Transferable Tax Credits Still Within Reach - But the Clock is Ticking

In the world of clean energy, the past few months have been like riding a rollercoaster. Tariffs and proposed changes to the Inflation Reduction Act’s clean energy tax credits have caused clean energy buyers and sellers alike to hold on tight, bracing for the next sharp turn. In effect, that has meant many tax credit deals slowed down as the industry waited for regulatory clarity.

But on May 22, we all exited a tunnel on the rollercoaster and took a steep drop after seeing what the House included in the One Big Beautiful Bill Act. Although there had been hopeful speculation about bipartisan tax credit supporters helping to retain the most important elements of IRA tax credits, the bill that passed includes several new restrictions that make it harder to qualify for and sell tax credits. It still needs to get negotiated between the Senate and House before it is final, but here are the key things you need to know about the current bill.

For a deep dive, we recommend Norton Rose Fulbright’s analysis here, but here is a greatly abbreviated overview of the bill’s impact on clean energy tax credits under 45Y, 48E, and 45X:

1. To qualify for tech-neutral tax credits (45Y and 48E), projects must start construction within 60-days of the bill’s enactment into law, and be placed in service by the end of 2028. The exception to this is for nuclear projects, which only have to commence construction by the end of 2028.
2. Beginning on Jan. 1, 2026, new rules would restrict who can claim tax credits if they have ties to foreign entities of concern (FEOC), specifically China, Russia, Iran, or North Korea. Projects or companies with even indirect ties to FEOC nations could lose eligibility. FEOC rules apply to projects under tech-neutral credits (45Y/48E) and advanced manufacturing (45X). And, the rules become more restrictive in 2028.
3. The full runway for transferability has been restored for tech-neutral tax credits, though that runway is impacted by the two major limitations above.

What the Current Draft Says - and What It Means

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Political Noise, Practical Signal

This isn’t the news that we as a collective industry were hoping for, but it’s important to remember two key things:

First, political experts broadly anticipated that the Senate will make changes to the bill before it lands on the President’s desk. The Senate often serves as a moderating force. These dynamics could soften the House draft, but the outcome is far from certain. The Senate is expected to begin discussion on June 2 when they return from recess.

With razor-thin majorities and internal friction, there could be major changes to reinstate more favorable tax credit provisions.

Second, the House bill is likely the most extreme version of IRA changes that we’ll see. And even within this scenario, there are key provisions that remain unimpacted, which should give buyers confidence to move forward on procurement:

• No retroactive changes. Deals that are already signed before the bill becomes law won’t be impacted.
• No changes to credit or bonus values.
• Projects that have already begun construction and have placed in service dates by the end of 2028 still qualify for transferable tax credits at their full value.

In other words, there is still reason to be hopeful that the final bill will change to become more favorable after it makes its way through the Senate. And, there are still billions of dollars in transferable tax credits that are largely shielded from regulatory changes.

3 Reasons to Act Now

Since the House bill was published, LevelTen has received a flood of interest from buyers who recognize that now is the time to act, for 3 main reasons:

1. Liquidity today, scarcity later. Assuming that there is a near-term deadline for projects to commence construction, tax credit inventory will begin to tighten, putting upward pressure on prices.

As of today, LevelTen’s Tax Credit Marketplace provides access to:

• More than $3B worth of 45, 45Y, 48E, and 45X tax credits from high quality, experienced developers and manufacturers.
• Nearly 70% of these credits are tied to projects that will be placed in service in 2025.
• Prices for high-quality credits are hovering in the low-mid $0.90s, with price swings shaped by insurance requirements, legal fees, and credit ratings.

2. Seasonal pricing. Historically, liquidity dips and prices rise in the second half of the calendar year. Waiting for “certainty” on the budget reconciliation bill could mean paying more for fewer options.

3. Safe-harbor advantage. Projects already under construction, or placed in service before the end of 2025, are largely insulated, making their credits particularly attractive.

Tech-neutral credits (45Y/48E) credits from late-stage projects could start commanding a premium since they are the most risk-mitigated. Corporate buyers prepared to transact now can choose from a deeper pool of credits, which will shrink quickly as the end of 2025 approaches. Waiting will likely mean entering a thinner, more competitive market once the bill is passed.

Transition Policy Precedent  in U.S. Tax Law: Whenever Congress changes credit rules, it traditionally includes transition language that shields transactions completed before the new law takes effect. Buyers who execute now should stay protected.

Knock-On Effects for PPAs

Tax credits underpin project economics, providing 30-60% of capital costs. If 45Y and 48E tax credits become harder to obtain, project economics for most developers will likely necessitate PPA price increases.

To give a sense of scale, based on project data from the interconnection queue and PPA price data from LevelTen Energy’s Platform, over the next 5 years (2025-2030), American solar, wind, and battery storage developers will seek PPAs for an estimated 545 GW of installed capacity, representing an estimated $1.2 trillion in clean energy PPA transactions.

Let’s Talk

If you have a tax liability to offset or a project that depends on credit monetization, reach out. We have buyers and sellers who are in the market – even in a noisy policy environment. For additional context on why timing matters, see our March 21 post, “Clean Energy Tax Credits: Is Now the Time to Buy?”

Committed to Your Success in Clean Energy

Tax credits are just one piece of the puzzle. Since our founding in 2016, LevelTen has been committed to accelerating the clean energy transition – providing the marketplaces, software, and data that empower buyers and sellers to get deals done. If you have any questions about clean energy tax credits or clean energy procurement in general, contact us at taxcredits@leveltenenergy.com.