On July 4, U.S. President Donald Trump signed the *Tax Act of 2025* (P.L. 119-21), which introduces major revisions to the renewable energy tax credit system under the *Inflation Reduction Act* (IRA). Core amendments include: strictly prohibiting Foreign Entities of Concern (FEOC) from claiming clean energy tax credits, covering entities affiliated with the governments of China, Russia, Iran, and North Korea, as well as foreign-controlled enterprises with over 50% ownership; and introducing a "substantial assistance" provision. This provision stipulates that if the cost of FEOC-supported raw materials exceeds a specified threshold during component manufacturing (50% in 2026, 60% in 2027, 70% in 2028, 80% in 2029, and 85% from 2030 onward), eligibility for the 45X Advanced Manufacturing Production Tax Credit (PTC) will be revoked. These restrictions will take effect in taxable years following the Act’s enactment.

The Act terminates the 45Y Clean Electricity Production Credit for wind and solar projects and the 48E Investment Tax Credit (ITC), prohibiting claims for projects placed in service after December 31, 2027. Following negotiations led by Senator Grassley, a one-year transition period was added: projects commencing construction before July 4, 2025, are exempt from this restriction. Seven consumer subsidies, including the 25E Used Clean Vehicle Credit and the 30D Clean Vehicle Credit, were simultaneously repealed, with termination dates phased between September 2025 and June 2026. The 45Z Clean Fuel Production Credit now imposes feedstock origin restrictions, requiring biofuels to be sourced exclusively from the U.S., Mexico, or Canada.

Expressing skepticism over Treasury’s enforcement rigor, Senators Grassley and Curtis stated in the Congressional Record in early August that they would leverage nominations for three Treasury positions to demand strict adherence to the "commencement of construction" criteria. On July 7, President Trump issued an executive order directing the Treasury Department to release FEOC restriction details and new construction commencement rules within 45 days, explicitly aiming to curb abuse of "safe harbor" provisions. Industry stakeholders are closely monitoring supplemental guidance expected by August 18, 2025, which will clarify FEOC identification standards and cost proportion calculation mechanisms.
url:https://www.jdsupra.com/legalnews/analysis-of-renewable-energy-credit-3295399/