Key facts
- A U.S. District Court judge vacated a Trump administration policy that restricted tax credits for wind and solar projects.
- The policy eliminated a 'safe harbor' provision allowing projects four years to begin construction by incurring 5% of total costs.
- Judge Colleen Kollar-Kotelly ruled the Treasury Department and IRS failed to provide adequate reasoning for the rule change.
- The lawsuit was filed by environmental groups, consumer advocates, and the city of San Francisco.
- The ruling allows projects to potentially qualify for tax credits if construction began by July 4, 2024, or they enter service by the end of 2027.
A U.S. judge has overturned a policy enacted under the Trump administration that made it more difficult for wind and solar energy projects to qualify for federal tax subsidies. The decision by Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia stated that the Treasury Department and its Internal Revenue Service (IRS) did not provide sufficient justification for eliminating a long-standing definition of when a project is considered under construction.
For a decade, clean energy developers could utilize a "safe harbor" provision, allowing them four years to begin construction by demonstrating substantial physical work or by incurring 5% of the total project costs before a tax credit expired. However, IRS rules introduced in August of the previous year removed this 5% provision for most projects, with exceptions only for the smallest ones. Judge Kollar-Kotelly's ruling sent the IRS rules back for further review.
The lawsuit challenging these rules was initiated by a coalition including environmental organizations like the Oregon Environmental Council and Natural Resources Defense Council, consumer advocacy group Public Citizen, the city of San Francisco, and clean energy consulting firm Woven Energy. They argued that the rule change would lead to higher electricity costs and hinder the development of clean energy projects.
"This decision puts an important check on the administration's actions, which are driving up energy prices for everyday Americans in cities and towns across the country," stated San Francisco City Attorney David Chiu. "We will continue to fight for the market fairness and predictability that allow clean energy providers to build projects that benefit us all."