The July 4 enactment of budget reconciliation legislation has started the clock on a number of tax credit related deadlines, including potentially new guidance on the definition of “beginning of construction” for a project and implementation of foreign entity of concern (FEOC) provisions effecting public power utilities’ ability to claim energy tax credits and provide supplies for energy tax credit projects.
It may also trigger budget sequestration later this year.
APPA provided a rundown on some of the near-term deadlines:
August 18, 2025 (Deadline for Guidance on definition of “beginning of construction”)
The deadline announced by President Trump (in a July 7 executive order) for guidance from the Treasury Department on the definition of “beginning of construction” for purposes of determining project eligibility for energy tax credits and implementation of FEOC provisions determining who can claim certain energy tax credits, and limiting the sourcing of materials for certain tax credit projects. For more information about current guidance related to the IRS definition of “beginning of construction” see “H3: When Is ‘Beginning of Construction’?” in the Elective Pay Blueprint for Public Power.
September 30, 2025 (Commercial Clean Vehicle Credit)
Vehicles must be acquired to qualify for Commercial Clean Vehicle Credit (26 USC 30D). It is worth noting that in an exchange prior to the House’s vote with Rep. Darrin LaHood (R-IL), House Ways & Means Committee Chairman Jason Smith (R-MO) said “it is the legislative intent that vehicles … be treated as ‘acquired’ as of the date on which a written binding contract is entered into for their acquisition and a payment has been made.” Treasury is not required to abide by such “intent,” but it seems likely given the chairman’s expressed preference, APPA said.
November 15, 2025 (Deadline to file Calendar Year 2024 Form 990 Returns to claim elective payment)
For entities that sought an extension of time to file, Calendar Year 2024 Form 990 Return’s to claim elective payment must be filed by this date. This deadline is particularly salient for entities operating on a calendar year basis that are considering claiming the existing nuclear tax credit (26 USC 45U).
Currently there is no guidance from Treasury on the credit, including the definition of “gross receipts” which is central to claiming the credit.
This may not be a time sensitive concern to for profit entities that can always file an amended return to reflect new guidance.
However, public power utilities face two hurdles. On the one hand, under elective payment a public power utility cannot retroactively file an elective pay return. On the other hand, a public power utility filing an elective pay return faces a 20 percent penalty on any overstated tax credit.
While some public power utilities are proceeding with filing, all would benefit from more concrete guidance from Treasury, APPA said, noting that it is working with allies in Congress to press Treasury for the guidance.
December 31, 2025 (PTC and ITC Tax Credits)
For the section 45Y production tax credit and section 48E investment tax credit (PTC and ITC), project construction must begin:
• To avoid new foreign entity of concern ownership and supply chain rules enacted as part of budget reconciliation law; and
• To obtain at least 85 percent of otherwise allowed credit IF domestic content requirements are not met (projects that do not meet domestic content requirements and do not qualify for a statutory waiver receive no elective payment if construction begins after December 31, 2025).
APPA also noted that in early 2026, the Office of Management and Budget (OMB) assess PAYGO scorecard and instructs agencies to begin sequestration if required.
Relative to prior law, the budget reconciliation bill is estimated to increase federal deficits over the next decade by roughly $4 trillion – including increased interest expenses as a result of those deficits.
Under Statutory Pay-As-You-Go Act (PAYGO) rules, two weeks after the end of the session, OMB is required to assess the budget effect of legislation passed during the session. Insofar as deficits would increase, OMB is required to order across-the-board spending cuts (sequestration) to entitlement spending. This includes federal payments for direct payment bonds and energy tax credit elective payments.
However, it is worth noting that in the Senate they decided to “score” the bill not compared to current law, but current policy. Based on that baseline, the bill would appear to decrease federal deficits, APPA said.
While there is no precedent for OMB using a current policy baseline in its PAYGO assessment, the Senate’s move to a current policy baseline was also unprecedented.
APPA said it will begin discussions with the House and Senate Budget Committee to determine whether PAYGO will be triggered by H.R. 1, and, if so, to begin to make the case for a waiver of PAYGO to protect direct payment bonds and elective pay tax credits.
