Mark Spurr, IDEA Legislative Director
May 26, 2025
On May 22, the U.S. House of Representatives has passed a multitrillion-dollar tax and spending package, largely along partisan lines. The “One Big Beautiful Bill Act” extends the 2017 Trump tax cuts, cuts spending on a wide range of programs and modifies provisions of the Inflation Reduction Act. With control of Congress, Republicans can use “budget reconciliation” to pass the package, which only needs a simple majority in the Senate. But the bill, which is more than 1,000 pages long, will certainly be modified in the Senate.
The IRA tax credits affected by the bill that are of greatest relevance to the district energy industry are:
• Section 48 Investment Tax Credits (ITCs) for Geothermal Heat Pumps (GHP)
• Section 48E ITCs for Thermal Energy Storage, Battery Storage and Solar
• Section 45Y Production Tax Credits (PTCs) for Solar
The House bill also eliminates the "transferability" of tax credits that enable developers to sell their tax credits and use the funds to finance project construction.
The House bill also provides extensive limitations on tax credits for taxpayers that are specified “foreign entities” or “foreign-influenced entities.” China is a key target here and is a major player in the renewable energy supply chain.
Technology-Neutral Credits PTCs and ITCs
Sections 45Y and 48E provide technology-neutral PTCs and ITC, respectively, for clean energy generation (zero or net-negative carbon emissions) such as solar power generation. The House bill would terminate these credits for projects that begin construction after 60 days from enactment or are placed in service after Dec. 31, 2028. Except for projects that are well advanced, the House bill essentially eliminates these credits.
Energy Storage
Section 48E ITCs for energy storage are also eliminated in the House bill except for projects that are already well advanced.
Geothermal Heat Pumps
ITCs for GHPs fare better but would still be subject to an accelerated phase-out. Construction of systems must now begin before Jan. 1, 2032, a 3-year acceleration. Credit levels begin phasing down in steps in 2030 rather than in 2033.
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