The Trump administration announced a policy Friday that will make it even harder for wind and solar projects to take advantage of federal tax credits — the latest in a series of Trump administration blows against clean energy since passage of the GOP’s sweeping new tax law.
The new Treasury Department guidance would undo years of existing practice defining when a solar or wind project has started construction, a key metric that spells out when developers can claim lucrative tax credits.
Treasury’s actions aim to fulfill pledges President Donald Trump made to House conservatives to secure their support for the massive spending and tax law he signed last month. But the crackdown on wind and solar has already drawn pushback from centrist Republicans and GOP lawmakers from wind-heavy states. Sens. Chuck Grassley (R-Iowa) and John Curtis (R-Utah) placed holds on three of Trump’s Treasury nominees after failing to secure assurances on the new tax credit guidance.
The GOP law terminated existing investment and production tax credits for solar and wind projects that start producing electricity after 2027, but provided more time for projects that begin construction within a year.
Trump then directed Treasury to “strictly enforce” the end of the credits for wind and solar facilities, including by issuing new guidance concerning when a project is deemed to have begun construction. Traditionally, that longstanding metric has allowed projects to qualify by taking steps such as incurring 5 percent of a project’s total cost or beginning physical construction activities.
Tax lawyers and clean energy developers have warned the guidance could mark an unprecedented and legally dubious attempt to rewrite congressional intent, and could be challenged in court. Grassley has also said he would object to consideration of the Treasury nominees until he can be “certain that such rules and regulations adhere to the law and congressional intent.”
But the guidance will have immediate impact for hundreds of planned solar and wind projects across the country. Adrian Deveny, founder and president of policy advisory firm Climate Vision, said the new guidance will “pull the rug out from under the entire pipeline of wind and solar projects that are in development.”
Deveny, who helped craft the clean energy credits as a former policy director for Democratic Senate Leader Chuck Schumer, said Trump is “determined to jack up American energy bills.”
Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, in a statement called it a “blatant rejection” of what Congress passed in the tax law.
In the weeks following Trump’s directive, the administration has undertaken a host of actions across agencies to further imperil wind and solar development, including major actions at the Interior Department that have received pushback from some Senate Republicans.
The new Treasury guidance — which is not open to public comment — will apply to projects after Sept. 2.
To demonstrate they have commenced construction, the new guidance will require all wind projects and most solar projects to show they are conducting physical work, rather than relying on the 5 percent safe harbor. Only solar facilities generating less than 1.5 megawatts, typically rooftop solar installations, would be allowed to use the safe harbor.
Projects will also have to demonstrate a “continuous program of construction,” with only limited exceptions permitted for certain construction delays.
Keith Martin, a partner at Norton Rose Fulbright, said the new guidance discards the “bright-line 5 percent test” in favor of a “less clear facts-and-circumstances approach.”
While many developers relied on the physical work test in the past, it “leaves some uncertainty about how much work is required,” Martin said. “The financiers and tax insurers will have to decide where they feel comfortable drawing lines.”
Josh Siegel contributed to this report.
