Introduction

On May 22, 2025, the U.S. House of Representatives approved H.R. 1, also known as the “One Big Beautiful Bill Act” (the House Bill).¹ The House Bill will next be considered by the U.S. Senate. The House Bill includes a number of provisions of interest to Wilson Sonsini clients. First, the House Bill would permanently extend many of the tax provisions initially introduced by P.L. 115-97, more commonly known as the “Tax Cuts and Jobs Act” (TCJA) and introduces other significant income tax changes relevant to businesses. In addition, the House Bill proposes to accelerate termination of or eliminate several of the tax provisions in P.L. 117-169, more commonly known as the “Inflation Reduction Act” (IRA) related to renewable energy credits. This alert summarizes the key provisions companies need to know in the House Bill.

For expanded coverage of the impact of the House Bill on Energy and Climate Solutions, please see this Wilson Sonsini alert, and for expanded coverage of the general tax provisions, please see this Wilson Sonsini alert.

Summary of General Tax Provisions Impacting Domestic and Multinational Businesses

• The House Bill temporarily suspends the requirement to capitalize and amortize domestic R&D expenses for tax years beginning on or after January 1, 2025, and before January 1, 2030. Foreign R&D costs must still be amortized over a 15-year period.
• The deduction afforded to owners of certain pass-through businesses for qualified business income (QBI) is increased to 23 percent (resulting in an effective tax rate of 28.49 percent on QBI) and permanently extended. In addition, the complex phase-in limitations are replaced with a simplified two-step process that reduces the deduction for taxpayers with taxable income over the threshold amount, increasing the availability of the deduction.
• The House Bill reinstates “bonus depreciation” for qualified property placed in service on or after January 20, 2025, and before January 1, 2030 (with certain exceptions), and increases the thresholds on permitted bonus depreciation. In addition, the full cost of certain “qualified production property” acquired or for which construction begins on or after January 1, 2025, and before January 1, 2029, and that is placed into service before January 1, 2033, is also eligible for bonus depreciation. The property must be used in connection with the manufacturing, agriculture and chemical production or refining of tangible personal property and must result in “a substantial transformation of the property comprising the product.”
• The calculation of the cap on the deduction for net business interest expense is changed from 30 percent of a taxpayer's earnings before income taxes (EBIT) to 30 percent of earnings before income taxes, depreciation and amortization (EBITDA), as was the case prior to January 1, 2022.
• Thresholds for filing IRS Forms 1099-MISC and 1099-NEC (miscellaneous income and nonemployee compensation, respectively) reporting is increased from at least $600 in a taxable year to at least $2,000 in a taxable year, indexed to inflation. The threshold for filing IRS Form 1099-K (payment card and third-party transactions) is increased from at least $600 in a taxable year to more than $20,000 and 200 transactions, significantly reducing the 1099-K filing burdens.
• As anticipated, the House Bill increases the cap on deductions for state and local taxes (SALT) to $40,000 from $10,000 (or $20,000 for a married taxpayer filing a separate return). The cap is phased down to $10,000 for taxpayers with a modified gross income over $500,000 (or $5,000 and $250,000 for a married taxpayer filing a separate return). The House Bill also eliminates the pass-through entity tax (PTET) workaround for businesses engaged in Specified Service Trade or Business (SSTBs), which has been a popular planning tool for owners in pass-through entities.
• The House Bill slightly decreases rates for deduction of foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) (from 37.5 percent to 36.5 percent and 50 percent to 49.2 percent, respectively), but the proposed rates are significantly higher than rate cuts expected to go into effect on January 1, 2026 (21.875 percent and 37.5 percent). Similarly, the House Bill sets the rate on base erosion anti-abuse tax (BEAT) to 10.1 percent from 10 percent currently, but lower than the 12.5 percent rate expected to go into effect on January 1, 2026.
• In what appears to be a reaction to the Organisation of Economic Co-operation and Development’s Pillar Two initiative, the House Bill introduces a new income tax regime that increases tax rates on taxpayers associated with foreign countries that impose an “unfair foreign tax,” including taxes imposed under an undertaxed profits rule, digital services taxes, and diverted profits taxes. Payments made to persons associates with such countries may also be subject to increased withholding tax rates.

Summary of Provisions Impacting the Energy and Climate Solutions Sector

• Eight tax credits enacted or extended by the IRA would fully terminate on December 31, 2025, including all of the electric vehicle (EV)-related tax credits and certain energy efficient home credits.
• The clean energy production credit (Tech-Neutral PTC) and clean energy investment credit (Tech Neutral ITC) would terminate for any qualified facility (other than qualified nuclear facilities) or energy storage technology (EST), as applicable, which begins construction more than 60 days after enactment of the House Bill, and for any qualified facility (other than qualified nuclear facilities) or EST, as applicable, that is placed in service after 2028. In addition, several other energy-related credits would terminate earlier than what is provided for under current law.
• The House Bill retains IRA’s transferability regime for eligible credits, subject to the timing of the underlying credit and, in some cases, earlier termination dates specifically for transferability.
• The House Bill introduces significant restrictions beginning in 2026 around certain “prohibited foreign entities” (PFEs), which includes both “specified foreign entities” (SFEs) and “foreign-influenced entities” (FIEs). SFEs consist of various foreign entities of concern appearing on certain national security lists, as well as “foreign-controlled entities,” which are focused on the “covered nations” of China, Iran, North Korea, and Russia, and FIEs include entities for which one or more SFE has significant ownership, control, or influence over its operations. These rules limit not only who can invest in renewable energy projects, but also who can supply components and know-how to develop them.
• Except for the foreign entity restrictions discussed above, the House Bill would not affect the carbon sequestration tax credit and extends the clean fuels tax credit to a new proposed termination date of December 31, 2031. In addition, the House Bill requires that to qualify for the clean fuels tax credit, the fuel produced must be exclusively derived from a feedstock produced or grown in the U.S., Mexico, or Canada.

