Clean Energy Tax Incentives Phase-Out
Issue Briefing
Learn (just enough) about this no-brainer solution to do something about it.
Our message as advocates:
People and organizations should install energy-efficient products ASAP to claim the cost-saving clean energy tax incentives before they disappear (bonus: reducing utility bills and climate pollution!)
THE PROBLEM
OBBBA just repealed billions in tax incentives saving families billions—Americans now have a much shorter window of opportunity to save money on clean energy products.
On July 4, 2025, Congress passed the “One Big, Beautiful Bill Act” (OBBBA). Among its many provisions, it repealed many of the clean energy tax incentives from the Inflation Reduction Act.i Beyond the typical big, grid-scale clean energy developers and investors, these tax credits were also designed to be used by everyday people – families, schools, small businesses, nonprofits, and local governments.ii
The credits make it cheaper to buy home and business products like solar panels, heat pumps, other energy-efficiency upgrades, EV chargers, and battery storage – meant to ensure people across society enjoy the benefits of cheaper utility bills, less pollution in their daily lives, and reduced climate emissions.iii In combination with other policies and regulations it was projected to put the US about halfway toward its climate goalson track to reduce emissions by up to 43% from 2005 levels by the end of the decade.iv
Now, we’re on a countdown clock. Thanks to OBBBA, many of these clean energy tax credits will expire in just a few months – or even weeks.v That means we find ourselves in a narrow window of opportunity, where the credits are still available – if only people know to claim them.
A SOLUTION
Let the people know!
The single biggest obstacle to maximizing the IRA’s remaining tax credits in the coming months is lack of quality information and resources. Big clean energy companies know all about them – teams of lawyers and accountants are already working around the clock on plans to maximize the credits. But most individual consumers, mom-and-pop shops, local nonprofits, and under-resourced local governments don’t know. And these are the very groups that stand to gain a lot from non-polluting technologies and the cost-savings—if they know the opportunity is here and that the clock is ticking.
If we can get the word out, we can:
✅ Maximize the decarbonization benefits of the IRA. It was good policy, but adoption dictates the upper ceiling of its impact.
✅ Help people you love save money and live cleaner lives. Say less.
✅ Help schools, local governments, and nonprofits save money on utility bills so they can spend it on other needs.
✅ Nudge businesses with real purchasing power – and a business-case motivation –to do the right thing.
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Tax credits are a common government policy tool meant to drive behavior change across the economy.x Especially for big purchases, consumers are often guided by where they can get the biggest savings, so tax credits are functionally a discount from the government – similar to if a product was going on sale at a store.xi
To “claim” a tax credit, each consumer – whether an individual, family, business, school, etc. – actually has to pay the full cost upfront and keep the relevant purchasing documents, like receipts. Then, when doing their taxes the following April, they fill out a form to indicate that they made an eligible purchase and submit the receipt. The value of the tax credit then shows up as a reduced tax bill or a higher tax refund.
Many decarbonization technologies, like electric vehicles or heat pumps, can have high up-front costs that create barriers for electrification.xiii But! They are typically more energy efficient than their fossil fuel counterparts and can save consumers money over their course of their lifetimes.xiv Tax credits help lower that cost barrier to uptake so everyone can benefit from cost-savings over time.
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Jump below for a deep dive on the specific technologies (or just keep scrolling!).
OUR ROLE
What can we do about it?
Our mission is to find eligible people and organizations and talk to them. You definitely do not need to own property yourself or have extra cash (in this economy?) to be part of the solution. You just need to know people – and we all do (promise!) – and want better for our communities.
There are three big points to get across:
Hey, there are tax credits. Seems basic, but over 60% of Americans haven’t heard much about the Inflation Reduction Act, let alone realized it offered incentives they could directly benefit from.xv
Y’all should act now, because they are going away soon. Thanks to the “One Big, Beautiful Bill Act,” the incentives for things like solar panels, heat pumps, EV chargers, and energy efficiency upgrades are disappearing within months – or weeks in some cases.xvi
Here are some resources to get you started. *hands over a bunch of helpful links via email*
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While one text, email, or phone call alone likely won’t result in solar panels on roofs and EVs in driveways, it is enough to start a conversation and get the ball rolling. Here are some examples of short-term wins that could come from just one nudge:
Your town’s Chamber of Commerce sends an email to 100 local businesses with information on how to take advantage of the credits.
Your city council member starts asking around and learns there are plans underway to install solar on city hall. They send the project manager the resources you shared, and the city gets the panels built in time to claim the credits.
