Tag: One Big Beautiful Bill Act

Energy Tax Incentives in the OB3 Act: What They Mean for CRE

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Major changes to the federal tax code’s clean energy incentives, signed into law on July 4 by the One Big Beautiful Bill Act (OB3 Act), continue to generate questions regarding the future of building-related solar, storage, and similar projects.

Why It Matters

  • The new law accelerates the phase-down of tax credits, shortens eligibility timelines, and adds new foreign content and control rules, creating an urgent planning window for energy-related building investments.
  • Regarding energy-related building investments, projects that begin construction in 2025 and after should consider:
    • Tax credits that phase-out over the next few years (such as the Section 48E “tech-neutral” credit for solar, the Section 179D deduction and 45L credit for energy efficiency projects, and the Section 30C credit for EV charging stations);
    • Tax credits that remain available well into the 2030s (such as Section 48E for energy storage); and
    • Permanent options for “full expensing” that can accelerate tax write-offs of energy-related and other building investments, regardless of Section 48E or other tax credit availability.

Executive Order Tightens Rules    

  • A July 7 White House executive order directs the U.S. Treasury Department to consider revising the IRS’s longstanding “5% safe harbor” test to determine a project’s “beginning of construction” date, which could further tighten tax credit eligibility for investments such as rooftop solar. (Roundtable Weekly, July 11)
  • The EO also directs Treasury to strictly enforce the OB3 Act’s scheduled termination of clean energy production and investment tax credits under Sections 45Y and 48E of the Internal Revenue Code. Updated guidance is anticipated in August. (Bloomberg, July 7) (Utility Dive, July 9)
  • In a similar move, on Tuesday, Interior Secretary Doug Burgum issued a final order requiring high-level departmental scrutiny of solar projects on public lands, and on private property that requires Interior’s approval (such as solar panels on historic buildings, or installed as part of projects impacting federally-listed endangered species habitat). (Politico, July 18).   

Market Impact

  • A new POLITICO analysis estimates that more than 662,000 jobs and $565 billion in investment tied to clean energy projects announced since 2017 could be at risk under the OB3 Act. (PoliticoPro July 30)
  • Many of these projects depended on long-term planning horizons and Biden-era tax incentives, now constrained by tighter deadlines and new eligibility rules.

EPA Endangerment Finding

  • In related news, the Trump administration this week proposed eliminating the 2009 “Endangerment Finding.” This Obama-era decision underpins federal regulations to address climate change and limit greenhouse gas emissions from power plants, vehicles, and other sources. (EPA Press Release, July 30) (Politico, July 29)
  • The EPA’s proposal only impacts federal-level rules. Governors and officials in California, Colorado, New York, and elsewhere pledged to continue their own climate regulatory efforts, citing the need for science-based action. (BBC News, July 29; The Hill, July 29; Colorado Governor statement; NYS-DEC statement.)
  • In this regard, efforts by EPA Administrator Lee Zeldin to rescind the Endangerment Finding will likely have minimal impact on state and local Building Performance Standards (BPS) that aim to reduce energy use and emissions from commercial and multifamily properties. (See RER’s 20-Point BPS Guide (Oct. 2024)).
  • The EPA’s proposal is not yet final and will undergo a 45-day public comment period once published in the Federal Register. (PoliticoPro, July 29)

As regulatory guidance evolves, RER will continue advocating for clear, workable policies that support long-term real estate energy investments.

New Tax Law to Spur Housing Construction and Property Improvements as Congressional Leaders Explore Options for Next Tax Bill

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President Donald Trump signed the One Big Beautiful Bill Act (OBBB Act) into law on July 4, the culmination of months of work by congressional Republicans to reshape federal tax and spending policies. The legislation included provisions long advocated by The Real Estate Roundtable (RER), such as a significant expansion of affordable housing tax incentives, accelerated depreciation for property improvements, and reform of tax accounting rules for condominium construction.

