Energy Freedom Act
Energy Freedom Act (S. 1721) proposes a sweeping repeal of Washington’s green energy and energy-efficiency tax incentives. Introduced in May 2025 by Sen. Lee and referred to the Senate Finance Committee, the bill would repeal a broad suite of federal tax credits and incentives designed to promote energy efficiency, renewable energy, alternative fuels, hydrogen, carbon capture, advanced manufacturing, and related technologies. The effective date language generally provides that most repeals apply to property or projects placed in service after December 31, 2025 (with some variations for certain credits that refer to acquisitions after that date). In addition to eliminating these incentives, the bill also repeals the federal tax on petroleum and eliminates allowances related to elective payment and transfer of credits. If enacted, the overall effect would be a substantial pullback of government subsidies aimed at accelerating clean energy, electrification, and low-emission technologies, shifting the financial incentives away from these policies and toward a more market-driven approach. The proposal would affect homeowners, businesses, energy producers, and equipment manufacturers by removing credits that currently help finance energy-efficient home improvements, residential and commercial clean energy installations, alternative fuels, electric vehicles, biofuels, sustainable aviation fuel, nuclear and hydrogen projects, and other low-emission technologies. It would also remove mechanisms for transferring credits and for taxpayers to elect certain energy-property payments. In short, the bill aims to repeal a wide array of existing energy-related tax subsidies and related provisions.
Key Points
- 1Sweeping repeal of major energy and clean-energy tax incentives
- 2- Repeals include: energy-efficient home improvements (Section 2), residential clean energy (Section 3), previously-owned clean vehicles (Section 4), alternative fuel vehicle refueling property (Section 5), clean vehicle credits (Section 6), biofuels and related incentives (Sections 7-8), sustainable aviation fuel (Section 9), electricity from renewables (Section 10), new energy-efficient home credit (Section 11), carbon capture (Section 12), zero-emission nuclear power (Section 13), clean hydrogen (Section 14), various clean-vehicle credits (Section 15), advanced manufacturing credits (Section 16), multiple clean-energy production credits (Sections 17-18), general energy credit (Section 19), and other related credits (Sections 20-21, 22).
- 3Broad categories of credits affected
- 4- Home energy efficiency (25C, 25D, 45L), vehicle and fueling credits (30D, 40B, 45W, 30C), biofuels and alternative fuels (40A, 6426-related credits), renewable electricity and production credits (45, 45Y, 45Z, 48, 48C, 48E), carbon capture (45Q), hydrogen (45V), and nuclear-related credits (45U).
- 5Repeal related to petroleum taxes
- 6- Section 23 would repeal the tax on petroleum, which would substantially alter the federal tax treatment of petroleum products and related compliance rules.
- 7Elimination of credit transfers and elective payments
- 8- Section 24 repeals provisions allowing transfer of energy credits and elective payment arrangements, removing options for taxpayers to assign credits to others or to elect special payment treatments.
- 9Effective dates and transitional language
- 10- Most repeals apply to property placed in service after December 31, 2025, meaning the 2026 tax year and later would be affected. Some references use “acquired after” a date, while others reference “placed in service,” creating transitional nuances for different credits.
- 11Administrative references and conforming amendments
- 12- The bill makes numerous conforming amendments to match the absence of credits (e.g., updating cross-references in the Internal Revenue Code and related statutory provisions).