The United States Senate has released an updated draft of the budget reconciliation proposal, eliminating the Clean Electricity Investment Credit under Section 48E and the Clean Electricity Production Credit under Section 45Y for solar and wind power projects that begin generating electricity after December 31, 2027.

The initial draft released by the Senate proposed a phased reduction in credit value for any wind and solar projects that did not begin construction by 2026, from 60% of the full credit to 20% in 2027, with the credits fully eliminated for projects starting in 2028.

The latest version bases incentives on when projects actually begin producing electricity, a more demanding requirement.

However, another amendment is being proposed where solar and wind power projects would qualify for 60% of the credit as long as they begin construction in 2026 and 20% if they begin construction in 2027.

In addition, the draft imposes a new tax of 50% for solar projects and 30% for wind projects that are commissioned after December 31, 2027, if they were constructed after the date of enactment and received any material assistance from a prohibited foreign entity. Projects that begin construction after June 16, 2026, and violate the material assistance cost ratio rule will be subject to this tax in the year they are placed in service.

The broad definition of “material assistance” includes critical minerals, subcomponents, recycling processes, and design elements. Ownership, board control, and financial influence from a foreign entity of concern are also restricted, which could disqualify many Chinese-made solar components, even if final assembly occurs elsewhere.

Another provision increases the required percentage of domestic content for eligibility, starting at 40% for onshore wind and solar projects (20% for offshore wind) for those beginning construction before June 16, 2025. The threshold rises to 45% (27.5% for offshore wind) for projects starting between June 16 and December 31, 2025, then to 50% (35% for offshore wind) for projects beginning in 2026, and reaches 55% for all projects, including offshore wind, starting after December 31, 2026.

If enacted, the bill could reverse much of the progress the clean energy industry has made under the Inflation Reduction Act (IRA).

Soon after assuming office as U.S. president, Donald Trump issued a raft of executive orders seeking to reverse his predecessor’s climate and energy agenda. One order directed federal agencies to immediately pause the disbursement of funds through the IRA, which proposed spending millions of dollars to promote clean energy.