Illustration: Tiffany Herring/Axios
The demise of Chevron deference might be the next hurdle for the IRA's hydrogen tax credit.
Why it matters: Beyond new limitations on EPA's regulatory powers, the Supreme Court's decision in Loper Bright v. Raimondo could have ripple effects for President Biden's landmark climate law.
- It will likely make it more difficult for Treasury to defend the "three pillar" approach it's taken with the 45V hydrogen credit.
- That's because the kind of climate guardrails the administration is contemplating aren't directly referenced in the text of the IRA.
Zoom in: The 45V guidance is still in draft form, but industry is in an uproar and warning that it could stymie development of a "clean" hydrogen industry.
- Expect lawsuits — bolstered by weakened agency deference — if the administration's additionality, time-matching and regionality requirements survive in the final rulemaking.
- "When the decision came out, the three pillars in the hydrogen proposed regulations were the first thing that came to my mind," said Mary Burke Baker, who leads the tax policy practice in K&L Gates' D.C. office.
- Without Chevron, the administration might have to show not just that it has a reasonable interpretation of 45V, but also that it has "adopted the best interpretation of the IRA," the Congressional Research Service wrote in April.
Between the lines: Beyond hydrogen, "there are several areas of tax guidance where there is arguable variance between the direct language of the Inflation Reduction Act and how it has subsequently been interpreted," said Scott Segal, a partner at Bracewell.
- That includes sourcing requirements for the 30D clean vehicle tax credit, which has been the subject of considerable debate (even Joe Manchin at one point threatened to sue).
Yes, but: The decision didn't totally throw out lawmakers' ability to delegate to agencies, and much of the IRA is fairly straightforward.
- There's also plenty of uncertainty about how, exactly, this will all play out.
- "While more time is needed to assess the full ramifications of the decision, it's important to remember that Treasury and IRS are issuing the bulk of the rules related to the IRA under broad and explicit grants of authority from Congress," said Michael Kaercher, director of the Climate Tax Project at NYU's Tax Law Center.
The big picture: Loper Bright v. Raimondo is one of a larger suite of high court decisions that have weakened agency power.
- This term, justices also lengthened the window for legal challenges to federal regulations in Corner Post v. Board of Governors.
- Taken together with the Major Questions Doctrine, small differences between the law and an agency's interpretation could get additional scrutiny from conservatives and industry opponents.
