Greg Matlock, EY Americas Tax Leader for Oil & Gas and Chemicals and Metals & Mining, said he didn\u2019t think this degree of changes to the 45Y and 48E tax credits \u2013 in particular the 60-day deadline \u2013 was anticipated. \u201cFrom a commercial perspective, it’s not a unilateral decision most of the time on whether you can begin construction,\u201d he said.<\/span><\/span><\/span><\/span><\/span><\/span><\/li>\n<\/ul>\nDive Insight:<\/h3>\n
Matlock said there was always an expectation that this administration and Congress would seek to make material changes to the clean energy provisions of the IRA, but his sense from talking to clients Thursday morning was that the 60-day clock took them by surprise.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\nMurphy said that he was \u201cpersonally surprised\u201d by the changes to the 45Y production credit and 48E investment credit as well \u2013 the 60-day deadline especially.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n\u201cI think there was a general expectation in the sector that the House bill was kind of the bookend of negotiations, and I think that amendment has clearly taken that and moved that goal post a bit,\u201d Murphy said. \u201cThat 60 days start-of-construction requirement, if that were to stay, is going to have a significant impact on projects that go forward \u2026 That\u2019s a very tight timeline for any developer to try to move the needle and qualify.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\nIf this bill is passed by the Senate, the deadline will go into effect 60 days after President Donald Trump signs it into law. A project that breaks ground during that period will then have to be placed in service by the end of 2028 to qualify for the 45Y or 48E credits, per the House\u2019s proposed new phaseout deadline.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\nThe legislation carves out many of the IRA\u2019s nuclear provisions, and carbon capture is \u201clargely unmodified,\u201d Matlock said.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\nThe preservation of tax credit transferability through 2032 for 45Y and 48E is \u201csomewhat of a small victory,\u201d Murphy said. \u201cBut I put it in the small victory column because that 60-day clock combined with having to have projects in service by the end of 2028 \u2013 those are fairly significant limitations on how many projects are ultimately going to qualify for the credit.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\nMatlock said that if these changes to the IRA remain, he expects capital to be redirected, and a \u201cslightly different growth curve for different technologies that are treated differently under this revised framework. It\u2019s also going to change the mix of who can invest in these projects.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\nThe House voted to phase out transferability for the 45Z clean fuel production tax credit and the 45X advanced manufacturing PTC after 2027, and if those projects \u201ccan’t sell credits after 2027, that changes the investor mix,\u201d Matlock said.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n\u201cIt’s not just that a developer can unilaterally go out and provide proof of concept on their project, generate a credit and sell it in the open market to a willing buyer,\u201d he said. \u201cYou’re going to have to get a little more creative \u2026 It’s definitely going to put pressure on financing of projects, no doubt, and it probably changes the mix of development and the speed of development on electron versus decarbonization type projects.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\nNow that the bill has been sent to the Senate, \u201cit’s a little bit of wait and see,\u201d Matlock said. \u201cYou’ve had public expectations that some things may get softened a little bit. But the House has been, I think, publicly fairly stern in saying, \u2018We don’t want a whole lot of changes here.\u2019 \u2026 Our expectation is there will be some level of change, just the depth and breadth of those changes is unknown at the moment.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n