What the OBBBA Means for Hydrogen & Fuel-Cell Tax Credits

The One Big Beautiful Bill Act (OBBBA) quietly slashed the lifespan of the Clean Hydrogen Production Credit. That same legislation also introduced a new 30% Investment Tax Credit (ITC) for qualified fuel-cell property under Section 48E.

For anyone in construction, commercial real estate or manufacturing, these provisions create both urgency and opportunity. With deadlines moved up and new eligibility hurdles to clear, hydrogen and fuel-cell projects will require tight coordination between engineering teams, supply chain managers, and tax advisors to fully capture available credits.

What OBBBA changed: A quick snapshot of §45V and §48E

At its core, the OBBBA accelerates the expiration of hydrogen production credits while simplifying access to fuel-cell ITCs. Previously, developers had until Jan. 1, 2033, to bring projects online and earn the full value of the Clean Hydrogen Production Credit under Internal Revenue Code §45V.

Now, any hydrogen fuel produced and placed in service after Jan. 1, 2028, no longer qualifies. This five-year reduction shrinks the window to capture credits that are worth up to $3.00 per kilogram of clean hydrogen produced, depending on lifecycle emissions levels.

Meanwhile, the new Section 48E-j formally brings qualified fuel-cell property into the fold with a flat 30% Investment Tax Credit. Unlike legacy §48 credits, which phased down over time or depended on bonus qualifiers like domestic content or energy community status, the §48E credit is straightforward. It applies to fuel-cell systems placed in service after Dec. 31, 2025, with no bonus multipliers or power-density caps.

Here’s how the core provisions compare:

Beyond the headline rates, developers must also track new eligibility criteria. For instance, the §48E credit only applies to projects that begin construction after Dec. 31, 2025. Additionally, to qualify for the full value, systems must meet rising thresholds for domestic content (45% in 2026, 50% in 2027 and 55% starting in 2028).

The implications of these changes reach across industries. Fuel-cell project developers must now act quickly to place projects in service before the hydrogen PTC drops off. Those who can’t hit that timeline will need to pivot to the 30% ITC route under §48E, recalibrating financial models and equipment sourcing strategies accordingly.

According to the IRS’s latest guidance on energy credits, compliance will require careful attention to procurement practices, documentation and certification thresholds to retain eligibility throughout the project lifecycle.

Construction sector: Timeline risks and safe harbor strategies

For construction firms involved in energy infrastructure, the new compressed window for hydrogen credits requires immediate action. The §45V credit only applies to hydrogen produced before 2028, which means eligible equipment must be operational by the end of 2027. That alone compresses typical EPC timelines. Add in the rising domestic-content thresholds, and contractors must now coordinate tax strategy at the bid stage.

The key tool available is the 5% safe harbor. Contractors and developers can lock in “begin construction” status for §48E by incurring at least 5% of total qualified project basis by Dec. 31, 2025. That early investment creates dual-track optionality: finish construction before 2026 and claim the 30% ITC under §48E or commission by 2027 and potentially stack the §45V credit for onsite hydrogen production.

The IRS has historically allowed a four-year window under the continuous construction test. But with OBBBA’s compressed horizon, contractors must draft cost-overrun clauses that shift credit-eligibility risk back to developers. If placed-in-service slips past 2027, the §45V value disappears entirely.

Contract structure matters too. Tax-exempt partners or long-term leasebacks can disqualify ITC eligibility under anti-abuse provisions. Tax teams should be involved before signing final design-build agreements.

Modular construction strategies will also play a critical role. Because domestic-content rules escalate from 40% today to 55% by 2028, fabricating components like compressors, membranes and power electronics in U.S. yards may become necessary to preserve full credit value.

At James Moore, we help contractors assess EPC schedules, capex timing and safe harbor documentation to ensure projects qualify before thresholds change. Learn more about our construction industry services and how we can support compliance with evolving hydrogen credit requirements.

Real estate: fuel-cell microgrids and lease structuring challenges

Commercial real estate developers and asset managers now have a powerful incentive to integrate fuel-cell microgrids into their projects. Under the OBBBA, qualified fuel-cell property earns a flat 30% Investment Tax Credit under §48E for any project starting construction after Dec. 31, 2025. That simplicity stands in contrast to legacy §48 ITCs, which faced phasedowns and bonus eligibility hurdles.

Because the energy-efficient commercial building deduction under §179D is repealed for projects starting after June 30, 2026, the §48E ITC becomes the primary federal tool for offsetting energy investments in commercial properties. Class A office buildings, data centers, and healthcare facilities with high demand charges stand to benefit the most.

