A federal judge in Washington, D.C., has struck down Internal Revenue Service guidelines that restricted tax credits for wind and solar projects.
In a ruling issued late Saturday, U.S. District Judge Colleen Kollar-Kotelly vacated the IRS guidance, known as Notice 2025-42. The policy had altered the standard for when a renewable energy project officially “begins construction.” This specific date is critical for developers trying to qualify for federal tax credits that are scheduled to expire next month. The tax credits at stake are worth 30% to 50% or more of total project costs.
The legal challenge was filed in December by a broad coalition of plaintiffs, including the Oregon Environmental Council, the Natural Resources Defense Council (NRDC), Public Citizen, Hopi Utilities Corporation, Woven Energy, the City and County of San Francisco, and the Maryland Office of People’s Counsel. They argued that the administration’s guidelines were unlawful, arbitrary, and a direct attempt to stall renewable energy growth.
In her decision, Judge Kollar-Kotelly wrote that the new “begin construction” standards represented “a significant change” from a decade of consistent IRS practice. She noted that clamping down on these projects would result in higher utility bills for consumers and increased air pollution for local communities.
“The natural economic consequence of the Notice is less clean electricity generation capacity and higher electricity prices,” the decision states.
Environmental and consumer advocates celebrated the ruling, stating it removes an artificial barrier to affordable power.
“The court’s decision reinforces that the Trump administration acted unlawfully in using the IRS to target wind and solar energy projects,” said Nandan Joshi, an attorney with Public Citizen. “The Trump administration’s war on solar and wind power results in concrete harm to consumers by raising energy prices. By using the tax code to wage war on wind and solar energy, the Trump administration will cause electric bills to rise, workers to lose their jobs, and older, dirtier power plants to spew more pollution into our air.”
Grace Henley, a tax attorney at the NRDC, echoed that sentiment. “The Trump administration’s illogical and illegal war on clean energy is making it harder to get the electricity the grid needs now more than ever, raising costs for cash-strapped utility customers,” Henley said. “This decision demonstrates, yet again, that its attacks are unlawful. The administration should take the hint and get to work on an energy policy that actually serves the American people.”
The decision marks another setback for the administration’s broader energy policies. Federal courts have already overturned an initial “wind ban” and issued preliminary rulings blocking other policies aimed at delaying renewable energy infrastructure.
“This is a huge win for clean energy development, and for everyone already feeling the impacts of rising electricity costs,” said Jana Gastellum, executive director of the Oregon Environmental Council. “Solar is the most affordable and fastest-growing energy source. Wind and solar energy are saving ratepayers from rising fossil fuel prices as well as combatting climate disruption. The IRS guidance that hindered these technologies was just another example of the federal administration causing energy market chaos. Saturday’s decision removes that barrier. This is a win for communities, businesses, and households across the U.S.”
Local government representatives also weighed in on how the policy shift impacts regional utility customers.
“This decision puts an important check on the administration’s actions, which are driving up energy prices for everyday Americans in cities and towns across the country,” said San Francisco City Attorney David Chiu. “We will continue to fight for the market fairness and predictability that allow clean energy providers to build projects that benefit us all.”
Though the court dismissed the Maryland Office of People’s Counsel from the specific lawsuit, Maryland People’s Counsel David Lapp welcomed the policy reversal. “While we’re disappointed with the Court’s decision to dismiss our office from this case, Maryland utility customers are better off with the IRS’s unlawful Notice off the books,” Lapp said. “We urge the administration to stop attacking clean energy development at a time when Marylanders can least afford it.”
For developers, the ruling restores previous industry standards, giving companies more flexibility to prove when a project started.
“We are pleased that our clients – and really anyone developing wind and solar assets – have the opportunity to establish meaningfully earlier ‘start of construction’ for tax credit purposes or possibly revive projects that did not have a pathway to ‘start construction’ under the IRS 2025-42 guidelines,” said Jake Schueller, a development executive at Woven Energy. “Having flexibility in how ‘start of construction’ is established is important, especially for many of our Tribal clients, where land development and disturbance has heightened implications. This ruling reestablishes industry norms that are critical for project development, certainty and investment.”
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