On July 4, the One Big Beautiful Bill Act (OBBB) was signed into law by President Donald J. Trump. Among its many provisions, the bill includes tax code reforms that allow businesses to immediately and fully expense new capital investments and research and development (R&D) costs, effective in the 2025 tax year.

These provisions represent a significant step toward a fairer and more neutral tax system. Since all businesses will have the ability to deduct their investment costs upfront rather than over a multi-year period, success in the clean energy market will be based on market demand, not government intervention. This broad-based approach is especially beneficial for the sector, as only the most innovative and competitive businesses — those best positioned to strengthen the green energy supply chain — will thrive. 

This new policy reduces the tax bias against investment. Previously, targeted subsidies and special tax credits allowed policymakers to attempt to preemptively select winners and losers. Data from the Tax Foundation shows how targeted tax credits disproportionately penalize the nuclear energy industry relative to the solar and wind energy sectors. By leveling the playing field for all businesses, full expensing encourages companies to invest in advanced energy technologies and equipment such as natural gas turbines, solar arrays, critical minerals mines, and next-generation nuclear energy facilities like the latest small modular reactor designs, without trying to predict which emerging energy sources will succeed via government backing. This is particularly useful for an industry that is as capital-intensive as the clean energy sector.

>>> READ: Clean Energy’s Future Remains Bright Even Without Energy Subsidies

Expensing would also increase wages for workers. Because firms can recover their business costs directly, they are incentivized to build more capital, therefore contributing to a more productive workforce and higher wages. Additionally, the policy promotes a strong domestic industry by making U.S. investments more attractive to companies. Since expensing boosts the after-tax return on investments for projects placed in the United States, companies are incentivized to invest more on American soil. Full expensing further offers more economic growth per dollar spent compared to traditional green subsidies. This is because taxpayer dollars are not wasted on unprofitable or uncompetitive projects, so private capital naturally flows to where it’s most productive.

The full-fledged benefits of immediate expensing have been outlined in Tax Foundation research and in a white paper co-published by my colleague Nick Loris for C3 and the Abundance Institute.

The new changes promoted by the OBBB represent a welcome shift that is both pro-growth and pro-environment. By rewarding, rather than punishing, industries that invest in America’s manufacturing capacities, particularly those within the clean energy sector, full expensing paves the way for a cleaner and more robust economy. 

The views and opinions expressed are those of the author’s and do not necessarily reflect the official policy or position of C3.