Table 1: House Bill Changes to IRA Tax Credit Termination Dates

Tax Credit	Existing Termination Date	Proposed Termination Date	Transferability Termination
Tech-Neutral PTC – §45Y	December 31, 2035	Non-nuclear: Beginning construction more than 60 days after enactment or placed in service after December 31, 2028 Nuclear: Beginning construction after December 31, 2028	No changes – remains eligible for transferability
Tech-Neutral ITC – §48E	December 31, 2035	Non-nuclear: Beginning construction more than 60 days after enactment or placed in service after December 31, 2028 Nuclear: Beginning construction after December 31, 2028	No changes – remains eligible for transferability
Energy Efficient Home Improvements – §25C	December 31, 2032	December 31, 2025	No changes – not eligible for transferability under IRA
Residential Clean Energy – §25D	December 31, 2032	December 31, 2025	No changes – not eligible for transferability under IRA
Used Electric Vehicles – §25E	December 31, 2032	December 31, 2025	No changes – not eligible for transferability under IRA
Alternative Fuel Vehicle Charging Stations – §30C	December 31, 2032	December 31, 2025	December 31, 2025 (by virtue of credit termination)
Electric Vehicles – §30D	December 31, 2032	December 31, 20252	No changes – not eligible for transferability under IRA
New Energy Efficient Home – §45L	December 31, 2032	December 31, 20253	No changes – not eligible for transferability under IRA
Carbon Sequestration – §45Q	December 31, 2032	No changes to phase-out date.	Transferability repealed for projects that begin construction after the second anniversary of enactment of the new law
Nuclear – §45U	December 31, 2032	December 31, 2031	December 31, 2031 (by virtue of credit termination)
Clean Hydrogen – §45V	December 31, 2032	December 31, 20254	December 31, 2025 (by virtue of credit termination)
Commercial Electric Vehicles – §45W	December 31, 2032	December 31, 2025	No changes – not eligible for transferability under IRA
Advanced Manufacturing – §45X	December 31, 20325	December 31, 2027 (for wind energy components) December 31, 2031 (for all other components)6	December 31, 2027
Clean Fuels – §45Z	December 31, 2027	December 31, 2031	December 31, 2027
Legacy Investment Tax Credit – §48	January 1, 2035, for §48(a) geothermal heat pump credit	January 1, 2032, for §48(a) geothermal heat pump credit7	Transferability repealed for projects that begin construction more than 2 years after the proposed legislation is enacted

For more information about the tax and energy provisions of the One Big Beautiful Bill and other issues pertaining to tax and energy and climate solutions, please contact Myra Sutanto Shen, Nicole Gambino, Andrew Bryant, or any member of the Tax or Energy and Climate Solutions practices at Wilson Sonsini.

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[1] Text - H.R.1 - 119th Congress (2025-2026): One Big Beautiful Bill Act, H.R.1, 119th Cong. (2025), https://www.congress.gov/bill/119th-congress/house-bill/1/text, as amended by the Amendment to Rules Committee Print 119-3.

[2] The House Bill creates a limited exception to this expiration date, under which vehicles produced by manufacturers that have not sold over 200,000 “covered vehicles” (i.e., any vehicles that would have qualified for the Section 30C credit) for use in the U.S. between December 31, 2009, and December 31, 2025, may qualify for the credit, if they are placed in service in calendar year 2026.

[3] Homes that have commenced construction by May 12, 2025, are eligible for the credit if they are acquired by December 31, 2026.

[4] Under the termination dates provided by both IRA and the House Bill, hydrogen facilities must have begun construction on or prior to the relevant termination date to be eligible for the 10-year production-based credit.

[5] Under IRA, the Section 45X credit begins to phase out in 2030 when the credit is worth 75 percent, and steps down in 25 percent increments until full termination in 2033; this phase-out schedule only applies to eligible components and not critical minerals. 

[6] The House Bill does not change the existing phase-out schedule, meaning the credit would be worth 75 percent in 2030 and 50 percent in 2031, and also imposes this schedule (and termination) on critical minerals.

[7] Under the House Bill, the legacy ITC for geothermal heat pumps would phase out as follows: for property beginning construction in 2030, the base credit would be 5.2 percent (26 percent with prevailing wage and apprenticeship multiplier) and for property beginning construction in 2031, the base credit would be 4.4 percent (22 percent with prevailing wage and apprenticeship multiplier).