A tax bill aimed at fulfilling President Donald Trump's tax cut promise passed the threshold of the House of Representatives on the 22nd (local time). It is expected that if this bill is also approved in the Senate and completed with Trump's signature, the U.S. budget deficit will significantly increase. Accordingly, the Republican Party, which proposed the bill, has cut various project budgets to reduce the financial burden. In particular, during this process, the tax credits for clean energy that benefited Korean electric vehicle and battery companies were drastically reduced.
The House held a vote on the tax cut bill, dubbed 'One Big and Beautiful Bill,' with 215 votes in favor and 214 against, passing it to the Senate. Even within the Republican majority in the House, there were two dissenting votes and one abstention. All Democratic representatives voted against it.
The bill includes provisions to extend key clauses set to expire at the end of this year, such as lowering individual income tax rates, reducing the corporate tax rate's maximum rate, and expanding the standard deduction and child tax credits, which were enacted under the 2017 tax cut law. Additionally, it encompasses the exemptions for tips and overtime wages that President Trump promised during last year's election campaign, as well as the new tax credits for interest on loans for purchasing American-made cars. According to the Congressional Budget Office (CBO), if this bill is finalized in the Senate, it is expected to increase the federal budget deficit by $3.8 trillion (approximately 5,252.74 trillion won) over the next 10 years.
In response, the Republicans significantly reduced the clean energy tax credits based on the Inflation Reduction Act (IRA), which Trump has labeled as 'new green fraud,' to procure the necessary funding for the tax cut. Compared to the original proposed bill, the deadline for the clean power production tax credit (45Y) and clean power investment tax credit (48E) has been accelerated.
This tax credit can be received by companies that produce carbon-free power, such as solar, wind, geothermal, and nuclear power plants, as well as energy storage facilities. The bill that passed the House limited eligibility to facilities that begin construction within 60 days of its enactment and are operational by the end of 2028. However, for nuclear power, which the Republicans prefer, the tax credit will apply if construction begins by the end of 2028.
Other major clean energy tax credits were not modified during the House passage process. The maximum tax credit of $7,500 (approximately 10.36 million won) for electric vehicle buyers meeting the origin requirements (30D) has had its deadline moved up to December 31, 2026, by six years. As a result, for 2026, the eligibility for tax credits is limited to electric vehicles sold in the United States that do not exceed 200,000 units over the past 16 years, meaning that there will likely be very few companies eligible for benefits after this year.
The tax credit provided for commercial electric vehicles, such as leasing and rental cars, which were previously eligible, will also be eliminated. The tax credit for companies producing clean hydrogen (45V), originally allowing credit for hydrogen produced at facilities starting construction before 2033, has also had its construction timeline moved up to before 2026. There was speculation that the expiration for the advanced manufacturing production tax credit (45X) could be shortened from 2033 to 2028 rather than just 2032, but it was not amended.
In addition to the clean energy tax credits, the bill also aims to reduce various social safety net expenditures, which could exceed $1 trillion over the next 10 years, according to The Washington Post (WP). Additionally, 8.7 million existing Medicaid beneficiaries could lose their insurance benefits.
The bill is now left with the review and voting process in the Senate, and U.S. media predict that much of the content will change during this process. According to The New York Times (NYT), in the Senate, fiscal conservatives want to cut Medicaid and other program budgets to reduce the deficit, while more moderate and politically vulnerable senators are trying to protect Medicaid and the clean energy tax credits.
Seeing his bill to fulfill his promise pass the 'first hurdle,' President Trump was encouraged and repeatedly urged for the speedy passage of the bill. Trump stated on social media that 'it is now time for our friends in the U.S. Senate to get to work and send this bill to my desk as soon as possible for (bill signing),' expressing that 'there is no time to waste.'