60-day IRA eligibility deadline to cause scramble: EY experts

TL/DR –

House Republicans passed a budget bill with an amendment requiring projects to break ground within 60 days of the bill’s signing to qualify for clean electricity production and investment tax credits. Professionals in the sector have expressed surprise and concern about the short time frame, predicting a scramble to start as many projects as possible in this window. If the Senate passes the bill and it becomes law, projects breaking ground within the 60 days will need to be in service by the end of 2028 to qualify for certain credits.

Dive Brief:

• House Republicans have approved a budget bill with an amendment that exacerbates cuts to the Inflation Reduction Act by insisting projects must commence within 60 days to qualify for clean electricity production and investment tax credits.
• This legislative change, if enacted, will “strain the renewable energy development community and supply chain,” says Ryan Abraham, a principal at Ernst & Young’s Washington Council advisory practice.
• EY Americas Tax Leader for Oil & Gas and Chemicals and Metals & Mining, Greg Matlock, expressed surprise at the unexpected 60-day deadline, which complicates initiation of construction projects.

Dive Insight:

Both Matlock and Abraham expressed clients’ surprise at the abrupt 60-day deadline for clean energy provisions of the Inflation Reduction Act. It significantly impacts the 45Y production credit, and 48E investment credit, disrupting expected negotiating terms.

If the Senate passes this bill, the 60-day countdown will start upon President Donald Trump’s signature. Projects initiated within this period must be operational by the end of 2028 to qualify for the 45Y or 48E credits, according to the proposed phaseout deadline.

The legislation leaves the nuclear provisions of the IRA largely untouched and carbon capture remains mostly unaffected, according to Matlock.

The extended tax credit transferability until 2032 for 45Y and 48E is a “small victory,” says Abraham, despite the severe time constraints limiting the number of qualifying projects.

Matlock anticipates capital redirection and a “slightly different growth curve” following these changes. The revised framework may also change the profile of the investors backing these projects.

The House decided to phase out transferability for the 45Z clean fuel production tax credit and the 45X advanced manufacturing PTC after 2027, impacting the investor pool, according to Matlock.

Flipside, it ups pressure on project financing, likely changing developmental pace and types of electron versus decarbonization projects, if developers can’t sell credits post-2027, he added.

The bill now heads to the Senate, where the extent of changes remains uncertain, Matlock concluded.

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