The Trump administration has been rapidly backing away from the various green energy incentives offered under the Biden administration, starting with a pair of executive actions that President Trump signed on the day of his inauguration, and continuing through sweeping deregulatory changes announced by the Environmental Protection Agency this week.
Trump signed the
Since that time, the Senate confirmed former New York Republican congressman Lee Zeldin in January as EPA administrator, and on Wednesday he
However, tax professionals are wondering about what is going to happen with all the various tax incentives their clients had counted on from the Inflation Reduction Act and other sources.
"Obviously we anticipated different energy policy goals under this incoming administration than we had under the Biden administration, so we've been bracing to see what happens," said Jess LeDonne, director of tax technical, policy and legislative affairs at the Bonadio Group in Rochester, New York, during an interview in late February. "And this executive order is certainly a signal of what to expect going forward, but I would say we're still in a little bit of a wait-and-see [period] because this executive order is really just a pause right now on the disbursement of funds under the Inflation Reduction Act and also the bipartisan infrastructure law."
She noted that one of the executive orders directs the agency to pause disbursement of funds under those laws for 90 days, and in those 90 days to create a report and submit a report to the White House Budget Office, essentially demonstrating that the spending aligns with the new administration's energy policies.
"In this 90-day hold period, there's no disbursements of funds under those laws," said LeDonne. "What this means long term right now is just a pause. Those laws are still the law. The Inflation Reduction Act has not been repealed. That would require either congressional action or judicial action stating that the law is unconstitutional. That law cannot be undone by executive order."
However, this is still creating uncertainty for clients who have invested in green energy sources at their businesses and homes.
"What we are seeing with our clients is certainly uncertainty around what this means — if this is an indication of a broader intention under the new administration to roll back green energy incentives," said LeDonne. "There is objective uncertainty for them for long-term planning."
Some clients have already embarked on projects and are wondering whether they will be able to claim the tax benefits they were promised under the Biden administration.
"We certainly have clients who have already completed projects," said LeDonne. "We have clients who have projects underway. There's all different points in this life cycle, and if and when anything does change other than this pause, my first question will be what's the effective date of that change? If something does happen congressionally that would undo these incentives, when does that change take effect? Is it 60 days after that law passes? Are they going to try to go retroactive to the beginning of this year? We have conversations with our clients about when they invested in these projects, when the projects went online, what those dates are, so that we can monitor the legislation and see if any changes actually impact that."
The biggest uncertainty for clients right now is longer-term planning. "If you're maybe a developer or someone in the construction industry, and part of the project is planning for a geothermal or solar energy offset for the project cost, that's where right now there's maybe a hesitation, given these changes under the new administration, that might give pause to spending that money," said LeDonne. "In the past, you may have been able to more confidently rely on some investment offset from the government."
Clients are unsure if they will be able to recoup the costs they have invested in green energy projects, even though the political lines aren't always so clear, as many Republican-leaning states also have large-scale projects underway. Around 80% of the manufacturing investments from the Inflation Reduction Act are in Republican congressional districts, according to
"It's tempting to think about these green energy incentives as a really partisan issue down party lines, and I would say it's really not that clean because there are certainly Republican lawmakers and Republican states and Republican districts that utilize Inflation Reduction Act incentives very heavily," said LeDonne. "There are some Republican lawmakers that have constituents that utilize these programs, and therefore maintaining these green energy incentives is actually a really important policy for a lot of Republican lawmakers."
Much will depend on the timing. "It really depends on a client's fiscal year when they're filing, when the project took place," said LeDonne. "But for right now, if money has been spent under the law as it currently stands, if there's eligible spend that can be offset by tax credits, we'll certainly help our clients claim those. If something were to change retroactively, there may be the need to amend."
She pointed out that even if the federal tax incentives for green energy are repealed, many states will still offer them. "It's not that all of this money is going away and there's not going to be any green energy incentives," said LeDonne. "We'd certainly look to the state and other potential funding mechanisms too. We'll keep an eye on it. But right now, there is some uncertainty. Short term, all we have right now is this pause — the 90 days — and that will be up on April 20. Thereafter, we'll see what happens, based on the agency reports around this funding, and thereafter what occurs."
The Inflation Reduction Act and the infrastructure law nevertheless remain in place, even if they're amended at some point or if the Trump administration keeps refusing to pay the disbursements.
"It is important to know that right now this is a pause. Those laws are still the laws, and those credits still exist," said LeDonne. "It's simply that right now they cannot be paid out. Of course, paying out federal incentives, funding anything, is not something that happens quickly anyway. Right now, this pause might not directly really impact too many people, but we're certainly monitoring to see if this is the canary in the coalmine, so to speak, that's really indicating a broader intention by the new administration to undo some of these green energy incentives."
