Update 05/22: The House passed a bill with amendments even more threatening to solar. See the latest here.
In a section titled “Working Families Over Elites,” the House Ways and Means Committee has eliminated the residential investment tax credit (ITC) in its draft budget bill. Working-class households would be unable to receive the 30% tax credit for installing rooftop solar if the bill’s language is passed as-is.
It’s just one update to clean energy credits in the Committee’s draft budget bill, which will go through markups today. The bill does not scrap the Inflation Reduction Act (IRA) entirely, but does eliminate certain credits and phases out others.
- Eliminates residential ITC (25D) after 2025
- Eliminates EV credits, including 30D, 30C and 45W
- Preserves full value of the ITC (48E) and PTC (45Y) through 2028 before phase-down through 2031
- Replaces “start of construction” with “placed in service” requirement to collect credit
- Eliminates transferability two years after bill enactment
- Preserves IRA adders including low-income bonus credit and energy communities
- Preserves full value of manufacturing tax credit (45X) through 2029 before phase-down through 2031
- Adds restrictions to 45X, 45Y and 48E credits for use of materials or patents from “Foreign Entities of Concern” (FEOC)
The draft bill removes clean energy credits for individuals, while preserving most of them for large-scale solar developers. It would eliminate the 30% residential ITC (25D) as well as the EV credit (30D) on December 31, 2025.
For large-scale solar, the full value of the ITC (48E) and PTC (45Y) remain intact through 2028 before a phase-down of the total credit to 80% in 2029, 60% in 2030, 40% in 2031 and zero in 2032. That’s earlier than current IRA language, which triggers phase-out at the later of 2032 or when U.S. greenhouse gas emissions from electricity are 25% of 2022 emissions or lower.
ITC adders like the low-income bonus credit and domestic content credit are not mentioned in the bill, so investment banking company Roth Capital Partners said those credits appear to be safe and to follow the same phase-down as the general ITC/PTC. However, transferability of the ITC and PTC would be eliminated two years after bill enactment. The bill also removes the “start of construction” provision and requires projects to be “placed in service” to begin collecting the ITC or PTC.
The advanced manufacturing tax credit (45X) is preserved at full value in the draft bill through 2029 before phasing down to 75% of the value in 2030, 50% in 2031 and 25% in 2032 before ending in 2033. Wind products are excluded from the credit starting in 2028.
The bill also adds restrictions to 45X, 48E and 45Y for any involvement with “prohibited foreign entities,” formally known as a “Foreign Entity of Concern,” classified under a 2021 defense bill. For the ITC and PTC, credits can’t be claimed if the facility includes “any material assistance from a prohibited foreign entity.” The bill further defines “material assistance” as “Any component, subcomponent, or critical mineral included in such property is extracted, processed, recycled, manufactured or assembled by a prohibited foreign entity, or any design of such property was based on any copyright or patent held by a prohibited foreign entity or any know-how or trade secret provided by a prohibited foreign entity.”
Solar industry trade organization SEIA said the bill will “effectively dismantle the most successful industrial onshoring effort in U.S. history.”
“This legislation will cause hundreds of American factories to close, eliminate tens of thousands of jobs, force electric bills to skyrocket for everyone, weaken the reliability of our electric grid, and eliminate our capacity to compete with China. This disruption would devastate local, red-state economies, with more than 75% of at-risk factories and investments concentrated in these communities,” said SEIA president and CEO Abigail Ross Hopper in a press statement.
“The solar and storage industry appreciates the many competing interests faced by this Congress and stands ready to work together with our elected officials to ensure that American energy dominance prevails. The current proposals do not achieve that. Our nation’s energy security and national security are on the line,” she continued.
The House Ways and Means Committee will now mark up the bill before voting on it and sending it to the full House of Representatives.
Does anyone know what the definition of “large scale solar” means? The draft budget doesn’t contain any language around kW sizes that I could find.
Large-scale solar would fall under the IRS codes 48E/45Y, which are opposite of the specified residential 25D code (homeowners). We use the blanket term “large-scale solar” to mean everything except residential/homeowner solar.
“The draft bill removes clean energy credits for individuals, while preserving most of them for large-scale solar developers. It would eliminate the 30% residential ITC (25D) as well as the EV credit (30D) on December 31, 2025.”
The statement of “draft bill” doesn’t mean set in stone and even then under the IRA any changes may well be challenged in any number of courts across the U.S. as unconstitutional and then the IRA would roll down the road intact until it sunsets in 2032. By that time Trump 2.0 is over and whatever comes next is in place. Many bills have been proposed and ended up dying on the vine in some committee review that either gutted the bill, pushing the authour of the bill to pull it from consideration.
45X for manufacturing is effectively gutted without changing it because the demand tail (out years after 2028) has been reduced significantly through the accelerated sunset for the ITC.
Expect most of those planned manufacturing facilities to never hit COD.
Why do you say that? Maybe residential, but for Utility scale, which is, by far, the largest market in terms of GW, nothing really changed. For large scale Utility scale manufacturers, no real change and tax credits are all in-tact, without reducing to 75% of an already large amount in 2030.
WHY ?.? For what reason, when industry is wanted back in this country, the US ????
Why have an article with an acronym like ITC yet never mention what it stands for or specifically what it means? The whole article is meaningless without that.
explained in the first paragraph, thanks
It’s the first line of the article, Elon.
Perfect example of how Washington works. Those with money pay for the politicians, and the politicians pay those with money back with legislation. Eliminating Resi ITC makes the only way a resi job can get done is by the huge companies offering leases. It crushes small installers and removes all competition from the big national brands. The little guys with no lobby, homeowners and small businessmen get the shaft.