What Does the Halt on Clean Energy Funding Mean for Energy Tax Credits?

  • Regulations
  • 1/30/2025
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Key insights

  • A new executive order calls for ending the “Green New Deal” and instructs federal agencies to pause disbursing funds from the Inflation Reduction Act or the Infrastructure Investment and Jobs Act.
  • Following swift pushback from Congress, the Office of Management and Budget (OMB) clarified the energy order only applies to funds for programs, projects, or activities implicated by Section 2 of the order.
  • The recent mandate from the OMB appears to support the view that the aim of recent executive actions is to pause cash outlays and assistance through grant and loan programs, not tax credit claims.

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Executive order curbs clean energy funding

On January 20, President Donald Trump issued over 100 executive orders. One executive order —Unleashing American Energy — calls for terminating the “Green New Deal” and mandates that federal agencies immediately pause disbursing funds appropriated through the Inflation Reduction Act (IRA) or the Infrastructure Investment and Jobs Act.

Interpreted literally, it would appear this order suspends disbursement of unspent federal grant funding, federal government loans, and monies allocated to the IRS to administer the aforementioned acts.

The order limits disbursement of “appropriated funds,” which typically refers to funds Congress allocated to specific federal agencies or programs to be spent for a specific purpose. For example, Congress appropriated $500 million to the IRS to carry out the provisions of the IRA.

OMB clarification of the energy order

Following swift pushback from members of Congress concerned about the availability of tax credits for renewables projects in their states and districts, the Office of Management and Budget (OMB) issued a memorandum the following day clarifying the energy order “only applies to funds supporting programs, projects, or activities that may be implicated by the policy established in Section 2 of the order.”

Section 2 of the order deals primarily with climate change mitigation policies and electric vehicle mandates and makes no mention of tax credits (in fact, tax credits are not mentioned anywhere in the entire order).
Based on a plain reading, it would appear energy tax credits under the Inflation Reduction Act fall outside the scope of the executive order as currently drafted.

What does the funding pause mean for IRA tax credits?

Many organizations have understandably expressed concern whether the energy order impacts IRA tax credits, especially those presently eligible for elective pay under Section 6417 and transferability under Section 6418. 

Based on a plain reading, as well as the subsequent clarification from the OMB, it would appear tax credits under the IRA fall outside the order’s scope as currently drafted. Additionally, since the tax credits created by the IRA are statutory in nature, any modifications to them would require a legislative act of Congress. 

That said, the full impact of Trump’s flurry of orders is still developing and some are already facing legal challenges. Therefore, it’s possible the IRS and other federal agencies will see operational delays as the impacts of the executive orders are evaluated. 

How CLA can help you navigate executive orders

CLA’s renewable energy practice serves clients throughout the full lifecycle of clean energy projects. From project cash flow modeling to tax credit monetization, our team helps investors, developers, and project owners enhance project returns and operational efficiencies. Reach out to discuss what this latest development could mean for your organization.

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