Sec. 70512. Termination and restrictions on clean electricity production credit

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A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

Section 45Y(d) is amended— in paragraph (1), by striking The amount of and inserting Subject to paragraph (4), the amount of , and by striking paragraph

(3)and inserting the following new paragraphs: For purposes of this subsection, the term applicable year means calendar year 2032. This section shall not apply with respect to any applicable facility placed in service after December 31, 2027. For purposes of this paragraph, the term applicable facility means a qualified facility which— uses wind to produce electricity (within the meaning of such term as used in section 45(d)(1), as determined without regard to any requirement under such section with respect to the date on which construction of property begins), or uses solar energy to produce electricity (within the meaning of such term as used in section 45(d)(4), as determined without regard to any requirement under such section with respect to the date on which construction of property begins). . Section 45Y is amended— in subsection (b)(1), by adding at the end the following new subparagraph: The term qualified facility shall not include any facility for which construction begins after December 31, 2025, if the construction of such facility includes any material assistance from a prohibited foreign entity (as defined in section 7701(a)(52)). , and in subsection (g), by adding at the end the following new paragraph: No credit shall be determined under subsection

(a)for any taxable year if the taxpayer is— a specified foreign entity (as defined in section 7701(a)(51)(B)), or a foreign-influenced entity (as defined in section 7701(a)(51)(D), without regard to clause (i)(II) thereof). In the case of a taxpayer for which section 7701(a)(51)(D)(i)(II) is determined to apply for any taxable year, no credit shall be determined under subsection

(a)for such taxable year if such determination relates to a qualified facility described in subsection (b)(1). . Section 7701(a) is amended by adding at the end the following new paragraphs: The term prohibited foreign entity means a specified foreign entity or a foreign-influenced entity. Subject to subclause (II), for any taxable year, the determination as to whether an entity is a specified foreign entity or foreign-influenced entity shall be made as of the last day of such taxable year. For purposes of the first taxable year beginning after the date of enactment of this paragraph, the determination as to whether an entity is a specified foreign entity described in clauses

(i)through

(iv)of subparagraph

(B)shall be made as of the first day of such taxable year. For purposes of this paragraph, the term specified foreign entity means— a foreign entity of concern described in subparagraph (A), (B), (D), or

(E)of section 9901(8) of the William M.

(Mac)Thornberry National Defense Authorization Act for Fiscal Year 2021 ( Public Law 116–283 ; 15 U.S.C. 4651 ), an entity identified as a Chinese military company operating in the United States in accordance with section 1260H of the William M.

(Mac)Thornberry National Defense Authorization Act for Fiscal Year 2021 ( Public Law 116–283 ; 10 U.S.C. 113 note), an entity included on a list required by clause (i), (ii), (iv), or

(v)of section 2(d)(2)(B) of Public Law 117–78 (135 Stat. 1527), an entity specified under section 154(b) of the National Defense Authorization Act for Fiscal Year 2024 ( Public Law 118–31 ; 10 U.S.C. note prec. 4651), or a foreign-controlled entity. For purposes of subparagraph (B), the term foreign-controlled entity means— the government (including any level of government below the national level) of a covered nation, an agency or instrumentality of a government described in clause (i), a person who is a citizen or national of a covered nation, provided that such person is not an individual who is a citizen, national, or lawful permanent resident of the United States, an entity or a qualified business unit (as defined in section 989(a)) incorporated or organized under the laws of, or having its principal place of business in, a covered nation, or an entity (including subsidiary entities) controlled (as determined under subparagraph (G)) by an entity described in clause (i), (ii), (iii), or (iv). For purposes of subparagraph (A), the term foreign-influenced entity means an entity— with respect to which, during the taxable year— a specified foreign entity has the direct authority to appoint a covered officer of such entity, a single specified foreign entity owns at least 25 percent of such entity, one or more specified foreign entities own in the aggregate at least 40 percent of such entity, or at least 15 percent of the debt of such entity has been issued, in the aggregate, to 1 or more specified foreign entities, or which, during the previous taxable year, made a payment to a specified foreign entity pursuant to a contract, agreement, or other arrangement which entitles such specified foreign entity (or an entity related to such specified foreign entity) to exercise effective control over— any qualified facility or energy storage technology of the taxpayer (or any person related to the taxpayer), or with respect to any eligible component produced by the taxpayer (or any person related to the taxpayer)— the extraction, processing, or recycling of any applicable critical mineral, or the production of an eligible component which is not an applicable critical mineral. Subject to subclause (II), for purposes of clause (i)(II), the term effective control means 1 or more agreements or arrangements similar to those described in subclauses

