Attorneys
The Inflation Reduction Act of 2022 (IRA) included many noteworthy tax reforms, but one of the most significant was the creation of new clean energy tax incentives directed at both individuals and businesses. In addition to implementing these new credits, the IRA also built on existing credits originally created in 2009 after the passage of the American Recovery and Reinvestment Act.
Since President Donald Trump was sworn into office earlier this year, there has been widespread discussion about the future of the IRA and its clean energy tax credits. To that end, Congress and the administration have already signaled their intent to modify and repeal several of the clean energy tax initiatives created by the IRA.
The IRA was an attempt by Congress to encourage businesses to engage and invest in clean energy adoption, manufacturing and production. Among the businesses eligible for these clean energy credits are those that invest in or produce hydrogen power, solar or wind energy, biofuel or sustainable aviation fuel or made energy-efficient improvements to commercial buildings.
Unlike prior legislation, for the first time, the IRA expanded clean energy tax credits to benefit taxpayers previously ineligible for such money-saving credits. It permits energy project owners and sponsors to sell tax credits to qualified businesses in exchange for cash. In return, the eligible buyers can use this tax credit to reduce their own tax liability. Additionally, the IRA allows qualified tax-exempt entities such as Indian tribal governments, state and local governments and certain other organizations to receive direct payments in the form of tax refunds. Previously, these organizations may not have been able to take advantage of such tax credits as they would not have had taxable income to which they could apply a credit.
The eligibility and amount of credit available varies widely based on the specific credit taken. The majority start with a “base credit” that increases if certain requirements are met. The additional requirements also vary based on the individual credit. Examples include if the facility at issue is in a low-income community or on Indian land or if it uses steel or iron mined, produced or manufactured in the United States.
Given the administration’s intent to repeal many of these incentives, the IRS may be apt to seek out and audit businesses that already took advantage of these credits. Those businesses should consider proactively seeking legal advice to ascertain whether they are likely to survive IRS scrutiny and, if not, the best and most appropriate way to remedy any issues. Even if they choose not to be proactive, businesses that come under IRS audit should immediately seek out tax controversy attorneys with an understanding of these credits. Given the complex requirements, the large credit amounts potentially available and the administration’s opposition to these incentives, a wait-and-see approach could prove to be very costly.
Kevin Sweeney, a shareholder at Chamberlain, Hrdlicka, White, Williams & Aughtry in Philadelphia, is an experienced tax attorney and former federal prosecutor who defends clients in civil and criminal tax controversy matters. Katherine Wheeler is an associate in the firm's tax controversy & litigation group in Philadelphia.
Reprinted with permission from the September 8, 2025, edition of The Legal Intelligencer © 2025 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.