Proposed Tax Changes Strip Federal Incentives for Near-Shore Offshore Wind Projects Starting 2026

This legislation aims to amend the Internal Revenue Code by removing key federal tax incentives for certain offshore wind facilities. Specifically, it targets projects built in the United States’ inland navigable waters or coastal waters. The bill disallows both the valuable Investment Tax Credit (ITC) and the newer Clean Electricity Production and Investment Tax Credits for these specific near-shore wind farms. These changes are prospective, meaning they only hit projects that are put into service after December 31, 2025.

The Fine Print: What’s Being Cut?

Think of federal tax credits as the financial engine for massive infrastructure projects. They make expensive ventures, like building wind turbines in the ocean, financially viable. This bill pulls the plug on two major engines for near-shore wind projects: the Investment Tax Credit (ITC) and the Clean Electricity Credits (Sections 45Y and 48E). For a developer, losing the ITC—which is a credit based on the initial capital investment—can dramatically increase the upfront cost of a project, potentially killing its economic viability right out of the gate. For example, a $500 million coastal wind farm could lose out on tens of millions of dollars in federal support.

Where the Line Is Drawn

The crucial element here is the location: "inland navigable waters" and "coastal waters." This means projects closer to shore, the ones often facing the most local opposition but that are also typically easier and cheaper to build than deep-sea installations, are the ones being penalized. The bill defines these projects as “disqualified offshore wind facilities” and explicitly bars them from claiming the Clean Electricity Production Tax Credit and the Clean Electricity Investment Tax Credit. While the bill does update an older credit (Section 45(d)(1)) to include these water areas, the simultaneous removal of the much more significant, modern clean energy credits essentially functions as a massive disincentive.

The Real-World Impact: Higher Costs, Slower Development

For the average person, this sounds like bureaucratic tax code shuffling, but the impact is real. When federal incentives are removed, the cost of developing cleaner energy goes up. Who pays for that? Ultimately, it’s the consumer. If developers face higher costs for near-shore wind, they may pivot to other energy sources, slow down development, or pass those costs onto utility companies, which then pass them onto you in your monthly bill. This change targets a specific sector of renewable energy deployment, potentially stifling the growth of wind power in areas where it might be most accessible and cost-effective to build, all starting in 2026. It makes the transition to renewable energy in coastal states significantly more expensive and complicated, favoring existing energy sources over new wind infrastructure in these areas.