Tax credits dodge outright repeal, but committee changes are dismal for climate and clean energy

By Flannery Winchester

This week, the House Ways and Means Committee released and marked up its portion of the budget reconciliation bill. This is the committee we’ve been watching — and lobbying — most closely this spring to protect clean energy tax credits from repeal.

The worst outcome from this committee would have been outright repeal of all the clean energy tax credits from the Inflation Reduction Act. We’re glad to say that the committee’s text does NOT outright repeal the clean energy tax credits. 

But, unfortunately, that’s pretty much all we’re glad about. The Ways and Means Committee proposed significant changes to the clean energy tax credits that would be dismal for climate and clean energy.

These changes include things like: 

• Phasing out tax credits for production and investments in clean electricity and existing nuclear power from 2029 to 2032. The new clean power plants, which take years to permit and build, would have to be operational by those dates to qualify for the tax credits.
• Ending tax credits for home energy efficiency and heat pumps by the end of this year
• Ending the 30% tax credit for rooftop solar and batteries by the end of this year
• …and much more, including many tax credits related to electric vehicles

See more details about all the changes from CCL Research Manager Dana Nuccitelli in CCL Community’s forums here.

According to an early Rhodium analysis, the committee’s proposed changes would “raise energy costs for American households by as much as 7% in 2035, stifle energy technology innovation, increase pollution, and could put a meaningful portion of half a trillion dollars of new manufacturing, industrial, and clean electricity investments across the country at risk.”

So, to be clear, CCL doesn’t endorse this legislation, and we won’t encourage members of Congress to vote for it. 

But we’ve seen that our dedicated, defensive advocacy helped dodge the bullet of outright repeal. We’ve seen new allies speak up during this fight. Some Senate Republicans have already said that the Ways and Means Committee went too far in slashing the clean energy tax credits — and these are Senators who we lobbied on the tax credits earlier this year. 

We can continue to build on that support. Our continued advocacy could further blunt the potential damage from this legislation. So we will double down on our defense as the budget reconciliation process moves forward from here. 

Let’s take a stand before the full House vote

After an “hours-long, overnight meeting that featured heated debate,” according to The Hill, the Ways and Means Committee passed their portion of the budget with the above changes.

But it’s important to understand that the budget reconciliation process is far from over. 

Other House committees have been releasing their own portions of the budget reconciliation bill and holding votes. Some have passed already, like the portions from the House Natural Resources Committee and the House Energy and Commerce Committee. 

(Note that several of these other committees will affect other portions of the Inflation Reduction Act, too. We’ve focused primarily on defending the clean energy tax credits because we felt our grassroots volunteers could make the most impact and because those tax credits delivered the most significant emissions reductions of any climate measures in the IRA.)

All together, the portions passed by the committees will combine to form one big budget reconciliation bill that will head to the House floor for a vote. A House vote is not yet scheduled for the full reconciliation bill, but Republican Party leadership has suggested they are aiming to hold this vote by Memorial Day.

So, with potentially less than two weeks between now and the full House vote — this is our next moment in the process to make a stand for the clean energy tax credits. 

How this could all play out

As we continue our push to preserve the clean energy tax credits, there are two main ways this could play out. Let’s take a look at each one.

Scenario 1: More support leads to lighter cuts

As negotiations progress, we could see a growing group of Republicans treat the IRA clean energy tax credits as one of their top priorities and be willing to go to bat for them. This is the scenario we’re working to make happen. 

We’ve already seen many Republican voices speak up in letters in support of the tax credits — 21 House Republicans in one letter, 4 Senate Republicans, another group of 26 House Republicans, and so on. Our advocacy can continue to build on this support, potentially leading to amendments in the full House bill or to a Senate version that does not cut the tax credits so drastically.

Another possibility, is that if enough lawmakers are feeling pressure not to support this legislation (whether because of the clean energy tax credits, or Medicaid cuts, etc.), there may not be enough votes to pass the reconciliation bill at all or this process may drag on for months as they work to find a package that has enough support to pass.

If the reconciliation effort falls apart and we get to the end of the year with no deal, there would likely be a push for a bipartisan tax extenders package. It is almost guaranteed that any bipartisan package on the clean energy tax credits would be better than the current reconciliation proposals but we would remain engaged and advocating for their preservation.

Scenario 2: The cuts to the clean energy tax credits don’t change, or Republicans seek even deeper cuts.

It’s possible that lawmakers will continue to stick by these deep cuts to the clean energy tax credits. They could pass the full House bill with these deep cuts as is, and the Senate could also pass similarly deep cuts. That’s not what we want to see. 

The clean energy tax credits could be vulnerable to even further cuts as the process continues to unfold. 

That’s because the Republican Party has extremely slim majorities in both the House and the Senate. To pass a budget reconciliation bill, they need essentially every Republican to vote for it. So, Republicans will be looking hard to find enough spending cuts they can all agree on, and they could come back to the clean energy tax credits to find those cuts.

That’s why our advocacy remains vital. We need to make sure that lawmakers can’t ignore the nationwide support for the clean energy tax credits, so at the very least, they don’t try to cut them even more than they are trying to right now.

Make your voice heard now

We’ve set up a new action tool for you to contact Republicans in both the House and the Senate in this key period before the House vote and as the Senate begins to discuss changes they want to see to the House bill.

For Republicans in the House, we are suggesting amendments that we would like to see before the full House votes on the complete budget reconciliation package. These amendments would prevent the worst cuts proposed to the clean energy tax credits, leading to a better outcome than the current version. 

Specifically, we’re asking for things like striking the repeals of tax credit transferability for clean energy tax credits, since transferability makes tax credits more efficient, and preserving the home efficiency tax credits that so many homeowners have benefitted from.

For Republicans in the Senate, we are starting with a more general message, encouraging them to work with the Senate Finance Committee to protect all of the clean energy tax credits in their version of the bill.

Don’t forget: for something to actually become law, everything needs to happen on the Senate side, too — committee votes and then passage by the full Senate. Ultimately, the House and Senate would have to agree on and pass the same version of the bill for it to go to the president to be signed into law.

CCL liaisons have already launched a targeted citizen lobbying push toward members of the Senate Finance Committee, so we’re working from every angle that we can.

Make your voice heard by sending your messages today.

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