Your neighborhood association chair forwards your email with the new deadlines along to the listserv. Two houses install both a heat pump and solar panels right away, cutting their bills in half this winter.
STOP! You know enough to take meaningful action.
Curious and want to learn more? Cool, scroll on!
Quick links to navigate this Issue Briefing (or just keep scrolling!)
(Above) Overview & State-specific | Talking points | Co-location benefits | Barriers | Transmission 101 | Reasons to expand | Other reforms | Policymaker resources | Learn more
Success stories to replicate
In just the last 2 years since the Inflation Reduction Act went into effect, these tax credits have already helped thousands of communities decarbonize and save money.
Local governments:
In Lima, Ohio, Mayor Sharetta Smith has touted Lima’s successful clean energy projects. “The city of Lima has put floating solar panels on two of our reservoirs. It is going to allow us to save on our water treatment plant electricity, [which produces a] bill of about $1 million per year,” said Mayor Smith. “Projections through our partner D3Energy, we’re going to save rate payers $200,000 in the first year and $10 million over the life of the project.” xvii Learn more, and see the more than 100 other examples of local governments maximizing clean energy tax credits.
School Districts:
In Baraboo, Wisconsin, the Baraboo School District claimed tax credits when it installed solar panels on its middle school and high school buildings. From clean-school nonprofit UndauntedK12: “The arrays have generated over $44,000 dollars in utility bill savings in the first year. The district tracks and shares the electricity production of both arrays through a live dashboard, enabling community members to learn about the savings opportunities. In December 2024, The School District of Baraboo received $153,817 as a federal reimbursement for the solar arrays.”xviii Learn more, and see the hundreds of other school districts maximizing the clean energy tax credits.
TBD
[TBD POSSIBLE PLACEHOLDER FOR 2 MORE POSSIBLE SUCCESS STORIES: INDIVIDUAL AND LOCAL BUSINESS]
Non profits:
In Atlanta, the LifeLine Animal Project installed solar panels on the rooftop of its shelter facilities. According to RE-volv, the organization that helped LifeLine go solar, “LifeLine will save $1.6 million on their electrical bills over the life of the system which they will re-invest in their animal welfare services and avoid emissions equivalent to removing more than 1,000 gas-powered vehicles from the road for a year.” And the best part? It was a Georgia Tech student who, through persistent outreach to local nonprofits, was able to connect LifeLine Animal Project to affordable solar.xix Learn more, and see the hundreds of other non-profits maximizing the clean energy tax credits!
What *exactly* did OBBBA do?
The “One Big, Beautiful Bill Act” (OBBBA) was passed through a special process called “reconciliation,” which is a way for Congress to fast-track the legislative process for policies related to federal spending and revenues.
Reconciliation bills also only need a simple majority in the Senate, or 51 votes, to pass, as opposed to the typical 60 votes required to avoid the filibuster and pass most legislation.xx Policy changes included in OBBBA include cuts to Medicaid and food stamps, an extension of tax breaks, and yes, an effective repeal of vital and popular clean energy and climate programs.xxi
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OBBBA is a terrible deal for Americans – rising energy prices, a strained power grid, and lost jobs are just some of the expected impacts.xxii The new law will:
Kill ~760,000 US jobs by 2030.xxiii
Raise total energy costs for average working families ~$170/year by 2035, with some states seeing cost increases of over $400/year.xxiv
Decrease how much electricity the US can generate as demand is exploding (~340 GW by 2035).xxv
Significantly increase climate pollution by ~190 million metric tons GHG emissions per year in 2030 and ~470 in 2035, directly fueling costly climate disasters across the country.xxvi
Cost the US GDP ~$980 billion through 2035, as less energy comes online and clean energy manufacturing declines.xxvii
Threaten a large portion of $522 billion of investments in US manufacturing, innovation, and blue-collar communities.xxviii
Holds US companies and entrepreneurs back in a global clean energy market set to reach over $2 trillion by 2035.xxix
The timing of these policy changes are particularly punishing for the US power grid. With the economy electrifying and data center demand growing, the country needs to build huge amounts of new power generation – and quickly. Projections for electricity demand are up to five times higher than recent forecasts, and if we don’t meet this demand, we’ll see higher utility bills and more frequent rolling blackouts.
