President Donald Trump signed the sweeping “One Big Beautiful Bill Act” into law on July 4, 2025, fundamentally reshaping the landscape of U.S. green energy tax credits and introducing significant market implications for the renewable energy sector. The Act, a comprehensive budget reconciliation bill, accelerates the phase-out schedules for solar and wind projects under the technology-neutral investment tax credits (ITCs) and production tax credits (PTCs), while maintaining a longer eligibility runway for other clean energy technologies such as energy storage, hydropower, and geothermal.

A key provision of the Act mandates that solar and wind facilities must begin construction by July 4, 2026, or be placed in service by December 31, 2027, to avoid credit termination. For all other qualified facilities, including energy storage and fuel cells, the phase-out of Section 48E ITC and Section 45Y PTC commences in 2034, with credits gradually reducing to 25% by 2035 and fully eliminating for projects starting in 2036 or later. Adding to the regulatory shift, an Executive Order issued on July 7, 2025, directs the Treasury to issue new, more restrictive “beginning of construction” guidance by August 18, 2025, potentially impacting traditional safe harbor strategies and increasing scrutiny on solar and wind projects, building on the Biden administration's prior audit ramp-up.

The Act also introduces substantial modifications to the Section 45X Advanced Manufacturing PTCs. Eligibility for wind components is eliminated after December 31, 2027, while temporary credits are introduced for metallurgical coal through 2029. Critical minerals face a phase-out starting in 2031. Furthermore, vertically integrated producers seeking multiple 45X Credits must now ensure the “primary” eligible component is integrated into a “secondary” eligible component within the same facility, with the secondary component sold to an unrelated party and at least 65% of its direct material costs attributable to U.S.-mined, produced, or manufactured primary components.

Clean fuel production tax credits (45Z) see an extension through December 31, 2029, but the $1.75 increased credit for sustainable aviation fuels (SAFs) is removed after 2025. Critically, 45Z Credits for clean fuels produced after 2025 are contingent on using feedstocks sourced exclusively from the U.S., Mexico, or Canada. The Act also revises carbon intensity calculations by excluding indirect land use change emissions, which could enhance credit values for certain biofuels, while eliminating negative emissions rates, except for specific animal manure feedstocks.

An overarching and broadly impactful change is the adoption of new Foreign Entity of Concern (FEOC) rules. Effective for taxable years beginning after July 4, 2025, these rules prohibit any taxpayer classified as a “prohibited foreign entity” from claiming most ITCs and PTCs, including 45X, 45Z, and 45Q credits. A “prohibited foreign entity” encompasses “specified foreign entities” (FEOCs or covered nations) and “foreign-influenced entities,” expanding restrictions beyond direct ownership to include supply chain involvement. This significantly broadens the scope of foreign ownership and supply chain restrictions, previously limited to clean vehicle and advanced microchip tax credits, now impacting a vast array of clean energy technologies.

Additionally, the Act eliminates tax credits for commercial and residential electric vehicles, individual residential solar systems, charging stations, and energy-efficient homes after 2025, with a phase-down for EVs based on sales volume. The Section 45Q Carbon Capture and Sequestration credit remains for facilities starting construction before 2033, with credit amounts for enhanced oil recovery and carbon sequestration activities now equal for equipment placed in service after July 4, 2025. The Section 45V clean hydrogen PTC terminates for facilities beginning construction after 2027. These sweeping changes necessitate a thorough re-evaluation of investment strategies and project development pipelines across the entire clean energy ecosystem.