S. 1721 — Energy Freedom Act

This section designates the Act as the “Energy Freedom Act” and sets forth a table of contents.

This section repeals the energy efficient home improvement credit (IRC § 25C), which provides individuals a nonrefundable tax credit equal to 30% of qualified costs (up to $1,200 annually overall, plus up to $2,000 for qualified heat pumps, heat pump water heaters, and biomass stoves/boilers) for energy efficiency improvements to principal residences (e.g., insulation, windows, doors, skylights, and certain heating/cooling/roofing equipment). The repeal applies to property placed in service in taxable years beginning after December 31, 2025. (Thus, taxpayers may claim the credit for qualified improvements placed in service in 2025 and earlier.)

This section repeals the residential clean energy credit (i.e., section 25D, which provides a tax credit of up to 30% for qualified solar electric, solar water heating, fuel cell, small wind energy, and geothermal heat pump property expenditures) for taxable years beginning after December 31, 2025. (Thus, taxpayers may claim the credit for qualifying residential clean energy property expenditures through 2025.)

This section repeals the previously-owned clean vehicle tax credit. (Thus, taxpayers may claim a tax credit of up to $4,000 for the purchase of a qualified previously-owned clean vehicle acquired before January 1, 2026.)

This section repeals the Alternative Fuel Vehicle Refueling Property Credit (IRC §30C) for property placed in service after December 31, 2025, and makes conforming amendments to the Internal Revenue Code and by striking paragraph (6) of 42 U.S.C. 17052(b). (Thus, taxpayers may claim a tax credit equal to 30% of the cost of qualified clean-fuel vehicle refueling property—such as electric vehicle chargers and hydrogen fueling stations—up to $100,000 per property ($1 million cost in eligible low-income or non-urban census tracts) for property placed in service through December 31, 2025; paragraph (6) coordinated the credit with grants under the renewable fuel blend infrastructure program to prevent duplicate federal benefits.)

This section repeals the clean vehicle tax credit (i.e., IRC § 30D credit of up to $7,500 for qualifying new plug-in electric drive motor vehicles) for vehicles placed in service after December 31, 2025. (Thus, taxpayers may claim the credit for qualifying vehicles placed in service through December 31, 2025, and conforming amendments preserve certain prior references to the credit in highway law and other tax provisions.)

This section repeals the second generation biofuel producer credit by striking its provisions from the alcohol fuels credit (IRC § 40). (As background, the credit provided a per-gallon income tax credit to producers of second generation biofuel, defined as biofuel derived from feedstocks other than corn kernel starch—such as agricultural or forestry residues—and related definitions and exclusions.)

This section repeals federal tax incentives for biodiesel, renewable diesel, and alternative fuels, including (1) the income tax credit for biodiesel and renewable diesel used as fuel (sec. 40A); (2) the excise tax credit for alcohol fuel, biodiesel, and alternative fuel mixtures (sec. 6426); and (3) related fuel tax payments for biodiesel, alternative fuel, or sustainable aviation fuel (sec. 6427(e)). (Thus, fuel producers and taxpayers are no longer eligible for these credits or payments after enactment.)

This section repeals the sustainable aviation fuel production credit under IRC §40B (i.e., a tax credit of $1.75 per gallon for qualified fuels that achieve at least a 50% reduction in lifecycle greenhouse gas emissions, relative to 2020 jet fuel baseline) for fuel sold or used after December 31, 2025. (Thus, producers may claim the credit only for fuel sold or used on or before that date.)

This section repeals the renewable electricity production tax credit (i.e., section 45 of the Internal Revenue Code), which provides a production tax credit of up to 2.75 cents per kilowatt hour (inflation-adjusted) for electricity produced at qualified renewable energy facilities (e.g., wind, solar, geothermal). (Thus, taxpayers may claim the credit for electricity produced in taxable years beginning before January 1, 2026.)

This section repeals the new energy-efficient home credit (IRC §45L), which provides eligible homebuilders a tax credit of up to $5,000 (or $2,500 for manufactured homes) for constructing or substantially reconstructing qualified energy-efficient homes that meet specified energy savings standards. (Thus, homebuilders may claim the credit only for homes acquired through December 31, 2025.) It also makes conforming amendments to remove cross-references in IRC §§38, 196, and 1016.

This section repeals the carbon oxide sequestration tax credit (IRC § 45Q). (Thus, taxpayers may claim a per-ton tax credit for qualified carbon oxide securely stored, used in enhanced oil recovery, or utilized at facilities placed in service through December 31, 2025.) It also makes conforming amendments to remove § 45Q from the list of business tax credits and to freeze cross-references to § 45Q in the exempt facility bond rules (IRC § 142) and the direct air capture prize competition (42 U.S.C. § 16298d) as in effect before enactment.

