A recent court filing reveals a US judge has invalidated a policy enacted last year by the Trump administration that made it more difficult for wind and solar projects to qualify for federal tax subsidies.
This ruling represents the latest legal setback for a series of efforts by President Trump aimed at slowing the development of clean energy technologies, which he has previously characterized as unreliable and unfairly subsidized.
On June 7, US District Judge Colleen Kollar-Kotelly ruled that the Internal Revenue Service (IRS), a division of the US Treasury Department, failed to provide adequate justification for revoking a long-standing definition of "commenced construction."
Under federal law, clean energy projects must begin construction by July 4 of this year or be placed in service by the end of 2027 to be eligible for a 30% tax credit, along with bonus adders that can further increase the subsidy amount.
For the past decade, project developers have been able to secure a four-year safe harbor period through two methods: either by performing significant and continuous physical work, or by incurring 5% of the project's total cost before the tax credit expiration date.
The new regulations issued by the IRS in August of last year eliminated this 5% safe harbor option, with the exception of the smallest projects. The judge's recent order has sent the IRS rulemaking notice back for further consideration.
Last year, a coalition of plaintiffs including environmental groups such as the Oregon Environmental Council and the Natural Resources Defense Council, the consumer advocacy organization Public Citizen, the City of San Francisco, and the clean energy consulting firm Woven Energy filed a lawsuit challenging the IRS rule.
Their legal challenge argued that the new regulation would increase electricity prices and hinder the development of clean energy projects.
San Francisco City Attorney David Chiu stated in a declaration, "This decision serves as a crucial check on government actions that are driving up energy costs for ordinary people in towns and cities across the nation. We will continue to defend market fairness and predictability, enabling clean energy providers to build projects that benefit everyone."
An IRS spokesperson indicated that the agency does not comment on ongoing litigation.
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