Skip to content
Clean-Energy Credits

Executive Order Targets ‘Green New Deal’

Maureen Leddy  

· 7 minute read

Maureen Leddy  

· 7 minute read

Among the flurry of actions taken by President Donald Trump on his first day in office was issuing an executive order (EO) to end clean energy-related disbursements. While a memo has since specified that the action targets appropriations, the fate of clean energy tax credits also is unclear.

What does the energy EO cover? The EO, entitled “Unleashing American Energy,” calls for an “immediate pause” in provision of funds under the Inflation Reduction Act (P.L. 117-169) and Infrastructure Investment and Jobs Act (P.L. 117-58). While the order specifically calls out funding for electric vehicle charging stations, it also could impact a broader swath of clean energy incentives.

A day later, a memo to department and agency heads clarified that the section of the EO targeting “funds supporting the ‘Green New Deal'” applies to specifically to appropriations.

The EO “talks about appropriated funds and tax credits are not appropriated,” Nicole Elliott, a partner at Holland and Knight, told Checkpoint. “So, my take on this is that that executive order does not impact the Inflation Reduction Act tax credits,” she said.

“That’s not to say that something in the future can’t,” said Elliott, adding that she’s “monitoring legislation, and whether a Trump Treasury will issue or modify guidance, because there’s also, of course, that regulatory piece.”

What about the memo freezing rulemaking? A second memo issued on day one froze rulemaking and allows for a 60-day pause and review of any rules published in the Federal Register but not yet effective.

Elliott explained that this type of freeze and look-back “happens when there’s a change in power.” She said it wasn’t really a surprise or, in her mind, problematic. “It’s about really stopping anything that’s been delivered to the Federal Register that hasn’t been published” and setting a look-back period. “A new administration will want to put its own stamp on things.”

“It’s too soon to say” which of the Inflation Reduction Act tax credit final rules might be at risk, said Elliott. But beyond the regulatory freeze memo, many final rules “were certainly done within the Congressional Review Act window,” she added, so Congress “could take action.”

The Congressional Review Act can be used to roll back so-called “midnight rules” that agencies submit to Congress (as required by the Act) within 60 session or legislative days before final adjournment.

That sweeps in a final rule on the Code Sec. 45Y and Code Sec. 48E Clean Electricity Production and Investment Credits, a final rule on the Clean Electricity Low-income Communities Bonus Credit, a final rule on the Clean Hydrogen Production Credit under Code Sec. 45V and Code Sec. 48, and a final rule on energy property under Code Sec. 48. It also puts at risk a final rule on the Advanced Manufacturing Production Credit under Code Sec. 45X and a final rule on the Advanced Manufacturing Investment Credit under Code Sec. 48D and Code Sec. 50.

“Certainly the Trump administration could do something about” these late-finalized rules said Elliott, whether that’s withdrawing final regulations or re-proposing and re-finalizing regulations. However, “simply withdrawing the regulation or delaying its enforcement — doesn’t necessarily change policy or direction,” she added. “You have to have a good idea about your platform and how you’d like to change to be.”

Where do we stand? As far as grants under the Inflation Reduction Act, 84% or $96.7 billion in clean energy grants of IRA grants were obligated as Biden left office — meaning contracts between U.S. agencies and grant recipients have been signed. An additional $11 billion has been announced publicly but not obligated.

“What President Trump can do, and what he did in the executive order, is to put a stop currently on paying out some of those [disbursements],” Sanjay Patnaik, a director at Brookings, told Checkpoint. That move was expected, he said, adding that the Trump administration also is “probably going to try to slow-walk or halt some of the payment disbursement and some of the processes within executive agencies” that administer Inflation Reduction Act programs.

Patnaik explained that congressional action is needed to actually repeal the full Inflation Reduction Act and its energy provisions. He said he doubts there will be a full repeal, noting the “very slim” Republican majority in Congress and support for the provisions among some Republican lawmakers.

Last August, 18 House Republicans wrote a letter to Speaker Mike Johnson pushing back against a full repeal of the Inflation Reduction Act energy credits. According to the lawmakers, the credits have “spurred innovation, incentivized investment, and created good jobs in many parts of the country,” including in Republican districts.

A lot of the energy credits “benefit rural America,” explained Senator Michael Bennet (D-CO) at a January 22 Politico event. “If you watch the politics of this, you probably have noticed that Mitch McConnell, for example, has not relentlessly attacked those credits the way that he relentlessly attacked Obamacare from the day that it was passed.” In contrast, said Bennet, the energy credits are “extremely popular” and Republicans are “going to have real trouble going after those because they’re visible to people” and “people will have something to lose.”

Cost concerns. Despite the popularity of Inflation Reduction Act programs, their high cost puts them at risk of being on the chopping block. The 10-year fiscal cost of the Inflation Reduction Act has been forecast as anywhere from $780 billion to $1.2 trillion, according to a recent Treasury report. While Treasury’s analysis concludes the benefits “far exceed the fiscal costs” and “exceed the true economic costs by even more,” it seems unlikely that a Trump Treasury will agree.

Patnaik suspects “we might see a limiting of some of the credits.” One reason for the higher-than-expected Inflation Reduction Act price tag is that “more people take them,” he explained — that means “you will have higher layouts from the federal government.”

What next? As far as which credits might be subject to legislative action, Patnaik thinks the electric vehicle credit “might be restricted to some degree” — he doesn’t foresee a full repeal, but sees a potential for income limits or some other cap. Other energy programs at risk include those related to environmental justice, the methane emissions reduction program, energy efficiency rebates, and certain loan programs related to renewable energy, he said.

Patnaik suspects we’ll see proposed repeals as Republicans negotiate the extension of the Tax Cuts and Jobs Act over the next few months.

In a Brookings commentary on the future of the Inflation Reduction Act, Patnaik and co-author Riki Fujii-Rajani posit that “[w]hile a repeal could be achieved explicitly or implicitly, courts are generally reluctant to construe implicit repeals of legislation.” They suspect repealing legislation “would need to be clear and explicit about the provisions being repealed.”

“In the meantime, I don’t expect too many of those tax credits to be dispersed that haven’t been yet, and probably also not too many of the grant programs,” Patnaik said. For those thinking about claiming the credits or making use of the energy programs, he recommends to “sit back and watch,” or “try to put in the request as fast as possible and hope that it still goes through.”

 

Take your tax and accounting research to the next level with Checkpoint Edge and CoCounsel. Get instant access to AI-assisted research, expert-approved answers, and cutting-edge tools like Advisory Maps and State Charts. Try it today and transform the way you work! Subscribe now and discover a smarter way to find answers.

More answers