Illustration: Shoshana Gordon / Axios
It's not doomsday for the Democrats' climate law yet — but House Republicans' proposed changes would all but kill many of its most important tax incentives.
Why it matters: Before the IRA, renewable tax credits were politically volatile, lapsing at times and phasing down and up in various tax-extenders packages.
- Democrats' pitch for the IRA was that it made the credits more predictable. If the Ways & Means Committee's proposal were to become law, we'd likely see a similar fight in a few years over re-extending or renewing.
Zoom in: Among the most important proposals in Ways & Means' reconciliation text is a proposal to phase out investment and production credits based on when projects are "placed in service."
- In the past, the incentives have been based on when projects begin construction — not when they begin generating and selling electricity to the grid.
- The change will "immediately impact project financing as companies will have to prove that they will place in service in time despite myriad uncertainties outside their control, including permitting delays, supply chain disruptions, and tariff-induced impacts," according to a Natural Resources Defense Council analysis.
- It could affect projects now in the pipeline. Even if a wind or solar installation isn't set to come online until 2027 or 2028, a permitting delay could mean it gets a significantly reduced tax credit — or none at all.
The bill also includes aggressive "foreign entity of concern language" that would zero out credits for companies with virtually any ties to adversarial nations like China or Russia.
- China currently dominates many of the supply chains for basic materials and renewable energy.
- Industry and environmental groups say the language could effectively make the incentives unusable.
- Plus, Republicans are proposing to repeal the IRA's "transferability" provisions, a key feature that made the incentives easier to monetize.
By the numbers: The Joint Tax Committee score Tuesday offers a look at how significant this could be.
- The early phaseouts of the production tax credit and investment tax credit would save the federal government roughly $182 billion.
- In total, repeals, early sunsets and changes to energy-related tax provisions of the IRA would save $515 billion.
What they're saying: "As supporters of all-of-the-above energy, we urge the House Ways and Means Committee to avoid action that will devalue the credits," CRES president Heather Reams said in a statement urging Republicans to preserve transferability.
- And Sen. Ron Wyden, architect of the IRA's tech-neutral incentives, told Axios: "Obviously, they're going to face a lot of pushback, because it's going to raise energy prices, cut jobs."
What we're watching: Notably, none of the 21 Republicans who signed the biggest pro-IRA letter sits on Ways & Means.
- GOP leaders are also facing pressure from conservatives who say the IRA rollbacks don't go far enough.
- If Republicans don't change the proposal in committee — particularly the foreign-entity language — one industry source who spoke on condition of anonymity told us to watch for a manager's amendment on the floor.
