credit (Section 45X).

However, there were some pockets of good news.

• Zero-Emissions Nuclear Power Production Credit (Section 45U): The Section 45U credit remains in place, with no changes to the eligibility window. It can also continue to be transferred or sold.
• Carbon Oxide Sequestration Credit (Section 45Q): The Section 45Q credit is awarded to those who capture carbon and (1) securely store it, or (2) repurpose it. Under the IRA, securely storing carbon was awarded the highest credit value. Repurposing carbon received less of a benefit, especially when it was used in oil production. The OBBBA created credit parity so that taxpayers won’t be punished with a smaller credit when they use carbon in enhanced oil recovery (EOR) activities.
• Clean Fuel Production Credit (Section 45Z): The OBBBA extended the deadline from December 31, 2027 to December 31, 2029, although it did restrict the credit to certain types of fuel production.

TLDR: How did the OBBBA change the energy credit landscape?

The One Big Beautiful Bill Act shifted energy incentives away from renewable energy (like wind and solar) toward more traditional energy sources (like oil and gas). Transferability and direct pay remain largely intact, ensuring eligible taxpayers can monetize their credits even without federal tax liability. And finally, projects with ties to foreign entities — through ownership, financing, or supply-chain support — are likely ineligible to claim most energy credits.

How should your tax and investment plans change under the new energy credit framework?

Here are a few things to consider when you’re planning for energy investment in the coming years:

• Re-evaluate eligibility.
  You may no longer qualify for energy credits in the same way you did in the past. Your project timeline, ownership structure, investor composition, supply chains, or project activities could now preclude you from these incentives. Review the new eligibility rules with an advisor to confirm whether credits are still available to you.
• Consider accelerating projects.
  Many energy credits now have shorter timelines and earlier cutoff dates. When project planning, take note of required placed-in-service dates to ensure you can still benefit from the incentives.
• Plan for continued uncertainty.
  Energy credits have been expanded and restricted many times over the last few decades, and that uncertainty doesn’t appear to have changed. When planning multi-year projects, factor in the possibility of future legislative changes rather than assuming all credits will remain available.

Plan Ahead Before Credits Expire

The energy credit landscape is shifting quickly, and the rules surrounding eligibility, timing, and project structure have become more complex. Reviewing your current and planned investments with a trusted advisor can help you better understand how these changes may affect your tax position and long-term strategy. Reach out to your CRI advisor to discuss your specific situation and explore the opportunities and considerations that may apply to your organization. A proactive conversation today can help you make more informed decisions for the road ahead.