Future of Energy Tax Credits Post-2024 Elections

Energy tax credits are not just environmental policy but are also widely viewed as industrial policy. These energy tax credits incentivize domestic development of advanced energy technologies, reward domestic employment, and encourage foreign companies to accelerate investment in U.S. manufacturing facilities.

Former President Trump has vowed to repeal the energy tax credits enacted in the Inflation Reduction Act on his first day in office if he succeeds in retaking the White House. It is generally believed that, if elected, Vice President Harris would seek to preserve those incentives.

Regardless of the November 2024 election outcome, most of the tax incentives included in the Inflation Reduction Act are expected to survive, and any changes are likely to be prospective in nature.

Factors Supporting Continued Availability of Energy Tax Credits

Investments Made in the IRA

Significant private investment has been made based on tax credits in existing law and these types of projects are often protected even if the law is prospectively changed.

Also, prospective repeal of energy tax credits will not likely raise significant revenue in either the short or medium term since grandfathered projects can be expected to generate tax credits in future years as production occurs or property is placed in service.

Political Sentiment

Tax credits benefit Republican-leaning areas of the country and there is significant support among Congressional Republicans for maintaining the credits. A letter signed by 18 Republican members of Congress states that “(a) full repeal would create a worst-case scenario where we would have spent billions of taxpayer dollars and received next to nothing in return.”

Allowing local governments and tax-exempt entities to share in energy tax credits through direct pay significantly expands the political support for continuing the credits.

If the repeal of some portions of the Inflation Reduction Act becomes politically necessary, direct Federal spending is more likely to be cut than tax credits.

How to Proceed with Energy Incentives and the Upcoming Election

While a full repeal of energy tax credits seems unlikely, it is wise to ensure that any project qualifies for potential grandfathering from potential changes.

Under current guidance, a project will be considered to have commenced and potentially protected from any changes if physical construction has begun or at least 5% of the eventual cost has been paid or incurred.

Binding commitments that would result in significant damages if the project were abandoned could also be considered and continued activity toward project completion is important.

As you consider clean energy projects or facility updates, consider working alongside a trusted energy services provider.