The One Big Beautiful Bill Act (OBBBA) modifies the §45X production credit, preserving its significance in clean-energy supply chain policy. Notable amendments introduce a domestic-content requirement for related party sales of integrated components, expedite the phase-out for select sectors, and prohibit credits for products receiving “material assistance” from restricted foreign entities.

The OBBBA maintains credits for solar, battery, and critical mineral manufacturers, but speeds up the phase-out of wind-energy credits and adds restrictions on some components. The §45X Advanced Manufacturing Credit still offers significant incentives for most clean-energy producers.

These recent OBBBA updates focus on promoting U.S. sourcing by introducing a domestic-content threshold for related-party sales and implementing additional safeguards to ensure compliance. While sectors such as wind energy and metallurgical coal face accelerated phase-outs, solar and battery manufacturers can continue to rely on the existing structure of the credit. For critical minerals, the majority of credits remain in place, with gradual reductions that allow for strategic planning.

By focusing on domestic manufacturing and adapting to compliance rules, companies in these sectors can optimize credits and support sustainable growth. This approach upholds U.S. leadership in clean energy and maintains incentives for key industries.

Domestic-Content Requirement

Moving forward, to claim and integrated component as a qualified related party sale, at least 65 percent of the direct material cost of the integrated component must come from primary components mined or manufactured in the United States. The new domestic content rule applies to tax years that begin after December 31, 2026.

Phase-out and Termination Schedule

• Wind energy components credits ends after 2027
• Metallurgical coal (now added to the critical-mineral list) credits ends after 2029.
• Credits remains for other critical minerals on the original timeline with decline in 2031:
  • 75% in 2031
  • 50% in 2032
  • 25% in 2033
  • 0% thereafter

Foreign-Entity Restrictions

Starting with the bill’s enactment, an “eligible component” is disqualified if it contains any material assistance from a prohibited foreign entity. In addition, no credit is allowed to a taxpayer that is itself a specified foreign entity or a “foreign-influenced” entity as defined in §7701(a)(51)(D).

Inclusion of Metallurgical Coal

Metallurgical coal used for steelmaking now qualifies as an “applicable critical mineral,” but only until the 2029 sunset and at a reduced 2.5 percent rate.

ICS Tax understands the technical and regulatory details of the 45X credit, ensuring your claim is accurate, complete, and fully aligned with IRS requirements. Contact us for qualifications.