The Senate on March 25 voted 47-53 to reject a resolution that would have rescinded guidance tightening rules on when construction begins for purposes of the phaseouts of wind and solar energy credits.
The vote is the second time this year that the Senate has defended IRS regulatory action. The first time, Republicans blocked a challenge to taxpayer-favorable changes to the corporate alternative minimum tax rules.
In this case, the regulatory change being challenged was unfavorable to taxpayers. The Congressional Review Act allows Congress to repeal regulations using privileged resolutions that require only majority votes. Democrats challenged Notice 2025-42, which makes it harder for taxpayers to establish that construction has begun on wind and solar projects. (For more information, see Treasury, IRS Release New Guidance for Determining Beginning of Construction).
Although there is some support for energy credits among Senate Republicans, the vote shows that Republicans remain unlikely to second-guess Treasury’s ambitious regulatory agenda.
BDO Takeaway
Even with the unfavorable beginning of construction rules, significant opportunities remain to pursue energy credit projects before the phaseouts. In addition, credits can still be sold. The transfer market is active and may offer a powerful tax reduction strategy for taxpayers with significant liability. Our Tax Insight, How the OBBBA Transforms the Energy Tax Credit Transfer Market, has more information.