Trump’s Executive Order Throws Caution to the Wind (and Solar)

 Enacted in August 2022, the Inflation Reduction Act (the “IRA”) expanded energy tax credits by increasing credit amounts, broadening eligibility beyond wind and solar, and allowing credits to be developed and sold, as outlined here.

The winds have now shifted. Two years later, the One Big Beautiful Bill Act (the “OBBBA”) slows that momentum by delivering a final blow to wind and solar, terminating the tech-neutral investment tax credit (“ITC”) and production tax credit (“PTC”) for projects that are not placed in service before 2028, with a safe harbor for projects that begin construction within 12 months of enactment. The OBBBA also introduces sweeping “foreign entity of concern” limitations that could disqualify many projects from the credits entirely.

The wind-down doesn’t stop there. On July 7, Trump issued an executive order giving Treasury 45 days to issue new guidance on what it means to begin construction, dispelling any doubt about his administration’s commitment to end support for what it broadly calls “unreliable, foreign-controlled energy sources.” The order also directs Treasury to take “prompt action” to implement the foreign entity of concern limitations. While these rules are intended to deny credits for projects with ties to China, Iran, North Korea or Russia, they are broad and could end up disqualifying far more projects than expected.

As a result, developers will need to scrutinize their ownership structures (including debt financing) and conduct due diligence across their entire supply chain. This added complexity will likely delay projects and may shut out smaller developers altogether, especially those wary about beginning construction before the 12-month safe harbor expires.

We will continue to monitor developments and provide updates in Brass Tax as the landscape continues to evolve.

Trump’s Executive Order Throws Caution to the Wind (and Solar) | Cadwalader, Wickersham & Taft LLP - JDSupra

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