Simply from an economic perspective, at a moment when demand is surging, we ought to be using tax incentives to encourage the development of clean energy because it’s the cheapest form of new electricity generation and the fastest to build.xxx
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OBBBA also introduced strict new rules to limit the use of Chinese technology – and limit use of the tax credits overall.xxxi These rules are called Prohibited Foreign Entity” or “Foreign Entity of Concern” restrictions, often abbreviated to “PFE” or “FEOC” (pronounced fee-yock). xxxii
Under the new rules, tax credits no longer apply to solar panels, wind turbines, and batteries, etc. imported from -- or manufactured with materials imported from – China, Iran, Russia, and North Korea. xxxiii
This renders the entire underlying tax credit “unworkable,” according to clean energy industry leaders, because China completely dominates the current clean energy and critical mineral supply chain. Finding alternative suppliers is challenging, and if developers do, the proof they will have to submit to the IRS is so technical and convoluted that it will impose a serious administrative burden on developers.xxxiv
The restrictions go into effect on Jan 1, 2026, causing many clean energy developers – as well as schools, local governments, non-profits, etc. – to treat Dec. 31, 2025 as their new deadline, even though the tax credit they’re claiming technically expires later.xxxv
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The “workhorse” of the IRA’s clean energy tax incentives – in terms of government money spent and decarbonization benefits achieved – are a twin set of incentives called the Investment Tax Credit (ITC) and the Production Tax Credit (PTC).xxxvi These are meant to encourage the (you guessed it) investment in and production of clean energy.
The ITC and PTC have actually been around for decades for wind and solar, but thanks to the Inflation Reduction Act, they were broadened to include other forms of clean energy, like battery storage and geothermal energy production.xxxvii The bulk of these credits are going toward big, grid-scale wind and solar farms, but small businesses, non-profits, and local governments can also claim the tax credits for putting solar panels on their roofs, installing geothermal systems, or investing in energy storage.
OBBBA phases out the ITC and PTC for wind and solar specifically in three waves:xxxviii
January 1, 2026: The PFE restrictions (see above) go into effect. After this point, it will be much more difficult to source eligible solar panels and wind turbines, so many clean energy developers – as well as schools, local governments, non-profits, etc. – are treating Dec. 31, 2025 as their new deadline, even though the tax credit technically expires later.
July 4, 2026: “Commence Construction” deadline. If a clean energy project is under construction by this point, developers have four more years to finish it and claim the tax credit. Note! If the project’s commence construction date is after Jan 1, 2026, the PFE restrictions apply.
December 31, 2027: “Placed in Service” Deadline. If a clean energy project is not able to meet the “Commence Construction” deadline, developers have until the end of 2027 to finish the project and connect it to the grid. For grid-scale solar and wind projects, it can be challenging to go from start to finish in just 18 months.
However! While incentives for solar and solar are being phased out quickly, the ITC and PTC for other clean technologies, such as battery storage and geothermal, remain available – albeit with the new PFE restrictions.xxxix Remember: These were new under the Inflation Reduction Act, so their preservation is a modest win for decarbonization that shouldn't be overlooked.
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Days after signing OBBBA, President Trump signed an Executive Order rolling out additional executive branch restrictions on the ITC and PTC (see above) as part of a deal with the House Freedom Caucus. The members of the Freedom Caucus didn’t think OBBBA went far enough in its repeal of clean energy tax incentives, so the White House promised to use executive action to further restrict the tax credits if the members of the Freedom Caucus would vote for the bill.xl
Enter: EO 14315, which directed the Treasury Department to issue new definitions for what counts as “beginning of construction,” and to draft the technical details for what counts as a Foreign Entity of Concern.xli
[PLACEHOLDER FOR SUMMARY AND TAKEAWAY - STILL AWAYING TREASURY GUIDANCE ON COMMENCE CONSTRUCTION AND FEOC RESTRICTIONS. Note - IRS “Beginning of Construction Requirements for Purposes of the Termination of Clean Electricity Production Credits and Clean Electricity Investment Credits for Applicable Wind and Solar Facilities” guidance now available.]
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Wait! In addition to phasing out the clean energy tax incentives, OBBBA also rescinded all unspent funding from the IRA’s various grant programs. These were federal grants for states, cities, tribes, and community groups to stand up climate action programs – like air pollution monitoring at schools or affordable rooftop solar installations for low-income homeowners.xlii
The highest-profile program targeted for repeal was the Greenhouse Gas Reduction Fund (GGRF), a $27 billion grants program to reduce emissions across the country, primarily via green banks – nonprofits that can offer loans and financing for innovative, community-based decarbonization that a traditional bank typically wouldn’t take on.xliii GGRF is making headlines because EPA is attempting to take back grants that were already allocated to recipients and using the OBBBA as justification. This move and others are currently being challenged in the courts.xliv
Sources?
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