On May 12, 2025 the House Ways and Means Committee introduced a draft legislative framework that proposes sweeping changes to several major federal energy tax credit programs. These changes, if enacted, would roll back, or restrict the availability and transferability of key clean energy incentives—most of which were expanded under the Inflation Reduction Act of 2022.

At a high level, the proposal would accelerate the sunset of multiple clean energy credits and impose stricter rules surrounding national security designed to restrict participation by select foreign-influenced or foreign-owned entities.

Fallbrook Financial Services is actively reviewing the development of these proposals in coordination with its institutional and investor clients to assess near- and long-term implications across the various subsectors in renewable energy.

What’s Changing: Key Credit Highlights

Clean Electricity Investment and Production Credits (Sections 48E & 45Y):
Both credits will phase out beginning in 2029 and end entirely after 2031. The value of the credit drops to 80% in 2029, 60% in 2030, and 40% in 2031. Projects placed in service after 2031 will no longer qualify.

Prohibited Foreign Entity Restrictions:
Starting one year after enactment, any project involving “material assistance” from a prohibited foreign entity—defined under new security provisions—will be disqualified. This includes software, design, or component supply ties. A 10-year recapture rule applies if payments are later made to such entities, triggering repayment of the full credit value.

Transferability Restrictions:
Beginning in 2028, several energy credits—including the Clean Electricity Investment Credit (48E), Clean Fuel Production Credit (45Z), and Carbon Capture Credit (45Q)—will no longer be transferable under Section 6418. This limits the ability to monetize credits via tax credit sale and may push developers back toward traditional tax equity structures, while investors who have traditionally not participated in tax equity will have to adjust.

Termination or Phase-Out of Several Credits:

• Residential Clean Energy (25D) and Energy Efficient Home Improvement Credit (25C): End after 2025.
• Clean Vehicle Credit (30D) and Used Clean Vehicle Credit (25E): Terminate after 2025.
• EV Charging Infrastructure Credit (30C): Ends after 2025.
• Carbon Capture Credit (45Q): The credit is retained, however transferability will be repealed for projects that begin construction more than two years after the proposed tax plan is enacted. It will also be subject to new restrictions on involvement with foreign entities.
• Nuclear Production Credit (45U): Begins phase-out in 2029 at 80%, then declines to 60% in 2030, 40% in 2031, and is fully phased out after 2031.
• Manufacturing Production Credit (45X): Phased out starting in 2026 and eliminated entirely by the end of 2029.
• Commercial Clean Vehicle Credit (45W): Ends for vehicles acquired after 2025, except under binding contracts.
• Technology Neutral Production Tax Credit (45Y) Mirrors the 48E structure—phases out starting in 2029, with full expiration after 2031.
• Advanced Manufacturing Production Credit (45X): Phased out starting 2026, ending entirely after 2029.

• Sustainable Aviation Fuel Production Credit (45Z): Repealed for fuel produced after December 31, 2027.
• Investment Tax Credit (48): Phased out starting for projects beginning construction after December 31, 2029, with reduced rates through January 1, 2032. Projects beginning after 2031 will no longer qualify.
• Technology Neutral Investment Tax Credit (48E): Phased out beginning in 2029, dropping to 80% in 2029, 60% in 2030, 40% in 2031, and eliminated entirely after 2031.

In total, the draft legislation touches 15 different energy-related tax credits—either sunsetting them early, reducing their value, imposing sourcing restrictions, or removing transferability options.

What This Means for Stakeholders

If passed in its current state, these changes would represent a significant recalibration of the current renewable energy incentive environment. For project sponsors and developers, the urgency to accelerate project timelines before the 2028–2031 wind-down window cannot be overstated. Likewise, tax credit buyers and financial institutions will need to carefully reevaluate structures, timelines, and counterparty compliance with new foreign affiliation rules.

As with all proposed legislation, this draft must still be passed by both chambers of Congress and is subject to change during the legislative process. Fallbrook will continue to monitor and provide guidance as new developments arise.

About Fallbrook Financial Services:
Fallbrook Financial Services is one of the largest specialty finance firms focused on tax incentives in the United States. We advise and transact across the full spectrum of federal and state tax credit programs in energy, real estate, and entertainment. Fallbrook partners with Fortune 500 companies, institutional investors, and project developers to structure, monetize, and navigate more than 40 incentive programs nationwide. For more information, visit fallbrookfinancialservices.com or reach out to our team at team@fallbrookfinance.com.