House Passes 2025 Reconciliation Bill – Further Restricting IRA Tax Benefits

After an intense 21-hour House Rules Committee markup, early in the morning of May 22, 2025, the House passed H.R. Con. Res. 14, 119^th Cong. (2025) (the “Reconciliation Bill”), which makes significant revisions to the Inflation Reduction Act (the “IRA”) provisions. While some provisions in the earlier released draft of the Reconciliation Bill remain the same (see our prior coverage here), as summarized below, there are material changes to the technology neutral credits under Sections 45Y and 48E, and the zero-emission nuclear power production credit under Section 45U worth noting, primarily terminating the credits in the near term.

Now that the House has passed the Reconciliation Bill, it is headed to the Senate, where it is sure to be scrutinized and marked.

As is obvious from the items outlined below, the Reconciliation Bill as it currently stands will have a tremendous and damaging impact on future renewable development – at a time that energy needs in the U.S. are projected to increase substantially. The Reconciliation Bill’s far-reaching consequences will affect manufacturers, developers, innovators, financiers and customers, among many others. Potentially most damaging will be the loss of onshoring opportunities and the loss of jobs that have been created by the now substantial energy transition and renewable workforce.

One other item that requires emphasis is the various provisions with respect to “prohibited foreign entities” (i.e., “FEOC” type restrictions) which would be effective in the near term under the current proposed legislation. These provisions are extremely broad in their application and are almost impossible to knowingly comply with and administer. Absent changes, these FEOC restrictions alone could scuttle future renewable development.

We urge the clean energy industry to mobilize and make clear to Congress and the Administration their views on this proposed legislation.

If you have any questions or world like to discuss the Reconciliation Bill, please reach out to your V&E contacts.

• Section 45Y and Section 48E (Clean Electricity Production Credit and Clean Electricity Investment Credit)
  • The legislation passed by the House terminates Section 45Y and Section 48E for projects that do not commence construction before 60 days after the Bill is ultimately enacted or are placed in service after December 31, 2028, except for nuclear technologies, which are allowed a credit so long as construction begins by December 31, 2028.
  • The legislation also accelerates the provision disallowing tax credits for projects which receive material assistance from prohibited foreign entities to December 31, 2025, based on beginning construction.
  • These credits would also be disallowed if the project is leased or rented to a third party if the lessee would have qualified for the Section 25D Residential Clean Energy Credit if such lessee owned the property.
• Section 45U Zero-Emission Nuclear Power Production Credit
  • The credit is allowed at full value through December 31, 2031, and terminates thereafter.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.