AES · 10-Q · 2026Q2 · Full report

U.S. Renewable Tax Credits

AES CORP · 2026-08-04 · Importance 53 · Surprise 60 · In source text

The U.S. 2025 Act significantly revised renewable-energy tax credits and foreign-earnings taxation, potentially affecting AES’s future effective tax rate and results. Wind and solar projects beginning construction within 12 months of July 4, 2025 retain 100% credit eligibility without the prior 2027 placed-in-service deadline, while later-starting projects generally must be placed in service by 2027; energy-storage projects may qualify for full credits if construction begins by 2033. Projects beginning construction after December 31, 2025 face Foreign Entity of Concern restrictions limiting material assistance from prohibited foreign entities, and Treasury has not yet issued comprehensive implementation guidance. AES expects the vast majority of its renewables backlog to qualify, but states that the 2025 Act and related Treasury and Interior actions could materially affect results of operations.

Key facts

• The 2025 Act restricts credits for projects that start construction after December 31, 2025 if they receive material assistance from a prohibited foreign entity and precludes credit eligibility for projects starting after December 31, 2024 that have certain prohibited foreign entity interests source
• Treasury has not yet issued comprehensive guidance implementing FEOC restrictions and further guidance is expected within coming months (as of filing) source
• The current quarter effective tax rate was impacted by the benefit associated with ITCs and the benefit associated with the Fluence sell-down transaction due to release of valuation allowance on U.S. capital losses, partially offset by tax expense from allocations of losses to tax equity investors on renewables projects. source
• The Department of Treasury issued updated guidance defining start of construction for ITC and PTC on August 15, 2025; AES does not expect the modifications to materially impact its projects source

Impact estimates