RER Summary of Real Estate Related Provisions

Affordable Housing Boost

  • The OBBB Act enacts landmark changes to address the nation’s housing shortage through enhancements to long-standing development incentives. (Roundtable Weekly, July 3)
  • The OBBB Act expands the Low-Income Housing Tax Credit (LIHTC) by permanently increasing state LIHTC allocations by 12% and reducing the private activity bond financing requirement for 4% LIHTC projects from 50% to 25%. The latter provision will allow more affordable housing projects to receive tax credits without a direct allocation from the state.
  • The bill’s overhaul of tax provisions is projected to support the development of up to 1.2 million affordable rental units over the next decade. (PoliticoPro, July 9)
  • These changes to the LIHTC represent “the single largest increase in affordable housing development resources in at least 25 years,” said Peter Lawrence, chief public policy officer at Novogradac. (PoliticoPro, July 9)

Other OBBB Tax Changes Will Stimulate Housing Construction, Property Upgrades, and Real Estate Investment

  • Bonus Depreciation: The new tax law permanently restores immediate 100% expensing of qualifying capital expenditures, including appliances, fixtures, leasehold improvements, and interior improvements to nonresidential property. The provision will encourage capital investment and spur real estate improvements by reducing the after-tax cost of modernizing and upgrading existing properties. (RER Summary of Real Estate Related Provisions)
  • Condominium Construction: OBBB ends a discriminatory tax accounting rule that unfairly created phantom income for condo developers with respect to the pre-sale of units. The prior rule requiring condo developers to use the percentage of completion method of accounting raised hurdles for construction financing and discouraged new housing construction. OBBB will allow developers to use the completed contract method, aligning tax liability with actual receipts.
  • Opportunity Zones (OZs): OBBB permanently extends the Opportunity Zones (OZ) tax incentives, establishes a new designation of OZ census tracts every 10 years, and going forward, creates a 5-year rolling deferral period for capital gains invested in opportunity funds. Since their enactment in 2017, OZs have attracted over $120B in capital for low-income communities, with most investment going towards new housing and other productive real estate development. (Joint Committee on Taxation, 2024; Novogradac, Feb. 2025; Economic Innovation Group, March 2025)
  • On the latest episode of the Walker Webcast’s Most Insightful Hour in CRE, RER member Willy Walker (Chairman and CEO, Walker & Dunlop) and economist Dr. Peter Linneman (Principal, Linneman Associates) discussed the OBBB Act, tariffs, impacts on construction costs, affordable housing, single and multifamily supply, CRE markets, and much more. (Watch Webcast) (ConnectCRE, July 9)

State-Level Initiatives Strengthen Federal Housing Efforts

  • Rising construction costs and ongoing affordability challenges have prompted states to complement federal initiatives like LIHTC.
  • States such as Tennessee, Georgia, and Michigan have introduced innovative financing programs—including state-level tax credits and tax increment financing (TIF), leveraging future tax revenues generated by increased property values to sustainably fund and accelerate housing projects. (GlobeSt. July 11)
  • This week, RER member David O’Reilly (CEO, Howard Hughes Holdings) appeared on CNBC to discuss interest rates, housing market, and consumer demand.
  • Florida will eliminate its longstanding tax on commercial rents effective Oct. 1, 2025, becoming the first and only state to repeal the tax. The move is expected to reduce costs for tenants across office, industrial, and retail sectors, enabling businesses to reinvest capital into operations, local communities, and real estate. (GlobeSt. July 10)

Looking Ahead

  • Senate Finance Committee Chair Mike Crapo (R-ID) said this week that Republicans are eyeing a second party-line reconciliation package this fall to pursue policy priorities left out of the final OBBB Act.
  • “I’ve always been in favor of a three-bill strategy and there’s a ton of things that we need to do,” Sen. Crapo said (Politico, July 9).
  • GOP leaders have discussed reworking provisions flagged by the Senate parliamentarian during OBBB Act negotiations, potentially reviving items such as additional tax reforms and deeper spending cuts.
  • House Speaker Mike Johnson (R-LA) and House Budget Chair Jodey Arrington (R-TX) are also pushing for fall action, though Sen. Crapo cautioned that timelines remain fluid. (Politico, July 8 | Fox News, July 6)
  • “We’ve been planning a second reconciliation bill for the fall attached to the next fiscal year, and then potentially one in the spring,” Speaker Johnson said on Fox News Sunday. “That’s my plan. Three reconciliation bills before this Congress is over. I think we can do that.” (Fox News, July 6)

