The IRS released new FAQs clarifying the accelerated terminations of various clean energy credits under the 2025 Act, formerly known as the One Big Beautiful Bill Act; the agency also updated the inflation adjustment factor and amounts used to calculate the Clean Electricity Production Credit for 2025. (FS 2025-05; IR 2025-86, 8/22/2025)
Affected Provisions
Issued Thursday afternoon, the IRS addressed modifications by the Act of 2025 (P.L. 119-21), signed by President Trump July 4. The FAQs in the August 21 fact sheet, announced in an accompanying notice, cover phase-outs and early sunset dates for tax credits under the following Code sections:
- IRC § 25C Energy Efficient Home Improvement Credit
- IRC § 25D Residential Clean Energy Credit
- IRC § 25E Previously-owned Clean Vehicle Credit
- IRC § 30C Alternative Fuel Vehicle Refueling Property Credit
- IRC § 30D New Clean Vehicle Credit
- IRC § 45L New Energy Efficient Home Credit
- IRC § 45W Qualified Commercial Clean Vehicle Credit
- IRC § 179D Energy Efficient Commercial Buildings Deduction
The FAQs include a chart breaking down the termination dates for each credit.
Section Specific Guidance
For Sections 25E, 30D, and 45W, the IRS explained that a vehicle is considered to be “acquired” the date a written binding contract “is entered into and a payment has been made.” Payments include down payments and trade-ins. But to claim the credits, the applicable vehicle must be “placed in service,” as simply acquiring a vehicle before the credit’s termination date does not automatically make a taxpayer eligible.
Should a taxpayer acquire a vehicle on or before September 30, 2025, “then the taxpayer will be entitled to claim the credit when they place the vehicle in service … even if the vehicle is placed in service after September 30, 2025,” the IRS said.
For the purposes of Section 25C, qualified manufacturers are not required to make periodic written reports to the IRS on their property, including property placed in service before January 1, 2026. Manufacturers must still register with the IRS to claim the credit before it expires.
The Section 25D credit cannot be claimed for property installed after December 31, 2025, or constructed after that date, if a taxpayer pays for the property beforehand. Expenditures generally are treated as “made when the original installation of the item is completed,” the IRS clarified.
Taxpayers are advised to “wait until the time of sale” to elect to transfer a clean vehicle credit since that is when the taxpayer takes possession the vehicle. The Energy Credits Online portal will close September 30, 2025, to new user registration, but the portal will “remain open beyond” that date in a limited capacity so previously registered taxpayers can submit necessary time of sale reports.
Clean Electricity Production Credit Inflation Adjustment
On Friday, the IRS in a notice provided the calendar year 2025 inflation adjustment factor for the IRC § 45Y Clean Electricity Production Credit. Created by the Inflation Reduction Act of 2022, the Section 45Y credit is available to renewable energy producers and incentivizes the generation of clean electricity from qualified facilities.
For 2025, the IRS has set the inflation adjustment factor at 1.9971. As a result, the credit amounts have been updated to 0.6 cents per kilowatt-hour (kWh) for the base credit and 3 cents per kWh for the alternative credit amount, which is available to projects meeting certain labor requirements.
The notice details the methodology for calculating the inflation adjustment, which is based on the gross domestic product implicit price deflator. It also clarifies the eligibility requirements for qualified facilities and the conditions under which taxpayers may claim the higher alternative credit amount.
Specifically, the alternative credit is available to facilities that comply with prevailing wage and apprenticeship standards, reflecting the government’s ongoing emphasis on supporting good-paying jobs in the clean energy sector.
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