In ISO regions like New York and California, fuel-cell systems can shave demand costs by up to 30%. This improves net operating income while earning a federal tax offset that covers 25% to 35% of installed system costs once bonus depreciation is factored in.

However, the OBBBA introduces a new challenge for real estate funds and landlords: the anti-lease rule. If a project involves leasing qualified energy property to a third party, the §48E credit is disallowed. That disqualifies many energy-as-a-service contracts unless the structure is modified.

The solution? Flip partnerships, in which the developer owns the project for at least five years and then transfers it to a REIT or landlord after the ITC recapture period expires. Structuring these arrangements requires careful attention to partnership allocations, timing and asset classification.

We help real estate professionals evaluate cost segregation opportunities, model credit stacks and navigate the anti-lease rule when deploying clean energy infrastructure. For details, visit our real estate tax planning page.

U.S. manufacturers: stacking §45V, §45X, and §48E for maximum benefit

Manufacturers of electrolyzers, fuel-cell stacks and related components are positioned to capture overlapping incentives after the OBBBA. The legislation not only secured a flat 30% ITC under §48E but also left intact the §45X advanced manufacturing production credit, which pays a per-unit credit for producing eligible clean energy components. When paired with the §45V production tax credit for hydrogen output, vertically integrated manufacturers can layer three different incentives on their various qualifying expenditures.

For example, a domestic electrolyzer producer can earn the §45X credit for each membrane and stack produced, use the §48E ITC to reduce the cost of building its own test facilities and claim the §45V credit for hydrogen produced if projects are placed in service before 2028. This triple benefit can drive after-tax internal rates of return above 15% for well-structured projects.

The OBBBA also amends §7704 to expand “qualifying income” for publicly traded partnerships (PTPs). Income from hydrogen storage and compression equipment now qualifies, which opens the door for midstream master limited partnerships to invest in hydrogen storage caverns and pipelines without jeopardizing their partnership tax status. This change could accelerate capital deployment by large midstream operators, easing infrastructure bottlenecks for new hydrogen hubs.

The Department of Energy’s hydrogen hub program provides additional funding that can be stacked with federal credits. These hubs are expected to anchor regional demand through 2028 and provide offtake certainty for manufacturers. For manufacturers, aligning credit strategies with regional hub developments ensures stronger market pull and sustained revenue visibility.

Tax planning moves before the deadline hits

The shortened hydrogen credit window makes tax planning a priority rather than an afterthought. Strategies vary by sector but share one theme: act early to lock in eligibility and protect credit value.

For construction and manufacturing firms, front-loading capital costs into fourth quarter 2025 purchase orders can secure the 5% safe harbor. Even if supply chains delay delivery until 2026, this strategy preserves §48E ITC eligibility and avoids credit loss from timing slippage.

Real estate owners should evaluate cost segregation studies to maximize depreciation deductions on balance-of-plant items such as pipes and transformers. With bonus depreciation scheduled to phase down after 2026, accelerating deductions now can significantly improve after-tax project economics.

Structuring ownership is another critical tactic. Real estate investment trusts and landlords facing anti-lease restrictions may need to use flip partnerships (as we mentioned earlier). This allows projects to maintain credit eligibility while ensuring long-term alignment with REIT compliance rules.

Manufacturers and EPC sponsors can strengthen economics with blend-and-extend contracts that monetize §45V credits through 2027 and then reset offtake pricing when the credit expires. In vertically integrated facilities, stacking §45X, §48E and §45V remains a viable path for returns above industry benchmarks.

Independent analyses confirm that front-loading expenditures and combining credits can yield material after-tax improvements in project value. The key is careful coordination among finance, legal and engineering teams to balance construction schedules, procurement and ownership models before statutory deadlines close key opportunities.

Act now or miss the hydrogen ITC window

The OBBBA shifted the clean energy tax incentive landscape overnight, and the message is clear: Projects that break ground in the next 18 months will capture the greatest benefits, while late movers risk missing the window. With deadlines, eligibility hurdles and structural traps like the anti-lease rule, proactive planning is the difference between maximizing incentives and losing them altogether.

At James Moore, we guide contractors, property owners and manufacturers through the complexity of energy tax planning. From structuring partnerships to securing safe harbor documentation, our team ensures projects capture full credit value. If your organization is planning a hydrogen or fuel-cell investment, now is the time to review models, accelerate timelines, and coordinate tax strategy with technical execution. Contact a James Moore professional today to safeguard your eligibility before deadlines close.

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