(II)and

(III)which provide 1 or more contractual counterparties of a taxpayer with specific authority over key aspects of the production of eligible components, energy generation in a qualified facility, or energy storage which are not included in the measures of control through authority, ownership, or debt held which are described in clause (i)(I). The Secretary shall issue such guidance as is necessary to carry out the purposes of this clause, including the establishment of rules to prevent entities from evading, circumventing, or abusing the application of the restrictions described subparagraph

(C)and subclauses

(II)and

(III)of this clause through a contract, agreement, or other arrangement. During any period prior to the date that the guidance described in subclause (I)(bb) is issued by the Secretary, for purposes of clause (i)(II), the term effective control means the unrestricted contractual right of a contractual counterparty to— determine the quantity or timing of production of an eligible component produced by the taxpayer, determine the amount or timing of activities related to the production of electricity undertaken at a qualified facility of the taxpayer or the storage of electrical energy in energy storage technology of the taxpayer, determine which entity may purchase or use the output of a production unit of the taxpayer that produces eligible components, determine which entity may purchase or use the output of a qualified facility of the taxpayer, restrict access to data critical to production or storage of energy undertaken at a qualified facility of the taxpayer, or to the site of production or any part of a qualified facility or energy storage technology of the taxpayer, to the personnel or agents of such contractual counterparty, or on an exclusive basis, maintain, repair, or operate any plant or equipment which is necessary to the production by the taxpayer of eligible components or electricity. In addition to subclause (II), for purposes of clause (i)(II), the term effective control means, with respect to a licensing agreement for the provision of intellectual property (or any other contract, agreement or other arrangement entered into with a contractual counterparty related to such licensing agreement) with respect to a qualified facility, energy storage technology, or the production of an eligible component, any of the following: A contractual right retained by the contractual counterparty to specify or otherwise direct 1 or more sources of components, subcomponents, or applicable critical minerals utilized in a qualified facility, energy storage technology, or in the production of an eligible component. A contractual right retained by the contractual counterparty to direct the operation of any qualified facility, any energy storage technology, or any production unit that produces an eligible component. A contractual right retained by the contractual counterparty to limit the taxpayer’s utilization of intellectual property related to the operation of a qualified facility or energy storage technology, or in the production of an eligible component. A contractual right retained by the contractual counterparty to receive royalties under the licensing agreement or any similar agreement (or payments under any related agreement) beyond the 10th year of the agreement (including modifications or extensions thereof). A contractual right retained by the contractual counterparty to direct or otherwise require the taxpayer to enter into an agreement for the provision of services for a duration longer than 2 years (including any modifications or extensions thereof). Such contract, agreement, or other arrangement does not provide the licensee with all the technical data, information, and know-how necessary to enable the licensee to produce the eligible component or components subject to the contract, agreement, or other arrangement without further involvement from the contractual counterparty or a specified foreign entity. Such contract, agreement, or other arrangement was entered into (or modified) on or after the date of enactment of this paragraph. Item

