Enacted in August 2022, the Inflation Reduction Act (the “IRA”) expanded energy tax credits by increasing credit amounts across the board and broadening eligibility criteria to include new technologies.
Notably, the IRA allows firms to develop and sell energy tax credits, as outlined here.
In our last update, available here, we discussed how Treasury rushed to finalize key guidance before the Trump administration took charge—only for it all to unravel shortly thereafter.
In his first week in office, President Trump called for the end of the “Green New Deal” and signed executive orders to withdraw from the Paris Climate Agreement and halt future energy appropriations. These actions signaled a deliberate shift away from clean energy initiatives backed by the IRA.
With these directives in place, the question isn’t whether energy tax credits will be affected, but how they will be affected and how soon.
While President Trump cannot unilaterally repeal the IRA’s tax credits, the internal House memorandum that leaked last month revealed that repealing the green energy tax credits is under consideration. In addition, President Trump has already paused new regulations and his administration can significantly limit the impact of the credits by withdrawing existing guidance. Given that many developers rely on highly technical regulatory guidance to claim the credits, this uncertainty could put many projects at risk.
For now, energy tax credits remain in the eye of the storm, but that could change as early as next week. Despite their popularity in Republican-led districts, the IRA’s tax credits come at a high cost, making them a target for potential cuts through the Congressional budget reconciliation process. A proposed $4.5 trillion budget package is set to reach the House floor soon.
We will continue to monitor developments and provide updates in Brass Tax.
