USA Trends and Developments Contributed by: Devon M. Bodoh, Joseph M. Pari and Blake D. Bitter, Weil, Gotshal & Manges LLP
No repeal of energy credit transferability A taxpayer (other than certain tax-exempt entities) claiming an energy transition tax credit can generally transfer the credit for cash to an unrelated person. While an early version of the OBBA sought to termi - nate transferability (with multiyear transition rules), the final version of the OBBA does not limit, curtail, or terminate the right of transferability. Foreign entity provisions The OBBA introduces certain owner-level limitations on the availability of certain energy tax credits for pro - jects with ownership from certain foreign countries (eg, China, North Korea, Russia, and Iran). For exam - ple, credits are disallowed for most energy transition tax credits if: • a project owner has certain levels of Chinese own - ership (generally 25% ownership by a single entity or 40% aggregate ownership by multiple entities); or • a Chinese entity has effective control (via con - tractual relationship) of a clean electricity project, energy storage project, or manufacturing opera - tion. Additionally, credits are disallowed if a clean electricity project, energy storage project, or eligible component includes an impermissible level of Chinese materials.
Energy storage remains eligible to receive an ITC on this same phasedown schedule even if it is co-located with a solar or wind project. Advanced manufacturing production credit The IRA introduced an advanced manufacturing pro - duction credit available for the production and sale of solar components, wind components, battery com - ponents, and critical minerals that are produced in the USA. The OBBA makes several surgical amend - ments to the advanced manufacturing production credit including: • terminating the credit for wind components after 2027 (previously did not begin scheduled phase - down until 2030); • subjecting the credit for critical minerals to a new scheduled phasedown starting in 2031 (previously no scheduled phasedown); and • introducing a new credit for metallurgic coal pro - duced through the end of 2029. Clean fuel production credit The IRA introduced a new tax credit that is generally available for clean transportation fuel that is produced and sold to unrelated buyers. This credit was originally scheduled to expire at the end of 2027, but the OBBA extends it to the end of 2029. Hydrogen PTC Under prior law, the clean hydrogen PTC was avail - able for facilities that begin construction before 2033. Early versions of the OBBA would have terminated this credit for projects that began construction after the end of 2025; however, the final version of the OBBA extended the termination date. Facilities that begin construction before 2028 will remain eligible for the credit, giving hydrogen developers an additional two years to start construction on early-stage projects.
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