This section repeals the zero-emission nuclear power production credit under IRC §45U. (Thus, taxpayers may claim the credit—generally 0.3 cents per kilowatt hour of electricity (or 1.5 cents with prevailing wage and apprenticeship requirements met)—produced and sold at qualified zero-emission nuclear power facilities through December 31, 2025.)

This section repeals the clean hydrogen production tax credit (i.e., section 45V, which provides a tax credit of up to $3 per kilogram of qualified clean hydrogen based on lifecycle greenhouse gas emissions). (Thus, taxpayers may claim the credit for eligible clean hydrogen produced through December 31, 2025.)

This section repeals the qualified commercial clean vehicles tax credit under IRC §45W (i.e., a general business credit of up to $7,500 for qualified vehicles under 14,000 pounds gross vehicle weight rating or $40,000 for heavier vehicles, for electric, fuel cell, or other non-gasoline/diesel vehicles acquired for use in a trade or business). (Thus, businesses may claim the credit only for vehicles acquired through December 31, 2025.)

This section repeals the advanced manufacturing production credit under IRC §45X (i.e., a tax credit for eligible components produced in the United States, including solar wafers and modules, wind turbine parts, inverters, and battery cells), effective for components produced and sold after December 31, 2025. (Thus, taxpayers may claim the credit for eligible components produced and sold through December 31, 2025.)

This section repeals the clean electricity production credit (IRC §45Y). (Thus, taxpayers may claim the credit—equal to up to 1.5 cents per kilowatt hour of electricity produced and sold at a qualified zero-greenhouse-gas-emissions facility—for facilities placed in service through December 31, 2025.) It also makes conforming amendments to the list of business tax credits in IRC §38(b) and to the definition of qualified property eligible for bonus depreciation in IRC §168(e)(3)(B)(viii).

This section repeals the clean fuel production credit (section 45Z). (Thus, producers may claim a tax credit of up to $1 per gallon (or $1.75 per gallon for sustainable aviation fuel), scaled by emissions factor, for qualified transportation fuel produced through December 31, 2025.)

This section repeals the energy investment tax credit under IRC §48 (i.e., a business tax credit for qualified energy property such as solar electric, wind, and geothermal facilities), effective for property placed in service in taxable years beginning after December 31, 2025. (Thus, taxpayers may claim the credit—generally 6% of basis, up to 50% with applicable bonuses—for eligible property placed in service in taxable years beginning on or before December 31, 2025.) It also makes conforming amendments to related tax provisions (e.g., general business credit limitations, other energy credits).

This section repeals the qualifying advanced energy project investment tax credit (i.e., IRC §48C credit for qualified investments in manufacturing facilities producing clean energy components such as batteries, solar wafers, and wind turbines) effective January 1, 2026. (Thus, the credit is available for eligible property placed in service through December 31, 2025.)

This section repeals the clean electricity investment credit (section 48E(i.e., a technology-neutral investment tax credit of up to 30% of qualified costs for zero-emission electricity generation facilities, or up to 50% with prevailing wage and apprenticeship requirements) for facilities placed in service after December 31, 2025. (Thus, taxpayers may claim the credit for qualified facilities placed in service through December 31, 2025, and the repeal includes conforming amendments removing cross-references in the energy credit (sec. 46), at-risk rules (sec. 49), special rules (sec. 50), and depreciation provisions (sec. 168).)

This section repeals the energy efficient commercial buildings deduction (IRC §179D). (Thus, building owners may claim the deduction—up to $5.36 per square foot in 2025 for qualifying energy-efficient property—only for property placed in service through December 31, 2025.)

This section repeals subchapter A of chapter 38 (i.e., the excise tax on petroleum under section 4611, currently 9 cents per barrel on domestic crude oil and imported petroleum products, which funds the Oil Spill Liability Trust Fund), effective January 1, 2026. The section also makes conforming amendments to related excise tax provisions (e.g., revising exemptions in section 4671(c), removing petroleum tax references from trust fund deposits under sections 9507 and 9509, and preserving pre-enactment definitions of petroleum substances in multiple sections).

This section repeals IRC §§6417 and 6418, which authorize elective direct payment (in lieu of tax credits) for clean energy production and investment tax credits (including those for electricity produced from renewable resources) and allow eligible taxpayers to transfer such credits to unrelated third parties. It also makes conforming amendments to IRC §§39, 50, and 56A and to the Inflation Reduction Act (P.L. 117-169, §13801(f)) by striking related references. The repeal applies to taxable years beginning after December 31, 2025.