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How the One Big Beautiful Bill Act Impacts Project Financing for Infrastructure & Manufacturing

How the One Big Beautiful Bill Act Impacts Project Financing for Infrastructure & Manufacturing

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Changes in the Budget Bill that Will Affect Infrastructure and Manufacturing Projects: The Highlights

July 7, 2025: H.R.1, the robust budget reconciliation bill known as the “One Big Beautiful Bill” signed into law on Friday, contains several provisions that will affect project finance in the near and longer term. While some areas of the infrastructure and manufacturing sectors will benefit, others will be negatively affected by changes to the tax code presented in the bill.

These key changes, as relate to modifications to various tax credits programs and other tax regulations enabled under the Inflation Reduction Act (IRA22), are noted below.

48E Clean Electricity Investment Credit

The 48E Investment tax credit for wind and solar sunsets for projects placed in service after December 31, 2027, unless construction begins before July 2026. The bill also stipulates the ineligibility of wind and solar leasing arrangements (“LeaseCo’s) from being eligible to claim ITC. While these changes clearly are quite negative for wind and solar project development, the ITC for other renewables such as biogas, geothermal, hydropower, waste-to-energy, storage, etc. is maintained until phase out begins construction by 2033, which is a significant “win” given earlier versions of the bill that would have accelerated the end to such credits for all projects. The bill also added fuel cell projects as an eligible type.

Furthermore, the final amended bill also eliminated ITC eligibility for certain wind and solar “lease co” arrangements. Rules regarding the domestic content added under Section 48E were modified by the bill relating to the required percentages of the manufactured products included in a facility produced in the US relative to when the facility is considered to begin construction.

The bill also amended a rule to allow for 100 percent recapture of the section 48E credit if a “specified taxpayer” makes an applicable payment before the close of the 10-year period beginning on the date the taxpayer placed in service investment credit property. Limitations are also imposed if the taxpayer is or receives material assistance from a prohibited foreign entity.

Section 48D

The direct dollar-for-dollar tax reduction Investment Credit for Advanced Manufacturing under Section 48D is increased from 25% to 35%, which will be a valuable capital source for qualified manufacturers in the clean energy sectors.

45Y Clean Electricity Production Tax Credit

As with the investment tax credits, production tax credits (IRC §§ 45Y) will be unavailable for wind and solar projects placed in service after December 31, 2027 unless construction starts by July 2026. Wind and solar “LeaseCo’s” are also denied PTC under the revised bill.

45Z Clean Fuel Production Credit

Perhaps one of the biggest winners in the bill will be users of the clean fuel production credit under IRC § 45Z, which was extended for two years, through December 31, 2029. Beginning in 2026, IRC § 45Z will only be available for fuel produced from feedstocks produced in North America.

The bill also reduced the production credit on sustainable aviation fuel to be in line with other renewable fuels, capped at $1.00 per gallon beginning in 2026, and eliminated the opportunity to “stack” credits, except for biogas for which the Treasury may provide for a credit value in excess of $1.00 per gallon depending upon the emissions rate of the fuel.

Also, the calculation for GHG Life Cycle emissions must now exclude emissions attributable to indirect land use change. Biogas from animal manure shall have distinct emissions rates for each feedstock.

45Q Credit for Carbon Oxide Sequestration

The credit rate for carbon oxide used as a tertiary injectant or otherwise utilized in an approved manner (i.e. enhanced oil recovery and commercial uses) is increased to equal the value per ton for permanent sequestration. This will certainly benefit clean traditional energy projects that might incorporate CCUS.

45V Clean Hydrogen Production Credit

The bill sunsets the clean hydrogen production credit five years earlier than under IRA22 (commence construction before January 1, 2028 by December 31, 2027). While this change is viewed negatively, it represents a more favorable outcome than initially anticipated, which was immediate termination.

45X Advanced Manufacturing Production Credit

The bill eliminates the credit for wind energy components produced and sold after December 31, 2027.  

It also adds metallurgical coal under the definition of “critical minerals” as the key input in steel production (through the end of 2029). The phase out of tax credits for other critical minerals after 2030 was modified. No credit is allowed for components that include material assistance from a prohibited foreign entity.

45U Zero-Emission Nuclear Power Production Credit

Under IRC § 45U, no credit is allowed if nuclear fuel imported from China, Russia, Iran or North Korea is used for electricity production from a facility, subject to an exception for binding contracts in effect before January 1, 2023. This prohibition represents an extension of the various foreign entity of concern (FEOC) restrictions imposed on renewable energy projects under the bill. While the FEOC restrictions largely remain intact in the final version of the bill, the prohibition of use of imported nuclear fuel under IRC § 45U has been removed.

Other Key Changes

  • The bill makes the New Markets Tax Credit and the Opportunity Zones programs permanent (with some changes to the OZ program) as well as increases the ceiling on the Low Income Housing Tax Credit program.
  • The bill stipulates that transfers of various energy and advanced manufacturing tax credits are prohibited to specified foreign entities which includes organizations found to be engaging in conduct detrimental to the interests of the US such as terrorist organizations, specially designated nationals, Chinese military companies, etc. Fortunately, the full restriction of the transfer of credits in the House version was removed.
  • The bill provided some modification to the environmental review process under the National Environmental Policy Act of 1969 (NEPA) but perhaps not as delineated as in earlier versions.
  • Electrical vehicle tax credits and energy efficient home improvement credits are phased out for the most party fairly immediately.

Preparing for What’s Next

Note that President Trump left the door open for further modifications in an executive order today. As always, we are closely watching developments relating to credits and incentives and the capital markets for project debt, mezzanine and equity as we assist clients with their financing strategies and procurement.

If you have questions about how the new tax credit changes could affect your infrastructure or manufacturing projects, our team can help you assess the impact and adjust your financing approach accordingly. Contact us to start the conversation.

The information in this article was intended to provide general information for individuals and companies interested in the subject matter. It may contain opinions and details which may or may not be indisputable and should not be considered fully exacting or comprehensive in nature. The information herein should not be considered tax, legal, investment or any other advice of any kind.

Contributors

Lance Healy, Managing Director, FD Real Asset Advisors

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