On a Saturday, there’s a certain kind of low-key drama that takes place in federal courtrooms; there are no cameras, no crowds, just a decision that lands in an inbox somewhere and spreads. Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia vacated an IRS notice that had been silently stifling the nation’s wind and solar project development pipeline for months. Before it became front-page news, it wasn’t. After that, it was difficult to ignore.
The “Five Percent Safe Harbor,” a rule that permitted energy developers to receive federal tax credits by merely spending five percent of total project costs prior to a statutory deadline, was eliminated by the IRS notice in question, which was issued in August of last year. For more than ten years, that standard had been in effect. All energy sources—wind, solar, nuclear, geothermal, and hydropower—followed the same regulations. Then, President Trump signed an executive order instructing agencies to “eliminate” clean energy incentives just days after a new Republican tax law was passed last year. The IRS revised the construction regulations in accordance with that directive. But only for solar and wind. Nuclear maintained its safeguards. Geothermal maintained its safeguards. The selective targeting is difficult to ignore.
Judge Kollar-Kotelly also took note. In her ruling, she stated that the administration had not provided a sufficient legal justification for the change, and that the IRS’s new standards marked a substantial break from ten years of consistent agency practice. The decision essentially vacated the guidance by sending it back to the agency for additional review. That distinction is worth hundreds of millions of dollars to developers who are rushing to start construction on projects that are eligible for a 30- to 50-percent tax credit by the July deadline.
Hopi Tribe Chairman Lamar Keevama stated it clearly. In order to provide electricity to those who still lack it, generate employment locally, and pay for necessary services, his community had been depending on solar projects. He claimed that all of that was made more difficult by the IRS rule. Hearing it presented that way, in terms of real power reaching real people rather than in terms of policy abstractions or investment returns, has a certain grounding. That’s what the legalese was all about.
The lawsuit was filed by an unusually large coalition. Plaintiffs included the Oregon Environmental Council, NRDC, Public Citizen, the City and County of San Francisco, the Maryland Office of People’s Counsel, Woven Energy, and Hopi Utilities Corporation. They made the simple claim that the rule change would increase the cost of electricity and hinder the development of clean energy projects. Judge Kollar-Kotelly concurred, stating that lower production of clean electricity and higher consumer prices would be the inevitable economic effects of the IRS notice.
This decision is not a stand-alone decision. The administration’s first wind energy ban has already been overturned by courts, and other policies intended to impede or postpone renewable development have been blocked by preliminary decisions. It’s starting to resemble a persistent judicial pushback against a cohesive policy agenda rather than a string of isolated legal skirmishes. It is genuinely unclear if the administration will change direction or intensify, though the current trend points to the latter.
Developers, tribal energy planners, utility consumers, and city lawyers nationwide undoubtedly woke up on Sunday morning to a slightly different legal environment than the one they had gone to bed in. The Five Percent Safe Harbor has returned. Under the August guidance, projects that lacked a viable pathway might now have one once more. Whether that results in real construction, real jobs, and real kilowatts entering the grid still depends on what happens next.
