Hours after his inauguration and swearing in for a second term, President Trump enacted a variety of executive orders related to energy policy that asserts both increased domestic energy capacity, as well as rolling back a variety of  President Biden’s climate and energy policies. One of these orders - Unleashing American Energy  - included a directive to “pause disbursement of funds appropriated through the Inflation Reduction Act of 2022.”  November’s election,  much attention has gone into the possibility of its rollback since the presidential election last November.  Corporate tax credit buyers are especially interested in understanding what is the risk of credits they purchase in 2025 being rolled back under a new administration. 

This post takes a closer look at some of the specific ways in which the Trump Administration or Congress may roll back IRA in the coming year, and in particular how different scenarios may affect tax credit buyers. Our main conclusions are:

Below is a detailed table outlining some specific avenues for tax credit repeal, and how they may be expected to impact buyers. Following the table is a deeper dive that explores some of the key repeal scenarios and the risks they do – and don’t – pose to buyers.
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Table 1. Actions that the U.S. federal government could take to roll back tax credit transfers and their effect on purchasers.

The highest-risk scenario is that Congress repeals all or part of the IRA tax credits, principally as a revenue raiser to offset the deficit spending created by extending portions of the Tax Cuts and Jobs Act of 2017 (TCJA). President Trump indicated that the extension of the TCJA’s income tax cuts, which expire in 2025, was a priority during his re-election campaign. Extension, along with any revenue-raising cuts to IRA, would likely all be achieved through a budget reconciliation process that requires a simple majority to pass.

This is a high-risk scenario primarily because of the importance of tax cut extensions to the incoming administration and the availability of IRA as a “pay for” measure for income tax cuts. However, only certain amendments would be expected to immediately affect buyers. Obviously, repeal of the transferability provisions or of the most frequently elected tax credits would eliminate or dramatically reduce, respectively, the liquidity and depth of the transfer market. Repeal or dramatic scaleback of Section 48E (which replaces the expiring investment tax credits) and possibly 45Y (replacing the expiring production tax credit) would be enough to significantly reduce market scale and the availability of credits for many buyers. 

The scaleback of other tax credit provisions, on the other hand, or smaller changes to the above program may have a more marginal effect on the transfer markets from the buyer’s perspective. The main effect on tax credit buyers from the moderate reduction of the overall supply of tax credits through partial repeal may be to narrow deal margins as the same number of buyers compete for fewer credits. Shortening the duration of the tax credit transfer program, widely considered one of the more attractive revenue-raising mechanisms involving IRA, should not materially affect buyers, at least not while the program is still running.

Congress can also repeal regulations under the Congressional Review Act of 1996 (CRA) for a period of sixty legislative session days following the finalization of any rule. For example, 48E and 45Y rules were finalized on December 24, 2024, and thus remain eligible for repeal at the time of this blog. This seems less likely because it would not raise revenue for tax cuts, and should in fact reduce the revenue-raising effect of any future repeal of the relevant provision of IRA by lowering forecasted spending due to that provision (see CBO explainer for details on their forecasting methodology).

The other high-risk scenario is that the Trump Administration’s regulatory approach hampers market activity. The administration could rescind regulations, repeal sub-regulatory guidance, or informally change how it operates programs.

If the administration were to rescind regulations providing the policy details that tax credit buyers and sellers need to transact, it would have a similar effect as the legislative repeal outcomes described above until such time that they replaced the regulation with a new one. However, the executive branch has significant statutory obligations to properly rescind a regulation. 

From the buyer’s perspective, this means that they should be aware of such adjustments to regulations prior to closing any credit purchase. In the event a buyer believed they were eligible to purchase and claim transferred credits, but the regulations changed between the time they purchased the credits and when they filed their taxes for the respective year, the buyer may dispute and contest any adjustment through contest or appeals through tax courts (it should be noted that retroactive changes are highly unlikely as it relates to tax code). It is important to note that in the tax code, litigants of the IRS are required to go through a contest and appeals process under the Anti-Injunction Act. 

For the most part, this could affect the availability of certain bonus credits (“adders”) available to projects that meet additional eligibility requirements, but a sponsor’s inability to obtain some adders will only change the size of the credit it is offering. Even here several of the adders, like prevailing wage and energy community requirements, are supported by enough detail in the IRA itself that sponsors can identify eligible projects from the statutory language alone.

Regulatory chokepoints exist particularly where the government must act for a credit to be used. To obtain and transfer clean energy credits, project sponsors must register projects with the IRS and obtain a registration number that is included in any tax filing where the credit is taken. Currently, buyers can already purchase the right to a credit from a sponsor before it is duly registered. Were the sponsor unable to obtain a registration number for an otherwise eligible project, however, the buyer would have to take an aggressive interpretation of tax policy to use the credit at filing: that they have substantially complied with requirements because only the government’s own inaction prevents full compliance.

Despite the wide range of mechanisms through which IRA may be rolled back, the impacts on buyers may under many of these circumstances be more muted, particularly in the near term. Some rollback scenarios do affect the scale and scope of the credit transfer market, and the availability of credits for buyers, while other rollbacks (while severely hampering certain clean energy sectors and markets) may only affect the transfer market on the margins. 

Most importantly, buyers considering purchasing credits today should be confident in the value of those credits: the primary risk is that of an unconsummated deal because of a policy rollback before closing. These concerns can be mitigated by reasonable vigilance, use of rational contractual language, and a prompt and efficient transaction process.  

Erik Underwood is CEO & Co-Founder of Basis Climate

Ilmi Granoff is a partner at advisory firm Climate Technology Group and a Senior Fellow at Columbia Law Schools' Sabin Center for Climate Change Law.