(aa)shall not apply in the case of a bona fide purchase or sale of intellectual property. For purposes of item (aa), any purchase or sale of intellectual property where the agreement provides that ownership of the intellectual property reverts to the contractual counterparty after a period of time shall not be considered a bona-fide purchase or sale. For purposes of subclauses (I), (II), and (III), the term taxpayer shall include any person related to the taxpayer. For purposes of this clause, the term contractual counterparty means an entity with which the taxpayer has entered into a contract, agreement, or other arrangement. Not later than December 31, 2026, the Secretary shall issue such guidance as is necessary to carry out the purposes of this subparagraph, including establishment of rules to prevent entities from evading, circumventing, or abusing the application of the restrictions against impermissible technology licensing arrangements with specified foreign entities, such as through temporary transfers of intellectual property, retention by a specified foreign entity of a reversionary interest in transferred intellectual property, or otherwise. Subparagraph (C)(v) shall not apply in the case of any entity the securities of which are regularly traded on— a national securities exchange which is registered with the Securities and Exchange Commission, the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or any other exchange or other market which the Secretary has determined in guidance issued under section 1296(e)(1)(A)(ii) has rules adequate to carry out the purposes of part VI of subchapter P of chapter 1 of subtitle A. Subparagraph (D)(i)(I) shall not apply in the case of any entity— the securities of which are regularly traded in a manner described in subclause (I), or for which not less than 80 percent of the equity securities of such entity are owned directly or indirectly by an entity which is described in item (aa). Subclause (I)(cc) shall not apply with respect to any exchange or market which— is incorporated or organized under the laws of a covered nation, or has its principal place of business in a covered nation. In the case of an entity described in clause (i)(I), such entity shall be deemed to be a foreign-controlled entity under subparagraph (C)(v) if such entity is controlled (as determined under subparagraph (G)) by— 1 or more specified foreign entities (as determined without regard to subparagraph (B)(v)) that are each required to report their beneficial ownership pursuant to a rule described in clause (iii)(I)(bb), or 1 or more foreign-controlled entities (as determined without regard to subparagraph (C)(v)) that are each required to report their beneficial ownership pursuant to a rule described in such clause. In the case of an entity described in clause (i)(II), such entity shall be deemed to be a foreign-influenced entity under subparagraph (D)(i)(I) if— during the taxable year— a specified foreign entity has the authority to appoint a covered officer of such entity, a single specified foreign entity required to report its beneficial ownership under Rule 13d-3 of the Securities and Exchange Act of 1934 (or, in the case of an exchange or market described in clause (i)(I)(cc), an equivalent rule) owns not less than 25 percent of such entity, or 1 or more specified foreign entities that are each required to report their beneficial ownership under Rule 13d-3 of the Securities and Exchange Act of 1934 own, in the aggregate, not less than 40 percent of such entity, or such entity has issued debt, as part of an original issuance, in excess of 15 percent of its publicly-traded debt to 1 or more specified foreign entities. For purposes of this paragraph, the term covered officer means, with respect to an entity— a member of the board of directors, board of supervisors, or equivalent governing body, an executive-level officer, including the president, chief executive officer, chief operating officer, chief financial officer, general counsel, or senior vice president, or an individual having powers or responsibilities similar to those of officers or members described in clause

