What is budget reconciliation?

Budget reconciliation is a process allowing lawmakers to pass budget-related legislation with a simple majority of 51 votes in the Senate, rather than the 60 votes you typically need in the Senate, which usually requires some votes from the minority party. The Democrats used this process in 2022 to pass the Inflation Reduction Act along party lines. The Republicans are in the majority now and are working among themselves to craft their own budget reconciliation bill.

Where is Congress in the budget reconciliation process?

The House and Senate each passed their own budget resolutions back in February, which kicked off the process of budget reconciliation in earnest. The two chambers eventually have to agree on a shared bill to pass it into law. The House budget resolution, passed on Feb. 25, has the support of President Trump. The budget resolution tells congressional committees the amount of cuts or spending they are responsible for.

Throughout the spring, committees worked together to discuss how they might achieve those cuts. In May, committees began to release, mark up, and vote on their portions of the budget reconciliation bill. The House approved their version of the bill on May 22, and it included significant rollbacks of America’s clean energy tax credits.

For a budget reconciliation bill to actually become law, everything needs to happen on the Senate side, too — committee votes and then passage by the full Senate. On June 16, the Senate Finance Committee (the Senate counterpart to the House Ways and Means Committee) released its version of its portion of the budget reconciliation bill. While it’s slightly better for clean energy than the House bill, it’s still not ideal. The Senate passed its version of the bill this week, meaning the bill is now on its way back to the House for another round of voting.

Ultimately, the House and Senate will have to agree on and pass the same version of the bill for it to go to the president to be signed into law.

What exactly are the clean energy tax credits? How does that relate to other IRA funding?

The Inflation Reduction Act (IRA) was a big package of legislation that passed Congress and was signed into law by President Biden in 2022. The IRA put America on track to reduce our carbon pollution 40% by 2030 because it included a range of climate provisions. Some of those provisions are clean energy tax credits, which are responsible for the bulk of the law’s potential emissions reductions.

We want to preserve as many IRA climate provisions and pollution cuts as possible, but according to various modeling efforts, the clean electricity tax credits are the most important. They’re responsible for almost half of the bill’s climate pollution cuts.

Some of the clean energy tax credits we’re interested in preserving include:

• 48E & 45Y – Clean electricity investment and production tax credits for clean electricity facilities
• 45X & 48C – Advanced manufacturing investment and production tax credit for domestic manufacturing of components for carbon capture, solar and wind energy, inverters, battery components, critical minerals, waste reduction, and energy efficiency
• 45Q – Tax credit for carbon dioxide capture and sequestration
• …and more!

What changes did the House Ways and Means Committee make to the clean energy tax credits?

The House Ways and Means Committee passed legislation that: 

• Phasing out tax credits for production and investments in clean electricity and existing nuclear power from 2029 to 2032. The new clean power plants, which take years to permit and build, would have to be operational by those dates to qualify for the tax credits.
• Ending tax credits for home energy efficiency and heat pumps by the end of this year
• Ending the 30% tax credit for rooftop solar and batteries by the end of this year
• …and much more, including many tax credits related to electric vehicles

See more details about all the changes from CCL Research Manager Dana Nuccitelli in CCL Community’s forums here. Remember that these changes do not become law until and unless they are passed by the full House and the Senate.

What changes did the Senate Finance Committee make to the clean energy tax credits?

The Senate Finance Committee proposed legislation that also phases out the clean energy tax credits (like the House bill), but with a longer runway. The current text:

• Phases out clean electricity tax credits (45Y & 48E). Solar and wind are phased out over the next two years (by 2027). Other clean energy sources (including batteries, nuclear, geothermal, hydro) are phased out over the next ten years (by 2035).
• Clarified some text from the House bill, including Foreign Entity of Concern (FEOC) language.
• Removes the $250 annual EV fee and $100 annual hybrid fee from the House bill.

See more details about all the changes from CCL Research Manager Dana Nuccitelli in CCL Community’s forums here. Remember that these changes do not become law until and unless they are passed by the full House and the Senate.

What is the last-minute tax on new wind and solar energy projects?

Prior to voting, the revised Senate text included a devastating, last-minute tax on future wind and solar projects in the U.S. Projects not in service by 2027 would have been hit with a tax that will increase project costs by 10-20%.

Many wind and solar projects are currently planned around the U.S. with federal subsidies in mind. This tax would have crippled the wind and solar industry in America while slowing down our transition to clean energy. However, we made thousands of calls to the Senate and this provision was removed before passage!

Did President Trump already stop the Inflation Reduction Act climate measures?

The Inflation Reduction Act includes tax credits and direct investments in various climate and clean energy projects. President Trump signed an executive order pausing the disbursement of funds from the Inflation Reduction Act. Legally, Congress has appropriated these funds, so President Trump should not be able to stop them permanently, and we hope to see all of those taps turning back on soon. But those direct investments are different from the clean energy tax credits we are seeking to protect. The executive order has not stopped the tax credits, and we want Congress to keep them in place.

Will my representative listen to me?

Yes! The idea that elected representatives don’t listen to their constituents is not true. In reality, congressional staffers take every call and voicemail and read every email their office receives and pass these onto their member of Congress in regular briefings. Congress works for you, and they want to know what their constituents care about. You may receive a generic email in response, but your message was still received loud and clear.