Thirteen US House Republicans seek 'thoughtful' phaseout to clean energy tax credits

Thirteen House Republicans called for a more measured approach to phasing out federal clean energy tax credits a day after a US House tax-writing panel advanced an aggressive plan to end the subsidies as part of a broader Republican Party budget reconciliation effort.

"We commend the Ways and Means Committee for including reasonable phaseout schedules for certain clean energy tax credits," the lawmakers said in a May 14 joint statement led by Representative Jen Kiggans, Republican-Virginia.

"While many of these provisions reflect a commitment to American energy dominance through an all-of-the-above energy strategy, we must ensure certainty for current and future energy investments to meet the nation's growing power demand and protect our constituents from higher costs," they said.

The internal Republican Party pushback comes as a new analysis shows that the clean energy tax credit repeal would result in higher energy costs, lost jobs and lower GDP in 19 states.

The group of lawmakers, representing a geographically diverse collection of competitive districts, urged House Republican leadership to consider three "thoughtful" changes to the Ways and Means Committee's bill ahead of a full House floor vote expected the week of May 19.

The bill's early phasedowns of the 45Y clean electricity production tax credit and 48E clean electricity investment tax credit, for example, would together yield about $182 billion in additional revenue, according to an estimate from the nonpartisan Joint Committee on Taxation. The technology-neutral 45Y and 48E credits were among more than a dozen new and expanded clean energy tax credits established by Democrats via budget reconciliation procedures in the Inflation Reduction Act of 2022.

The law's passage kicked off a major US clean energy investment boom, with most of the announced investments and jobs so far located in Republican congressional districts.

Phaseout changes

As an initial matter, the 13 Republicans called the bill's new restrictions on foreign entities of concern "overly prescriptive."

The bill would broadly prohibit projects from receiving "material assistance" from "foreign-controlled" and "foreign-influenced" entities with ties to the governments of China, Iran, North Korea or Russia.

Material assistance would be defined in terms of components, subcomponents, or critical minerals extracted, processed, recycled, manufactured or assembled by a prohibited foreign entity. The bill would also prohibit credit eligibility for any property designs based on a copyright or patent held by a prohibited foreign entity.

"These provisions should be revised to allow companies additional time to reorganize their supply chains, ensuring a strategic and successful transition," the Republican lawmakers said May 14.

The group also took issue with the bill's shift from the IRA's "start construction" standard to a more restrictive "placed in service" standard for determining credit eligibility.

"The current 'placed in service' standard does not align with the Committee's thoughtful phaseout schedule," the lawmakers said. "Replacing it with a 'start construction' standard is essential to supporting the energy development needed to meet the growing power demand and protect thousands of high-quality American jobs in communities across the country."

The group also recommended maintaining transferability of the IRA tax credits -- the ability to buy and sell them -- for the duration of the proposed phaseout period. Under the Ways and Means Committee bill, transferability for most IRA credits would be repealed after two years.

'Significant lost jobs and lost economic opportunity'

The Clean Energy Buyers Association, a trade group with members representing more than $20 trillion in market capitalization, released a study on May 15 on the economic impacts of full repeal of the 45Y production credit and 48E investment credit.

The group engaged NERA Economic Consulting to analyze the impacts of 45Y and 48E credit repeal for 19 states across the US, with modeling on how less solar and wind deployment could affect demand for natural gas in applications like home heating.

The study found that Arizona households would experience a 12.7% increase in electricity prices from 2026 to 2032 relative to a no-repeal scenario. Businesses in North Carolina could see a 20% increase in electricity costs under the same scenario, NERA found.

California and New York would take $4.78 billion and $3.45 billion hits to state GDP, respectively, and Pennsylvania would see roughly 6,680 job losses over the six-year period, according to the study.

"I think we confirmed with more detailed modeling that as electricity prices go up, that leads directly to significant lost jobs and lost economic opportunity," the association's CEO, Rich Powell, said in an interview.

Powell noted the Republican Party budget reconciliation effort is still in its early stages. The House of Representatives must still vote on a final reconciliation bill, and some Senate Republicans have already promised to take a different approach on tax incentives in their own reconciliation legislation.

Powell said a bill introduced last week by Kiggans and Representatives Andrew Garbarino, Republican-NY, David Valadao, Republican-California, Mark Amodei, Republican-Nevada, and Dan Newhouse, Republican-Washington -- who all joined the May 14 statement -- represents "a very workable compromise piece of legislation."

The bill would eliminate the 45Y and 48E credits for wind and solar facilities that commence construction after 2030 and create a more straightforward approach for ensuring tax credits do not benefit foreign entities of concern.

"The Kiggans bill, we think, has a very workable expansion of a [foreign entity of concern] process into the technology-neutral credits, and that seems like the right way to approach this," Powell said.