Senate Republicans are reportedly moving to eliminate a controversial tax on solar and wind energy projects as part of their budget reconciliation bill, according to three sources. This amendment, which is intended to placate critics and ensure the continued viability of clean energy initiatives, would allow projects to begin construction within one year of the bill’s enactment to qualify for tax credits. However, projects that start construction after that period would still need to be in service by the end of 2027 to receive the benefit of the tax credit phase-out.
The decision follows a sharp backlash from clean energy developers and advocacy groups, who had raised concerns about the potential impact on hundreds of pending projects. The original version of the Senate’s budget text, released last week, had included a new excise tax on solar and wind projects, prompting outcry from industry leaders. The amendment appears to be a compromise to address these concerns while still maintaining some of the phase-out provisions that had been part of the original proposal.
Key GOP senators, including Sen. Lisa Murkowski (R-Alaska), have played a central role in the negotiations, as the amendment seeks to appease a divided Republican caucus. The changes reflect behind-the-scenes efforts to balance environmental objectives with political realities, particularly in light of the House’s earlier moves to cut clean energy tax credits. Senators Joni Ernst (R-Iowa), Chuck Grassley (R-Iowa), and John Curtis (R-Utah) have also been involved in these discussions. The amendment is expected to be finalized as part of the final revisions to the budget reconciliation bill, which was previously revised to significantly reduce the scope of the climate law’s solar and wind tax credits.
Despite these adjustments, the bill still requires projects seeking the Inflation Reduction Act’s tax credits to be placed in service by the end of 2027. While this provision has drawn criticism for potentially undermining the growth of renewable energy, the amendment is seen as a step toward reconciliation between different factions within the Senate. The final version of the bill is likely to have a significant financial effect on the clean energy sector, with implications for both developers and investors who rely on these tax incentives to move forward with large-scale projects.