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This Clean Energy Tax Credit Could Survive Massive Cuts

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by Dean Zerbe, Former Senior Counsel to the U.S. Senate Finance Committee; alliantgroup National Managing Director

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While the Trump administration is turning away from many renewable energy initiatives some subsidies for U.S. manufactured parts will remain.

As Congress dukes it out over the “big beautiful bill,” one Biden-era tax credit is poised to survive amid the onslaught of clean energy tax credits that largely got axed or hollowed out.
 
It’s known as the advanced manufacturing production credit, which as of now, lawmakers have decided to save. That may be because of the Trump administration’s focus on onshore domestic manufacturing and uncoupling the U.S. economy from existing global trade relationships. 
 
The credit, also referred to as 45x, was first enacted as part of the Inflation Reduction Act, a law passed in 2022 that focused on boosting clean energy among its main objectives. Under the IRA, the 45x credit helped subsidize critical minerals, power inverters, battery parts, plus parts for both solar energy and wind energy. U.S.-based manufacturers qualify for the credit. 
 
That will remain under both the House and Senate versions of the reconciliation package, though both pieces of draft legislation would not provide credit for wind energy components sold after Dec. 31, 2027, according to Katherine Breaks, a Washington, D.C.-based principal in the incentives and credits group at KPMG’s national tax practice.  
 
Wind energy components include things like blades and towers. Affected parts in the solar sector include solar panels and charge controllers. 
 
“This credit remains largely intact under both the House and the Senate bill, as compared to some of the other credits that would be completely repealed almost immediately,” Breaks says. “Its purpose is to promote onshoring or also to encourage companies that are already based here in the U.S. to expand or to stay in the U.S. and make these materials.”
 
Both pieces of draft legislation would also introduce a phase-out for the production of critical minerals, including the likes of lithium and cobalt, both of which are needed to manufacture batteries. And there’d be a rule moving forward that would limit the acquisition of assembly parts, or manufactured parts, made by prohibited foreign entities like China.
 
The value of the credit amount varies since it’s based on production volumes, but the good news is that there’s no funding cap. And while the credit is geared toward larger entities, smaller companies can also get in on it. 
 
“It’s open for everybody that meets the criteria, you don’t have to be a large company to qualify for it,” says Dean Zerbe, the national managing director at alliant, a business and tax consulting firm. “That said, small and medium-sized companies will need to sharpen their pencils to make sure they can qualify for it and talk to their tax advisors.”
We have been working with scores of businesses and nonprofits that have taken ERC with “pop up” shop providers and now are waking up recognizing that all this may be too good to be true.

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Dean Zerbe is alliantgroup’s National Managing Director based in the firm’s Washington D.C. office. Prior to joining alliantgroup, Mr. Zerbe was Senior Counsel and Tax Counsel to the U.S. Senate Committee on Finance. He worked closely with then-Chairman and current Ranking Member of the Finance Committee, Senator Charles Grassley (R-IA), on tax legislation. During his tenure on the Finance Committee, Mr. Zerbe was intimately involved with nearly every major piece of tax legislation that was signed into law – including the 2001 and 2003 tax reconciliation bills, the JOBS bill in 2004 (corporate tax reform), and the Pension Protection Act. Mr. Zerbe is a frequent speaker and author on the outlook for short-term and long-term changes in tax policy, as well as ways accounting firms can help their clients lower their tax bill.

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