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Federal Judge Reportedly Rejects IRS Changes to Wind, Solar Tax Subsidy Rules

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A federal judge struck down a Trump administration policy that made it more difficult for wind and solar projects to qualify for federal tax incentives, according to multiple media reports on Monday.

US District Judge Colleen Kollar-Kotelly ruled Saturday that the Internal Revenue Service failed to adequately explain why it changed a long-standing standard for determining when a project is considered under construction.

Judge Kollar-Kotelly reportedly vacated IRS Notice 2025-42 in a Saturday order because it was "arbitrary and capricious," and violated the Administrative Procedures Act.

The decision adds to a series of legal challenges facing President Donald Trump's efforts to slow renewable energy development across the US.

To remain eligible for a 30% tax credit and additional bonus incentives, developers must either begin construction by July 4 or place projects into service before the end of 2027.

For about 10 years, developers could lock in tax-credit eligibility for four years by either maintaining meaningful construction activity or spending at least 5% of a project's total cost before incentives expired.

Last August, the IRS narrowed that flexibility by removing the 5% spending option for most projects while keeping it available only for smaller developments, the reports said.

Judge Kollar-Kotelly sent the policy back to the IRS for further review after vacating the agency's guidance, according to the reports.

The Oregon Environmental Council, the Natural Resources Defense Council, Public Citizen, the City of San Francisco, and the clean-energy consulting firm Woven Energy brought a lawsuit challenging the changes implemented by the IRS last year.

Arguing that the revised policy would discourage project development, the plaintiffs said the changes could also lead to higher electricity costs for consumers.

IRS did not immediately respond to' request for comment.

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