Chemical Industry Reacts to Trump’s Tax Bill and Renewables Rollbacks

President Trump's signature tax-and-spending bill received mixed reactions from various trade groups with ties to the chemical industry.

Overall, the industry offered a sanguine view of H.R. 1, the “one big beautiful bill,” despite measures that could negatively impact planned investments in renewable energy and force manufacturers to rethink sourcing strategies. 

The bill, signed into law July 4 by President Trump, received endorsements from many businesses and trade associations, including the American Chemistry Council (ACC). 

ACC praised the bill for preserving corporate tax rates, extending critical business tax provisions and for laws that “empower new domestic chemical manufacturing.” 

The Society of Chemical Manufacturers and Affiliates issued a statement saying expanded research and development tax credits in the bill will enable companies to boost investments in breakthrough technologies.

Under the bill, businesses can immediately deduct R&D expenses in the year they're incurred, rather than spreading the deduction over multiple years.

“The passage of this legislation affirms what we’ve long advocated: that robust R&D tax incentives are essential for maintaining our nation’s leadership in specialty chemistry,” said Robert Helminiak, vice president of legal and government relations, in a press statement. “This represents meaningful progress for American manufacturing competitiveness.”

Also, the bill extends green hydrogen tax credits and grants batteries recognition as baseload power—a crucial distinction that benefits battery processing operations and the broader chemical industry supply chain, said Ben Steinberg, president of the Battery Materials and Technology Coalition, which comprises organizations across the battery manufacturing supply chain. 

“They're not really treated as intermittent sources,” Steinberg explained. "They're treated in sort of the same light as some of the other credits that deal with baseload power and fuel like nuclear and geothermal hydrogen.”

Batteries and minerals are also receiving a boost from defense spending aimed at securing critical minerals, Steinberg said. This includes $5 billion from the Industrial Base Fund specifically for critical mineral supply chains, plus an additional $2 billion for the National Defense Stockpile Transaction Fund and $500 million from other defense appropriations — totaling $7.5 billion in critical minerals investments.

Meanwhile, the chemical industry has anticipated reduced regulatory restrictions on federal oil and gas development, as ACC CEO Chris Jahn indicated at the GlobalChem conference in May. It appears Jahn will get what he wanted, with the bill set to expand production opportunities on federal lands and waters while offering tax incentives and streamlined permitting processes.

Foreign Entity Rules Create Supply Chain Uncertainty

When asked how the elimination of incentives for renewables development could impact the chemical industry, ACC provided a more cautious outlook. 

“Eliminating some IRA [Inflation Reduction Act] tax credits will impact companies differently depending on their business model and their supply chains,” said Allison Edwards, ACC director of advocacy communications in an email reply to Chemical Processing. 

ACC also is trying to understand how foreign entity of concern (FEOC) provisions in the bill could impact chemical manufacturing. 

The main purpose of FEOC laws is to prevent Chinese companies from claiming tax credits and to reduce reliance on China for clean energy technology supply chains, though Russia, North Korea and Iran also fall under FEOC provisions. But the FEOC laws in Trump’s tax-and-spending bill are extremely complex and “will require extensive work by President Trump’s administration to implement,” the Bipartisan Policy Center noted.  The new rules expand the IRA’s FEOC definition, with the creation of specified foreign entities and foreign-influenced entities categories, the Bipartisan Policy Center explained. 

The specified foreign entity definition specifically targets Chinese military companies in the U.S., entities subject to certain forced-labor prevention laws, and individual battery manufacturers like Chinese company Gotion High-Tech Co., which plans to invest in a battery plant in Michigan. 

A foreign-influenced entity is one where a specified foreign institution can exert significant control or influence through various means. This can come through partial ownership of the organization or debt and the ability to appoint board members or executive officers. The "effective control" provision eliminates tax credits for entities that make payments to specified foreign entities when those payments result in the foreign entity gaining control over qualified energy facilities, storage technology or eligible components.

These rules could have a major impact on supply chains and investment decisions, Edwards said, adding that ACC is awaiting further guidance from the U.S. Department of the Treasury to assess the full impact.

“H.R. 1 adds new FEOC restrictions to several clean-energy tax credits (for example, 45Y, 48E, 45X, 45Z) and moves the phase-out timeline for some of the energy tax credits forward by several years, shortening the timeline and adding burdensome FEOC restrictions [that] might stymie projects,” ACC’s Edwards stated, adding that the new FEOC restrictions require interpretive guidance. 

“Without clarity, investors may sit on the sidelines,” she said.

Renewable Energy Cuts Force Investment Rethink

The legislation sunsets the clean hydrogen production credit for hydrogen projects that haven't begun by Dec. 31, 2027, accelerating the original timeline under the IRA by five years. It also significantly curtails clean-energy incentives, most notably ending clean electricity from solar and wind production and investment tax credits, as well as incentives to purchase electric vehicles (EVs). Certain wind and solar installations can still qualify if construction begins promptly. Specifically, wind and solar projects placed in service after 2027 will lose eligibility for clean electricity production or investment credits unless construction begins within one year of the legislation's enactment.

ACC has touted in the past the chemical sector’s critical role in renewables development. After releasing its Sustainability Starts With Chemistry report in 2024, Jahn stated: “It would be impossible to manufacture a wide range of critical products, from renewable energy solutions like solar panels and wind turbines, durable high-performance building materials, lightweight vehicle parts, EV infrastructure, advanced battery storage, high-tech electrical products, composite materials and more, without the products of chemistry.”

Also, many chemical companies have made investments in solar and wind energy to meet their sustainability targets. The new rulings create uncertainty regarding future investments, said Steve Ottley, head of chemicals and pharma at global supply chain consultancy firm Maine Pointe. Chemical producers have made commitments to reach net-zero Scope 1 and 2 emissions by 2030, Ottley said.

“That requires huge investments to make themselves cleaner,” he said. “I think you're going to see a lot of rethinking about whether they can meet their 2030 Scope 2 emissions targets without this funding. I think you're going to see a lot of projects put on hold.”

While Steinberg was optimistic about the bill’s impact on the battery manufacturing industry, he said the elimination of EV credits and incentives for wind and solar production was unfortunate. 

The reason, he said, is that the clean vehicle tax credit included important content requirements for sourcing from the U.S. and allied nations. Additionally, batteries play a critical role in energy storage for the wind and solar industry, Steinberg said. “It is not helpful for the growth of the battery industry not to have those demand pulls, particularly those content requirements,” he explained. 

Despite losing these demand drivers, continued Department of Defense investment remains vital for building domestic production capacity and reducing dependence on Chinese supply chains, Steinberg said. But he said tariffs and their impact on securing materials that are currently sourced outside the U.S. leave much uncertainty. 

“I’m hopeful, but we're still in the middle of the mechanics of this industrial policy push to build processing capabilities, manufacturing, recycling capabilities, mining capabilities, and a lot of it is TBD,” Steinberg said. ⊕