(i)or (ii). For purposes of subparagraph (C)(v), the term control means— in the case of a corporation, ownership (by vote or value) of more than 50 percent of the stock in such corporation, in the case of a partnership, ownership of more than 50 percent of the profits interests or capital interests in such partnership, or in any other case, ownership of more than 50 percent of the beneficial interests in the entity. For purposes of this paragraph, section 318(a)(2) shall apply for purposes of determining ownership of stock in a corporation. Similar principles shall apply for purposes of determining ownership of interests in any other entity. For purposes of this paragraph— The term applicable critical mineral has the same meaning given such term under section 45X(c)(6). The term covered nation has the same meaning given such term under section 4872(f)(2) of title 10, United States Code. The term eligible component has the same meaning given such term under section 45X(c)(1). The term energy storage technology has the same meaning given such term under section 48E(c)(2). The term qualified facility means— a qualified facility, as defined in section 45Y(b)(1), and a qualified facility, as defined in section 48E(b)(3). The term related shall have the same meaning given such term under sections 267(b) and 707(b). For purposes of applying any provision under this paragraph, the beginning of construction with respect to any property shall be determined pursuant to rules similar to the rules under Internal Revenue Service Notice 2013–29 and Internal Revenue Service Notice 2018-59 (as well as any subsequently issued guidance clarifying, modifying, or updating either such Notice), as in effect on January 1, 2025. The Secretary may prescribe such regulations and guidance as may be necessary or appropriate to carry out the provisions of this paragraph, including rules to prevent the circumvention of any rules or restrictions with respect to prohibited foreign entities. The term material assistance from a prohibited foreign entity means— with respect to any qualified facility or energy storage technology, a material assistance cost ratio which is less than the threshold percentage applicable under subparagraph (B), or with respect to any facility which produces eligible components, a material assistance cost ratio which is less than the threshold percentage applicable under subparagraph (C). For purposes of subparagraph (A)(i), the threshold percentage shall be— in the case of a qualified facility the construction of which begins— during calendar year 2026, 40 percent, during calendar year 2027, 45 percent, during calendar year 2028, 50 percent, during calendar year 2029, 55 percent, and after December 31, 2029, 60 percent, and in the case of energy storage technology the construction of which begins— during calendar year 2026, 55 percent, during calendar year 2027, 60 percent, during calendar year 2028, 65 percent, during calendar year 2029, 70 percent, and after December 31, 2029, 75 percent. For purposes of subparagraph (A)(ii), the threshold percentage shall be— in the case of any solar energy component (as such term is defined in section 45X(c)(3)(A)) which is sold— during calendar year 2026, 50 percent, during calendar year 2027, 60 percent, during calendar year 2028, 70 percent, during calendar year 2029, 80 percent, and after December 31, 2029, 85 percent, in the case of any wind energy component (as such term is defined in section 45X(c)(4)(A)) which is sold— during calendar year 2026, 85 percent, and during calendar year 2027, 90 percent, in the case of any inverter described in subparagraphs

(B)through

(G)of section 45X(c)(2) which is sold— during calendar year 2026, 50 percent, during calendar year 2027, 55 percent, during calendar year 2028, 60 percent, during calendar year 2029, 65 percent, and after December 31, 2029, 70 percent, in the case of any qualifying battery component (as such term is defined in section 45X(c)(5)(A)) which is sold— during calendar year 2026, 60 percent, during calendar year 2027, 65 percent, during calendar year 2028, 70 percent, during calendar year 2029, 80 percent, and after December 31, 2029, 85 percent, and subject to clause (ii), in the case of any applicable critical mineral (as such term is defined in section 45X(c)(6)) which is sold— after December 31, 2025, and before January 1, 2030, 0 percent, during calendar year 2030, 25 percent, during calendar year 2031, 30 percent, during calendar year 2032, 40 percent, and after December 31, 2032, 50 percent. Not later than December 31, 2027, the Secretary shall issue threshold percentages for each of the applicable critical minerals described in section 45X(c)(6)), which shall— apply in lieu of the threshold percentage determined under clause (i)(V) for each calendar year, and equal or exceed the threshold percentage which would otherwise apply with respect to such applicable critical mineral under such clause for such calendar year, taking into account— domestic geographic availability, supply chain constraints, domestic processing capacity needs, and national security concerns. For purposes of subparagraph (A)(i), the term material assistance cost ratio means the amount (expressed as a percentage) equal to the quotient of— an amount equal to— the total direct costs to the taxpayer attributable to all manufactured products (including components) which are incorporated into the qualified facility or energy storage technology upon completion of construction, minus the total direct costs to the taxpayer attributable to all manufactured products (including components) which are— incorporated into the qualified facility or energy storage technology upon completion of construction, and mined, produced, or manufactured by a prohibited foreign entity, divided by the amount described in subclause (I)(aa). For purposes of subparagraph (A)(ii), the term material assistance cost ratio means the amount (expressed as a percentage) equal to the quotient of— an amount equal to— with respect to an eligible component, the total direct material costs that are paid or incurred (within the meaning of section 461 and any regulations issued under section 263A) by the taxpayer for production of such eligible component, minus with respect to an eligible component, the total direct material costs that are paid or incurred (within the meaning of section 461 and any regulations issued under section 263A) by the taxpayer for production of such eligible component that are mined, produced, or manufactured by a prohibited foreign entity, divided by the amount described in subclause (I)(aa). Not later than December 31, 2026, the Secretary shall issue safe harbor tables (and such other guidance as deemed necessary) to— identify the percentage of total direct costs of any manufactured product which is attributable to a prohibited foreign entity, identify the percentage of total direct material costs of any eligible component which is attributable to a prohibited foreign entity, and provide all rules necessary to determine the amount of a taxpayer’s material assistance from a prohibited foreign entity within the meaning of this paragraph. For purposes of this paragraph, prior to the date on which the Secretary issues the safe harbor tables described in subclause (I), and for construction of a qualified facility or energy storage technology which begins on or before the date which is 60 days after the date of issuance of such tables, a taxpayer may— use the tables included in Internal Revenue Service Notice 2025–08 to establish the percentage of the total direct costs of any listed eligible component and any manufactured product, and rely on a certification by the supplier of the manufactured product, eligible component, or constituent element, material, or subcomponent of an eligible component— of the total direct costs or the total direct material costs, as applicable, of such product or component that was not produced or manufactured by a prohibited foreign entity, or that such product or component was not produced or manufactured by a prohibited foreign entity. Notwithstanding subclauses

