The Republicans’ "Big, Beautiful Bill" included the largest repeal of green corporate subsidies in U.S. history. Congress cut more than half a trillion dollars in open-ended tax credits from the Biden-era Inflation Reduction Act’s (IRA) so-called Green New Deal programs. It’s a remarkable achievement, but one that will mean little unless the Trump administration follows through with strict regulatory implementation.
The budget bill ends subsidies for electric vehicles and home energy improvements this year and next. The industry-level tax credits for wind, solar, and hydrogen are supposed to end after 2027, and most other energy sources will lose their subsidies by 2035. Had Congress not acted, these uncapped electricity production and investment tax credits were on the road to costing taxpayers more than $100 billion annually by the 2030s. But the taxpayer savings will mean little without careful regulatory follow-through.
As part of the political compromise to secure the budget bill’s passage, a coalition of conservative lawmakers demanded something often overlooked in Washington: faithful regulatory implementation. In response, President Donald Trump issued an Executive Order on July 7 directing the Treasury Department to tighten its interpretation of requirements to begin construction on projects to qualify for the tax credits and restrict foreign-subsidized firms (foreign entities of concern) from accessing the subsidies.
PRESIDENT TRUMP IS PURSUING ENERGY DOMINANCE — CONGRESS SHOULDN'T GET IN THE WAY
This next regulatory phase is where the battle to end the blank check for green energy will be won or lost.
The Trump administration can learn from its predecessor. Under President Biden, Treasury guidance dramatically expanded the green subsidies, inviting aggressive tax credit harvesting, and inflating the fiscal cost of some programs several times over. Trump’s Treasury should do the opposite: narrow interpretations, strict eligibility rules, and rigorous anti-abuse enforcement.
Start with the beginning of a construction test. Under current guidance, developers can secure tax credits simply by incurring 5 percent of projected costs or performing limited on-site work, often amounting to little more than site prep or buying some solar panels (which can always be sold later). The project then has four years to be brought online, with an option to ask for an extension.
The new executive order rightly calls out these lax rules, directing the Treasury to prevent "artificial acceleration or manipulation of eligibility." The administration should raise the spending threshold to 50 percent or more, require substantial physical work to be completed, shorten the four-year harbor, eliminate extension applications, and require regular re-certification to prove construction is ongoing.
Next, the administration should strictly enforce the foreign entity of concern restrictions, which bar tax credits from flowing to projects dependent on Chinese-controlled suppliers and other adversarial regimes. Biden’s Treasury gutted this requirement by exempting subsidiaries and intermediate components from scrutiny. A stricter interpretation would lower foreign ownership thresholds, expand scrutiny of supply chains, and enforce strict certification and audit procedures with meaningful penalties for falsification.
The Treasury should also consider reforms, not explicitly addressed in the executive order. For example, there is an 80/20 rule, which allows companies to claim full tax credits for refurbishing old systems so long as 80 percent of the project’s value is "new." Trump’s Treasury should eliminate this rule. Tax credits should apply only to new infrastructure.
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Finally, the Treasury must crack down on appraisal-based tax credit fraud. It’s common for companies to claim inflated "fair market values" for used property under the 80/20 rule and leased property, sometimes inflating those values to multiple times the actual cost. Congress intended the credit to reflect real capital investment, not paper valuations conjured by aggressive tax attorneys. Credits should be based on actual out-of-pocket expenses.
None of these reforms require new legislation. They simply require the Treasury to do what the law already requires: enforce eligibility requirements and prevent abuse.
Small government advocates often lose sight of the regulatory battlefield, assuming that good laws will implement themselves. But special interests never forget this stage. They are already flooding agencies with comment letters, white papers, and exaggerated claims about the negative effects of strict enforcement. The Trump administration must not blink.
The heavy lift in Congress is done. What’s needed now is execution. The Inflation Reduction Act’s implementation was shaped by special interests and green energy lobbyists. If the administration acts boldly, it can undo that influence and the United States can close the book on one of the most expansive and distortionary industrial policy experiments in decades.