House GOP wants to cut parts of the Inflation Reduction Act while sparing others

CodeCanyon · May 13

Republican leadership in the Ways and Means committee of the U.S. House of Representatives released Monday night a draft of a reconciliation bill that seeks to undo much of the Inflation Reduction Act.

The landmark 2022 law implemented a range of incentives that spurred the production of clean energy, electric vehicles, carbon capture, and battery storage. Since the IRA was enacted, the law has spurred more than $275 billion in private investment in the United States.

House Republicans’ axe has fallen in places both expected and surprising.

Under the “expected” column: Electric vehicle tax credits and the ability to transfer tax credits for clean energy production from one organization to another.

The EV tax credit gives consumers up to a $7,500 tax credit on the purchase of an EV; the bill proposes ending the credit in 2026 and reinstating a cap of 200,000 vehicles per manufacturer. Several companies, including Tesla, GM, and Toyota, hit that cap years ago.

The transferability clause has spurred an entirely new market, with over $30 billion worth of deals happening in 2024 alone. The provision allows companies and other organizations to take advantage of IRA tax credits even if they have no tax liability. A church, for example, can install solar panels and sell the tax credits to companies that can make use of the incentives.

There were more surprising changes, too.

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Nuclear power, normally a favorite of GOP lawmakers, would no longer benefit from tax credits for electricity generation. The law would also end tax-exempt status for environmental groups if the government decides that they have “supported terrorist organizations.” Advanced manufacturing would also see incentives cut back, as would tax credits for carbon capture, something that many large oil companies have publicly supported.

Sustainable aviation fuel is among the technologies that might see its incentives spared, as were bonuses for clean energy producers known as “adders.” The House bill also does not seek to claw back funds that have already been spent, contrary to what’s happening at the EPA. The House bill would move up the date for which large projects can qualify for incentives.

None of this is set in stone, of course. This is a first draft at a process that’s certain to be drawn out and messy. Lobbyists and political action committees are already rolling out pressure campaigns to dissuade GOP politicians from voting in favor, and they have a chance at succeeding given how many Republican districts have benefited from the IRA in just a few years.

Whether such an ambitious repeal of an existing law will pass muster under reconciliation rules also remains an open question. The process allows for a simple majority vote in the Senate provided a reconciliation bill raises revenue or spends it. Repealing the IRA would essentially be doing the opposite.