Senate Tax Advisor: New Energy Credits Likely Safe From ‘Full Repeal’ in 2025

Various energy tax credit programs amended or created by the Inflation Reduction Act (PL 117-169) likely will not be outright repealed if Republicans take control of the White House and/or the Senate in 2025, but any shift in the political landscape will influence the possibility of future changes, according to a Senate official.

Speaking May 3 at a conference hosted by the American Bar Association’s Tax Section in Washington, DC, Senate Finance Committee Senior Tax Policy Advisor Alice Lin said no one thinks that “full repeal” of clean energy tax incentives enacted under the 2022 bill “is possible” regardless of the results of the November elections.

Energy incentives extended, enhanced, or created by the inflation bill include those for electric vehicle purchases, home modifications, and green energy production projects.

According to Lin, several provisions of the Inflation Reduction Act enjoyed bipartisan support before its enactment, and she expects that “underlying support” to continue. Although the bill was passed at a time when Democrats had full control of Congress and the presidency, Lin said there have been “a lot of investments” in Republican states and districts.

That is not to say that the door is completely shut on legislative modifications to those programs, she cautioned. Upcoming elections this fall will “drastically” affect the “bounds for who’s pushing to make changes” and how “significant” those changes could be.

Lin added that even during initial debt limit negotiations on the Hill when “Republicans voted to kill almost everything,” there were “a few carveouts” as representatives of the energy industry told lawmakers repeals would be not only disruptive, but also counter to existing bipartisan support. Overall, Lin has noted a “shift towards a more productive conversation.”

Guidance and regs implementing the energy credit provisions have gradually been released from the Treasury Department since the Inflation Reduction Act’s enactment. Lin said she is “thankful” many of the regs have clarified technical mechanics of the credits, making it unnecessary for Congress to legislate a technical corrections bill.

“It used to be the case that we could do technical corrections as a matter of course,” but that did not happen for other major bills like the Tax Cuts and Jobs Act of 2017 (PL 115-97). Nowadays, it is “safer” for the Treasury and IRS to address issues through the rulemaking process, Lin said.

Should the next Congress take serious issue with a Treasury rule, there are “fast-track procedures” under the Congressional Review Act (CRA) to overturn an agency’s final regs during a lookback period. CRA resolutions tend to come during administration changes or shifts in majority control. As of now, Lin does not see a “huge CRA risk for most of the regulations,” adding that the CRA is not exactly “the most important factor” in terms of timing.

The next CRA deadline is May 22, 2024, meaning rules published after that date would be eligible for review by the incoming Congress. Even so, Lin said that there is a general recognition from the Hill “that the volume of regulations just means that even if you would like to have had everything done” by the deadline, it is “simply an impossibility.”