(I)and (II)— if the taxpayer knows (or has reason to know) that a manufactured product or eligible component was produced or manufactured by a prohibited foreign entity, the taxpayer shall treat all direct costs with respect to such manufactured product, or all direct material costs with respect to such eligible component, as attributable to a prohibited foreign entity, and if the taxpayer knows (or has reason to know) that the certification referred to in subclause (II)(bb) pertaining to a manufactured product or eligible component is inaccurate, the taxpayer may not rely on such certification. In a manner consistent with Treasury Regulation section 1.45X–4(c)(4)(i) (as in effect on the date of enactment of this paragraph), the certification referred to in subclause (II)(bb) shall— include— the supplier’s employer identification number, or any such similar identification number issued by a foreign government, be signed under penalties of perjury, be retained by the supplier and the taxpayer for a period of not less than 6 years and shall be provided to the Secretary upon request, and be from the supplier from which the taxpayer purchased any manufactured product, eligible component, or constituent elements, materials, or subcomponents of an eligible component, stating— that such property was not produced or manufactured by a prohibited foreign entity and that the supplier does not know (or have reason to know) that any prior supplier in the chain of production of that property is a prohibited foreign entity, for purposes of section 45X, the total direct material costs for each component, constituent element, material, or subcomponent that were not produced or manufactured by a prohibited foreign entity, or for purposes of section 45Y or section 48E, the total direct costs attributable to all manufactured products that were not produced or manufactured by a prohibited foreign entity. Upon the election of the taxpayer (in such form and manner as the Secretary shall designate), in the case of any manufactured product, eligible component, or constituent element, material, or subcomponent of an eligible component which is— acquired by the taxpayer, or manufactured or assembled by or for the taxpayer, pursuant to a binding written contract which was entered into prior to June 16, 2025, and placed into service before January 1, 2030 (or, in the case of an applicable facility, as defined in section 45Y(d)(4)(B), before January 1, 2028) in a facility the construction of which began before August 1, 2025, or in the case of a constituent element, material, or subcomponent, used in a product sold before January 1, 2030, the cost to the taxpayer with respect to such product, component, element, material, or subcomponent shall not be included for purposes of determining the material assistance cost ratio under this subparagraph. The Secretary shall prescribe such regulations and guidance as may be necessary or appropriate to prevent circumvention of the rules under this subparagraph, including prevention of— any abuse of the exception provided under clause

