The U.S. House of Representatives passed the 2025 budget reconciliation bill, advancing it to the Senate. The bill proposes significant changes that could severely undercut the clean energy sector. If passed in its current form, it would undo many of the long term tax credit policies that have driven investment and growth in solar, wind, and storage projects.

The bill passed narrowly, 215-214, with all Democrats voting against it.

The bill eliminates the Investment Tax Credit (Section 48E) and the Production Tax Credit (Section 45Y) for utility scale projects that are not operational by the end of 2028. This is not a phase down, it is a hard stop. Projects must also begin construction within 60 days of the bill’s enactment to remain eligible. The initial draft had an extended phaseout schedule. That is an incredibly short runway for planning and financing large scale projects.

The amendment adds a restriction under Sections 48E and 45Y, denying tax credits for residential solar systems leased to third parties if the lessee could have claimed the Section 25D credit by owning the system. This could significantly impact third-party ownership models that have driven residential solar growth.

However, companies building new nuclear reactors can still qualify for tax breaks as long as construction begins before the end of 2028. PTC for existing nuclear projects will phase out at the end of 2031.

The House bill also aims to limit foreign involvement in the clean energy supply chain by introducing strict new foreign entity of concern (FEOC) provisions. Based on the 2021 National Defense Authorization Act, these rules bar tax credit eligibility for projects that use materials, components, or intellectual property linked to nations deemed adversarial to the U.S.

The restrictions apply to the 45X manufacturing credit and the 45Y and 48E credits. The broad definition of “material assistance” includes critical minerals, subcomponents, recycling processes, and design elements. Ownership, board control, and financial influence from FEOCs are also restricted, which could disqualify many Chinese-made solar components, even if final assembly occurs elsewhere.

The bill further specifies that wind products will no longer qualify for the 45X credit starting in 2028. The credit will remain fully in place until 2031 and be eliminated in 2032 without a gradual phase-down.

This bill, if enacted, would reverse much of the progress the clean energy industry has made under the IRA. That said, there is hope that the Senate version will moderate some of the more extreme provisions proposed in the house bill.

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.