When the Republican-backed Big Beautiful Bill budget law passed in July, it rolled back federal support for a broad swath of climate initiatives.

Now an Oregon-led coalition that includes tribal groups, consumer advocates and environmental advocates is suing the Internal Revenue Service over the phaseout of clean energy tax credits, saying the agency has gone too far in its interpretation of those cuts.

At issue: tax credits that help large-scale, costly wind and solar projects to pencil out. When Congress voted to retire those credits, it left room for projects already in the planning and permitting process to keep going — if they could meet tight timelines.

It was the IRS’s job to map out the specific rules that govern how wind and solar developers qualify for these credits, and that’s at the heart of the litigation filed Thursday. The IRS re-defined when developers of those renewable projects can say work has started — giving them a stricter standard than companies seeking other tax credits face.

Officials from the IRS declined to discuss the lawsuit, citing a policy that the agency does not comment on pending litigation.

Jana Gastellum, executive director of the Oregon Environmental Council, says those rules are more restrictive than rules the IRS uses with other industries and under similar legislation — and that could hold back the state’s green energy priorities. The lawsuit alleges the changes are illegal, and that the IRS made them without giving renewable developers adequate reasoning for why they’re being treated differently from industries like geothermal and nuclear power — which were granted tax credits in the same legislation.

“It’s unfair treatment of clean energy,” Gastellum said. “This is about the administrative action against wind and solar, and it’s really important to stand up to unjust actions. This impacts the affordability of energy, it reduces job opportunities and it furthers air climate pollution.”

The Oregon Environmental Council, a Portland-based environmental nonprofit, is leading the lawsuit against the IRS, joined by the city of San Francisco, the state of Maryland, tribal utility groups from Arizona and Minnesota, as well as consumer and environmental advocates.

They are asking a federal judge in Washington, D.C., to toss out the new IRS rules, and to allow wind and solar developers to continue using the definitions that govern other sectors.

The legal conflict gets to the heart of starkly different federal and state energy priorities.

President Donald Trump has repeatedly called climate change a hoax and pushed for more investment in fossil fuels and less in renewable energy. Oregon, meanwhile, has set some of the country’s most ambitious climate goals, and has ordered electric utilities to fully eliminate greenhouse gas emissions by 2040.

Before Trump successfully pushed Congress to cut federal support for wind and solar, the law allowed developers of big renewable projects to subtract as much as 30% of their construction spending from their tax bills.

Those credits will soon go away. Under the Big Beautiful Bill, wind and solar projects that break ground by July 4, 2026, and that are complete by 2030, can still get credits. Projects that don’t start construction by July 4 must be up and running by Dec. 31, 2027, to qualify.

Gov Tina Kotek recently ordered Oregon agencies to prioritize renewable energy projects, in an effort to assist developers racing to start work on projects slowed by state bureaucracy.

Oregon to accelerate siting of renewable energy projects to beat Trump’s incentive deadline

But even before the credits expire, those developers face a new set of IRS rules defining when they’ve broken ground — rules that don’t apply to other construction-related tax credits. IRS documents show that these rules were shaped by more than the federal budget bill. They were also influenced by a Trump executive order making it federal policy to end green energy subsidies.

Under the old rules, energy developers could say they’d started work if they had spent at least 5% of the total cost of a project — even if they had not broken ground. It can take years for projects to get approval to build and connect to the electrical grid, and developers have little control over that process.

Under the new rules, large wind and solar projects can only qualify for a tax credit after construction starts.

Higher prices, rolling blackouts: The Northwest is bracing for the effects of a lagging green energy push

When the tax agency released its new rules in August, some renewable energy proponents actually celebrated. They’d expected even more rigorous restrictions. Share prices for renewables companies’ stocks climbed after the IRS released its guidance, according to Project Finance News, which covers energy sector financing.

The Oregon Environmental Council and its allies are asking a federal judge in Eugene to toss out the new IRS rules, and to allow wind and solar developers to continue using the definitions that govern other sectors.

News Source : https://www.opb.org/article/2025/12/18/oregon-environmental-group-leads-lawsuit-reverse-irs-wind-solar-rules/