(iv)through the stockpiling of any manufactured product, eligible component, or constituent element, material, or subcomponent of an eligible component during any period prior to the application of the requirements under this paragraph, or any evasion with respect to the requirements of this subparagraph where the facts and circumstances demonstrate that the beginning of construction of a qualified facility or energy storage technology has not in fact occurred. For purposes of this paragraph— The term eligible component means— any property described in section 45X(c)(1), or any component which is identified by the Secretary pursuant to regulations or guidance issued under subparagraph (G). The term energy storage technology has the same meaning given such term under section 48E(c)(2). The term manufactured product means— a manufactured product which is a component of a qualified facility, as described in section 45Y(g)(11)(B) and any guidance issued thereunder, or any product which is identified by the Secretary pursuant to regulations or guidance issued under subparagraph (G). The term qualified facility means— a qualified facility, as defined in section 45Y(b)(1), a qualified facility, as defined in section 48E(b)(3), and any qualified interconnection property (as defined in section 48E(b)(4)) which is part of the qualified investment with respect to a qualified facility (as described in section 48E(b)(1)). Rules similar to the rules under subparagraphs

(H)and

(J)of paragraph

(51)shall apply for purposes of this paragraph. The Secretary may prescribe such regulations and guidance as may be necessary or appropriate to carry out the provisions of this paragraph, including— identification of components or products for purposes of clauses

(i)and

(iii)of subparagraph (E), and for purposes of subparagraph (A)(ii), rules to address facilities which produce more than one eligible component. . Section 45Y is amended by adding at the end the following new subsection: No credit shall be determined under this section with respect to any production of electricity during the taxable year with respect to property described in paragraph

(1)or

(4)of section 25D(d) (as applied by substituting lessee for taxpayer ) if the taxpayer rents or leases such property to a third party during such taxable year. . Section 45Y(b)(2)(C) is amended by adding at the end the following new clause: For purposes of clause (i), in determining greenhouse gas emissions rates for types or categories of facilities for the purpose of determining whether a facility satisfies the requirements under paragraph (1), the Secretary shall consider studies published on or before the date of enactment of this clause which demonstrate a net lifecycle greenhouse gas emissions rate which is not greater than zero using widely accepted lifecycle assessment concepts, such as concepts described in standards developed by the International Organization for Standardization. . Section 45(b)(11) is amended— in subparagraph (B)— in clause (ii)(II), by striking or at the end, in clause (iii)(II), by striking the period at the end and inserting , or , and by adding at the end the following new clause: for purposes of any qualified facility which is an advanced nuclear facility, a metropolitan statistical area which has (or, at any time during the period beginning after December 31, 2009, had) 0.17 percent or greater direct employment related to the advancement of nuclear power, including employment related to— an advanced nuclear facility, advanced nuclear power research and development, nuclear fuel cycle research, development, or production, including mining, enrichment, manufacture, storage, disposal, or recycling of nuclear fuel, and the manufacturing or assembly of components used in an advanced nuclear facility. , and by adding at the end the following new subparagraph: Subject to clause (ii), for purposes of subparagraph (B)(iv), the term advanced nuclear facility means any nuclear facility the reactor design for which is approved in the manner described in section 45J(d)(2). For purposes of clause (i), a facility shall be deemed to have a reactor design which is approved in the manner described in section 45J(d)(2) if the Nuclear Regulatory Commission has authorized construction and issued a site-specific construction permit or combined license with respect to such facility (without regard to whether the reactor design was approved after December 31, 1993). . Section 48E(a)(3)(A)(i) is amended by inserting , as applied without regard to clause

(iv)thereof after section 45(b)(11)(B) . Section 45Y(b)(1) is amended— by redesignating subparagraph

(D)as subparagraph (E), and by inserting after subparagraph

(C)the following new subparagraph: For purposes of subparagraph (C), additions of capacity of a facility shall be determined in any reasonable manner, including based on— determinations by, or reports to, the Federal Energy Regulatory Commission (including interconnection agreements), the Nuclear Regulatory Commission, or any similar entity, reflecting additions of capacity, determinations or reports reflecting additions of capacity made by an independent professional engineer, reports to, or issued by, regional transmission organizations or independent system operators reflecting additions of capacity, or any other method or manner provided by the Secretary. . Section 6418(g) is amended by adding at the end the following new paragraph: With respect to any eligible credit described in clause (iii), (iv), (vi), (vii), (viii), or

(xi)of subsection (f)(1)(A), an eligible taxpayer may not elect to transfer any portion of such credit to a taxpayer that is a specified foreign entity (as defined in section 7701(a)(51)(B)). . Section 6501 is amended— by redesignating subsection

