Month: August 2025

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OBBB changes reviewed: Over the next few weeks CFO Services will go through the business credits and incentives impacted by the bill.     

In Brief  

The One Big Beautiful Bill Act (OBBB, P.L. 119-21), signed into law July 4, 2025, brings major changes to the Section 45X Advanced Manufacturing Production Credit and the rules for transferring energy tax credits. The OBBB accelerates the phaseout of 45X for wind and other components, introduces new restrictions on foreign entity involvement, and tightens the rules for credit transferability. 

Key Takeaways: 

1. Accelerated Phaseout 

• Wind energy components: Ineligible for the credit if sold after 2027. 

• Other eligible components: Full phaseout accelerated by one year (excludes sales after 2031 rather than 2032). 

• Critical minerals: Now subject to a staggered phaseout beginning in 2031. 

2. Foreign Entity Restrictions 

• No credit for PFEs: No 45X credit for any tax year beginning after enactment if the taxpayer is a specified foreign entity. 

• No credit for foreign-influenced entities: No credit after two years for entities meeting certain foreign ownership or control thresholds. 

• Material assistance threshold: The Senate bill allows a declining percentage of materials to be sourced from PFEs, with stricter limits each year. 

3. Transferability 

• Allowed: Credits can be transferred, but not to specified foreign entities. 

• No universal ban after 2027: Unlike some earlier proposals, OBBB does not universally disallow transferability for 45X after 2027, but prohibits transfers to PFEs immediately. 

4. Supplier Certification & Safe Harbors 

• Supplier certifications: Required to document compliance with PFE/material assistance thresholds. 

• Safe harbor tables: To be issued by Treasury for calculating PFE content. 

• Anti-circumvention: Treasury is directed to issue rules to prevent evasion of PFE/material assistance restrictions. 

5. Metallurgical Coal 

• Added as a critical mineral: Eligible for a 2.5% credit through 2029. 

Key Changes, Deadlines, and Restrictions 

Feature	Prior Law (IRA)	OBBB (as Enacted)
Wind Component Credit	Phased out after 2032	Ends after 2027
Other Components	Phased out after 2032	Ends after 2031
Critical Minerals	No phaseout	Phaseout begins 2031
Metallurgical Coal	Not eligible	Eligible through 2029
Foreign Entity Restrictions	None	Yes (phased in)
Transferability	Yes	Yes (not to PFEs)

IRS Circular 230 Required Notice‐‐IRS regulations require that we inform you that to the extent this communication contains any statement regarding federal taxes, that statement was not written or intended to be used, and it cannot be used, by any person (i) for the purpose of avoiding federal tax penalties that may be imposed on that person, or (ii) to promote, market or recommend to another party any transaction or matter addressed herein. 

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OBBB changes reviewed: Over the next few weeks CFO Services will go through the business credits and incentives impacted by the bill.     

In Brief  

The One Big Beautiful Bill Act (OBBB, P.L. 119-21), signed into law on July 4, 2025, brings targeted changes to the Section 45Q Carbon Capture Credit. While the core structure and value of 45Q remains intact, OBBB introduces new restrictions on foreign ownership, modifies transferability rules, and aligns credit rates for different carbon utilization pathways. These changes have significant implications for project sponsors, investors, and compliance teams. 

Key OBBB Changes to 45Q Carbon Capture Credit 

1. Eligibility Restrictions: Foreign Entities 

• Specified Foreign Entities: As of the date of enactment, projects owned by “specified foreign entities” (as defined in IRC §7701(a)(51)(B)) are ineligible for the 45Q credit. 

• Foreign-Influenced Entities: For tax years beginning two years after enactment, projects owned by “foreign-influenced entities” (as defined in IRC §7701(a)(51)(D)) are also ineligible  

• Transferability: Unlike the House bill, the Senate-enacted OBBB does not repeal elective transferability, but it does prohibit transfers to specified foreign entities upon enactment. . 

2. Parity in Credit Rates 

The OBBB brings parity to the credit rates for carbon oxide used in enhanced oil recovery (EOR) and other commercial uses, aligning them with the rates for secure geological storage. This increases the base rate for these uses to match the secure storage rate for facilities placed in service after enactment.  

3. Direct Pay and Monetization 

• Direct Pay: The direct pay option for 45Q remains available for the first five years a facility is in service, regardless of whether the taxpayer is a tax-exempt entity  
• Transferability: Transfer of the credit is still allowed (except to specified foreign entities), providing continued flexibility for project financing

4. Minimum Capture Thresholds and Compliance 

• Thresholds remain unchanged: 
  • Direct air capture: ≥1,000 metric tons/year 
  • Electricity generation: ≥18,750 metric tons/year and 75% capture design capacity 
  • Other industrial: ≥12,500 metric tons/year  
• Prevailing Wage & Apprenticeship: Projects must meet these requirements to receive the higher bonus credit rate  
• Reporting: Detailed records of captured carbon oxide, storage/utilization, and labor compliance are required  

Key Changes, Deadlines, and Restrictions 

Feature	Prior Law (IRA)	OBBB (as Enacted)
Max Credit Rate (Secure Storage)	$85/ton (bonus)	$85/ton (bonus, parity for EOR/commercial use)
Direct Pay	Yes (first 5 years)	Yes (first 5 years)
Transferability	Yes	Yes (not to specified foreign entities)
Foreign Entity Restrictions	None	Specified/foreign-influenced entities ineligible
Construction Start Deadline	1/1/2033	1/1/2033
Capture Thresholds	Unchanged	Unchanged
Bonus Rate (PWA compliance)	Yes	Yes

IRS Circular 230 Required Notice‐‐IRS regulations require that we inform you that to the extent this communication contains any statement regarding federal taxes, that statement was not written or intended to be used, and it cannot be used, by any person (i) for the purpose of avoiding federal tax penalties that may be imposed on that person, or (ii) to promote, market or recommend to another party any transaction or matter addressed herein.