Tax credits and ‘foreign entity of concern’ under H.R. 1

Insights from the EY Center for Tax Policy

Legislation (H.R. 1) signed on July 4 takes a comprehensive approach to tax credits that support healthcare, housing, innovation, and domestic manufacturing, in addition to energy-related initiatives. The Act rolls back many individual and residential clean energy incentives from the 2022 Inflation Reduction Act (IRA), phases out wind and solar projects sooner, and adds additional foreign-entity-of-concern (FEOC) requirements for the majority of the energy tax credits. The IRA’s provisions related to direct pay and transferability remain in place.

In addition to H.R. 1, an executive order (EO) President Trump issued July 7 directed the Treasury Secretary to strictly enforce these changes, including implementing tighter rules on what qualifies as “beginning of construction” and limits on safe harbor provisions, creating new complexity for energy and fuel project developers and investors. The EO also directed Treasury to provide more guidance on the complex FEOC restrictions related to energy tax credits and how these restrictions may apply to various tax credits beyond energy.

Join Ernst & Young LLP tax professionals for a webcast covering immediate steps companies may consider to help navigate the complex tax credit landscape after H.R. 1, including:

• Documenting eligibility now for energy tax credits on both current and upcoming projects and reviewing project timelines to determine if acceleration may be appropriate, considering revised credit eligibility timelines and sunset dates
• Evaluating ownership and control of credit-eligible projects and audit supply chain relationships to address compliance with FEOC requirements
• Updating internal due diligence, compliance and reporting processes to reflect the latest regulatory expectations

Panelists

• Greg Matlock, EY Global Energy & Resources Tax Leader; EY Americas Energy Transition and Renewable Energy Leader
• Brian Murphy, EY Americas Power & Utilities Leader
• Kerry Funderburk, EY US Power and Utility Indirect Tax Sector Leader

Moderator

• Adam Bering, Principal, Credits & Incentives, Ernst & Young LLP

EY webcast managed and produced by Ernst & Young LLP’s Tax Technical Knowledge Services Group, Washington, DC: Lynn Fairfax