On Monday May 12, 2025, the House Ways and Means Committee released the full draft of its portion of the FY2025 reconciliation bill. The draft includes significant amendments to the energy tax provisions enacted under the Inflation Reduction Act (IRA). Nearly all IRA-created or extended tax credits currently in effect would be repealed or placed on an accelerated phaseout schedule. Notable exceptions include the Section 45Z Clean Fuel Production Tax Credit and Section 45Q Carbon Oxide Sequestration Credit.

Section 45Z is the only tax credit created by the IRA that would be expanded and extended under the draft bill rather than repealed or phased out. Section 45Q, originally created in 2008 and later expanded by the IRA, would remain largely intact under the proposal. The only changes to 45Q involve new restrictions related to “foreign entities of concern” and credit transferability—provisions that would broadly apply to the remaining IRA tax credits as well.

The Ways and Means Committee held a markup on its portion of the FY2025 reconciliation bill on Tuesday, May 13, and passed it out of committee without amendment.

Summary of Proposed Changes to the IRA Tax Credits included in the House Ways and Means Draft

Termination of Certain Tax Credits

The bill would terminate the following tax credits at the end of 2025 (except 30D):

• Section 30D Clean Vehicle Credit (12/31/2026)
  • A per-manufacturer cap of 200,000 vehicles sold from 2009-2026 applies; once reached, no further credits shall be allowed. Manufacturers that do not hit the cap may continue to claim the credit until the end of 2026.
• Section 25E Previously-Owned Clean Vehicle Credit
  • Includes an exception for vehicles acquired pursuant to a written binding contract signed before May 12, 2025.
• Section 45W Qualified Commercial Clean Vehicles Credit
• Section 30C Alternative Fuel Refueling Property Credit
• Section 25C Energy Efficient Home Improvement Credit
• Section 25D Residential Clean Energy Credit
• Section 45L New Energy Efficient Home Credit
• Section 45V Clean Hydrogen Production Credit

Accelerated Phaseouts of Existing Credits

• Section 45Y Clean Electricity Production Credit (phaseout starting in 2029 instead in 2033)
• Section 48E Clean Electricity Investment Credit (phaseout starting in 2029 instead in 2033)
• Section 45U Zero-emission Nuclear Power Production Credit (phaseout starting in 2029 instead of expiring at the end of 2032)
• Section 45X Advanced Manufacturing Production Credit (wind components no longer qualify after 2027, previously 2030; for all other components the credit expires at the end of 2031, previously phased out in 2030 and expired in 2032 except for critical minerals)
• Section 48 Energy Investment Tax Credit (ITC) (changes the phaseout for geothermal heat pump property, expiring in 2031 instead of 2035)

Foreign Entity of Concern Restrictions & Disallowing Transferability

Under current law, restrictions related to foreign entities of concern (FEOC) restrictions apply only to two tax credits: the Section 30D Clean Vehicle Credit and the Section 45X Advanced Manufacturing Production Credit. The proposal would expand the definition of FEOC and apply these restrictions to a broader set energy tax credits.

If a taxpayer is deemed a specified foreign entity, they would be ineligible to claim the affected tax credits beginning on the date of the bill’s enactment. Taxpayers falling into a lesser category—such as foreign-influenced entities or those receiving material assistance from a prohibited foreign entity—would be eligible to claim these credits for two additional years. After that, they would become ineligible unless they restructure to eliminate foreign influence from their supply chains.

The IRA also authorized “direct pay” and “transferability” for various energy tax credits. Direct pay allows eligible entities to receive a cash payment instead of a credit against their tax liability. Transferability allows entities to transfer all or a portion of an eligible credit to an unrelated taxpayer. The House Ways and Means proposal would repeal credit transferability generally two years after the bill’s enactment but does not affect direct pay.

The proposal would apply FEOC restrictions and the two-year transferability restrictions to the following credits:

• Section 45Y Clean Electricity Production Credit
• Section 48E Clean Electricity Investment Credit
• Section 45U Zero-emission Nuclear Power Production Credit
• Section 45X Advanced Manufacturing Production Credit
• Section 48 Energy Investment Tax Credit (ITC)
• Section 45Q Carbon Oxide Sequestration Credit
• Section 45Z Clean Fuel Production Credit

Other Modifications to Tax Credits

Aside from the FEOC and transferability restrictions, the 45Q tax credit—used to support carbon capture and storage—would remain unchanged. The IRA previously expanded 45Q by lowering the minimum capture amount threshold, increasing the credit amount, and extending eligibility to facilities that begin construction before the end of 2032. The Treasury Department estimates that 45Q will cost taxpayers $36.2 billion from FY2024 to FY2033.

While the proposal would also apply FEOC and 2-year transferability restrictions to the 45Z Clean Fuel Production Credit, it would significantly expand and extend the credit. Specifically, it would:

• Extend the credit through the end of 2031 (currently set to expire in 2027)
• Broaden eligibility by excluding emissions from indirect land-use changes in lifecycle emissions calculations—potentially allowing fuels such as corn ethanol and soy biodiesel to qualify
• Restrict eligible fuels to those derived from feedstocks grown in the United States, Canada, or Mexico.

According to the Joint Committee on Taxation (JCT), the extension and expansion of 45Z would cost taxpayers $45 billion from FY2025 to FY2034.

The House Ways and Means proposal also includes a provision that would allow income from the transportation and storage of hydrogen and certain carbon capture and storage (CCS) activities to qualify as “qualifying income” for certain publicly traded partnerships (PTP). Under current law, PTPs whose interests are traded on public exchanges are generally treated as corporations for tax purposes. However, if at least 90 percent of a PTP’s gross income is derived from qualifying sources—such as rents, gains from the sale of real properties, or income and gains from the exploration, production, processing, refining, transportation, or the marketing of any mineral or natural resource—it can be treated as a partnership instead. This allows the entity to avoid corporate-level taxation, with income passed through to partners and taxed at the individual level. This preferential tax treatment is currently estimated to cost taxpayers $1 billion from FY2022 to FY2031—a figure that could increase under the Committee’s proposal.