“Revenge Tax” Provision

  • The final OBBB Act excluded a provision opposed by The Roundtable that would have raised taxes on foreign investment that originated in countries deemed to have unfair tax policies. Proposed Section 899 could reappear, however, if international tax talks to exempt US companies from a global tax deal falter. (Roundtable Weekly,  June 27)

The G7 agreement to agreement is still only a “statement of intent,” with implementation details unresolved, raising the risk that Section 899 could return in a future reconciliation package, according to Tax Notes. “Republicans made clear they’d bring it back if G7 partners slow-walk the deal,” said Danielle Rolfes of KPMG. (Tax Notes, July 10)

OBBB Act Signed Into Law: Energy Policy and CRE Impacts

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Sustainable Renewable Energy Concept With Wind Turbines, Solar Panels And City Buildings Background.

President Trump signed the “One Big Beautiful Bill Act” (OBBB) into law on July 4, enacting a sweeping overhaul of tax policy with far-reaching implications for energy, real estate, and investment. The legislation, followed by a companion executive order this week, includes provisions that scale back the Inflation Reduction Act (IRA), tax credits, and modifies rules for solar and wind development.

Clean Energy Tax Incentives

  • While the OBBB Act pares down many energy tax incentives from the Inflation Reduction Act, a number of important elements remain relevant to CRE:
  • The Act does not include a proposed excise tax on solar and wind projects that would have penalized facilities using materials from China and other designated foreign entities. (WSJ, June 29; CBS News, July 1; POLITICO, July 1)
  • 100% Expensing Provisions: Building owners may now fully write off the costs of clean energy projects, including solar installations when placed in service, regardless of tax credit eligibility or availability. Accelerated depreciation significantly enhances return on investment for such projects.
  • Tariffs and Duties: High tariffs remain in place on imported solar components, especially from Southeast Asia, as part of ongoing trade enforcement and reshoring efforts. These tariffs apply independently of any tax credit eligibility. (Solar Power World, May 20)
  • Cost-Effectiveness of Renewables: Despite the policy changes, utility-scale solar and onshore wind remain the most cost-effective new-build energy sources even without tax subsidies, according to Lazard’s 2025 Levelized Cost of Energy report.

New Executive Order

  • The EO directs the Treasury Department to:
  • Strictly enforce the termination of clean electricity production and investment tax credits under Sections 45Y and 48E, and to more narrowly define when a project is deemed to have started construction. (Bloomberg, July 7)
  • Issue updated guidance within 45 days (August 18) that tightens the definition of when clean energy projects begin construction, curtailing reliance on the long-standing “5% safe harbor” provision that allowed developers to qualify for tax credits by incurring just 5% of project costs. (PoliticoPro, July 10)
  • Restrict the use of broad safe harbors unless a “substantial portion” of a project is actually built.
  • The guidance also requires projects to demonstrate “continuous construction,” a threshold they can meet by completing the project within four years. (PoliticoPro, July 10)
  • The move creates a layer of uncertainty for companies planning solar and wind projects that have relied on the 5% rule under IRS Notice 2021-41. Additional guidance is expected from Treasury to clarify the scope and enforcement.

ENERGY STAR

  • The ENERGY STAR program long supported by real estate, manufacturing, and consumer tech industries, remains intact following the OBBB Act’s funding rescissions.
  • RER continues to lead coalition efforts to preserve the program, including spearheading a June 6 letter to Congress signed by more than 30 organizations, urges continued support for ENERGY STAR as a voluntary public-private partnership. (Roundtable Weekly, June 6)

RER will work closely with Congress, federal agencies, and coalition partners to shape practical guidance and protect real estate’s role in the clean energy transition.

Roundtable Statement on Senate Passage of the One Big Beautiful Bill Act

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Statement by Real Estate Roundtable President and CEO Jeffrey D. DeBoer

(WASHINGTON, D.C.) —“The Real Estate Roundtable supports the Senate Amendment to H.R. 1, the One Big Beautiful Bill Act. We urge its final passage and speedy enactment. This legislation will spur needed investment in our nation’s housing supply, strengthen urban and rural communities, and grow the broader economy to the benefit of all Americans.”

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