(o)as subsection (p), and by inserting after subsection

(n)the following new subsection: In the case of a deficiency attributable to an error with respect to the determination under section 7701(a)(52) for any taxable year, such deficiency may be assessed at any time within 6 years after the return for such year was filed. . Section 6662 is amended by adding at the end the following new subsection: In the case of a taxpayer for which there is a disallowance of an applicable energy credit for any taxable year, for purposes of determining whether there is a substantial understatement of income tax for such taxable year, subsection (d)(1) shall be applied— in subparagraphs

(A)and (B), by substituting 1 percent for 10 percent each place it appears, and without regard to subparagraph (C). For purposes of this subsection, the term disallowance of an applicable energy credit means the disallowance of a credit under section 45X, 45Y, or 48E by reason of overstating the material assistance cost ratio (as determined under section 7701(a)(52)) with respect to any qualified facility, energy storage technology, or facility which produces eligible components. . Section 6417(d)(6) is amended by adding at the end the following new subparagraph: In the case of an applicable entity which made an election under subsection

(a)with respect to an applicable credit for which there is a disallowance described in section 6662(m)(2), subparagraph

(A)shall apply with respect to any excessive payment resulting from such disallowance. . Part I of subchapter B of chapter 68 is amended by inserting after section 6695A the following new section: If— a person— provides a certification described in clause (iii)(II)(bb) of section 7701(a)(52)(D) with respect to any manufactured product, eligible component, or constituent element, material, or subcomponent of an eligible component, and knows, or reasonably should have known, that the certification would be used in connection with a determination under such section, such person knows, or reasonably should have known, that such certification is inaccurate or false with respect to— whether such property was produced or manufactured by a prohibited foreign entity, or the total direct costs or total direct material costs of such property that was not produced or manufactured by a prohibited foreign entity that were provided on such certification, and the inaccuracy or falsity described in paragraph

(2)resulted in the disallowance of an applicable energy credit (as defined in section 6662(m)(2)) and an understatement of income tax (within the meaning of section 6662(d)(2)) for the taxable year in an amount which exceeds the lesser of— 5 percent of the tax required to be shown on the return for the taxable year, or $100,000, then such person shall pay a penalty in the amount determined under subsection (b). The amount of the penalty imposed under subsection

(a)on any person with respect to a certification shall be equal to the greater of— 10 percent of the amount of the underpayment (as defined in section 6664(a)) solely attributable to the inaccuracy or falsity described in subsection (a)(2), or $5,000. No penalty shall be imposed under subsection

(a)if the person establishes to the satisfaction of the Secretary that any inaccuracy or falsity described in subsection (a)(2) is due to a reasonable cause and not willful neglect. Any term used in this section which is also used in section 7701(a)(52) shall have the meaning given such term in such section. . Section 6696 is amended— in the heading, by striking and inserting and 6695A , 6695A, and 6695B in subsections (a), (b), and (e), by striking and 6695A each place it appears and inserting 6695A, and 6695B , in subsection (c), by striking or 6695A and inserting 6695A, or 6695B , and in subsection (d)— in paragraph (1), by inserting (or, in the case of any penalty under section 6695B, 6 years) after assessed within 3 years , and in paragraph (2), by inserting (or, in the case of any claim for refund of an overpayment of any penalty assessed under section 6695B, 6 years) after filed within 3 years . The table of sections for part I of subchapter B of chapter 68 is amended by inserting after item relating to section 6695A the following new item: Sec. 6695B. Penalty for substantial misstatements on certification provided by supplier. . Except as provided in paragraphs (2), (3), and (4), the amendments made by this section shall apply to taxable years beginning after the date of enactment of this Act. The amendments made by subsection (b)(1) shall apply to facilities for which construction begins after December 31, 2025. The amendments made by subsection

(k)shall apply to certifications provided after December 31, 2025. The amendments made by subsection

(a)shall apply to facilities the construction of which begins after the date which is 12 months after the date of enactment of this Act.

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