We are often asked by our clients what may happen to the Inflation Reduction Act (IRA) given the incoming Republican party will control both chambers of Congress and the Executive Office. 

By all accounts of recent information, the states that have by far benefited the most from the IRA, are those that traditionally vote Republican. As such, we do not expect widespread changes or an all-out appeal of the Inflation Reduction Act.  

This pattern is particularly evident in manufacturing and energy infrastructure investments across key swing states and traditional Republican strongholds, where job creation and economic growth have become increasingly tied to IRA initiatives. 

Understanding credit vulnerability 

As we examine specific areas of potential change, it’s important to first understand which components of the IRA may be most susceptible to revision. The most vulnerable components of the IRA are typically those with pending guidance or interim rules, particularly those finalized during recent congressional sessions.  

Additionally, tax credits with substantial fiscal impact may face greater scrutiny, especially as the new administration prioritizes extending Tax Cut and Jobs Act credits set to expire in 2025. 

However, with the power the Republicans can wield, we do anticipate changes to certain aspects of the IRA including: 

• IRS funding: IRS resources could be cut or revised. This could impact enforcement capabilities and program administration, particularly for newer tax credit provisions. Historical precedent suggests these changes might focus on oversight and compliance requirements.
• Redirecting funds: There is a possibility the GOP lead government could redirect funds related to climate change. Historical precedent from previous administrations suggests this could affect both unallocated funds and pending program implementations. This might particularly impact discretionary spending programs not yet fully implemented. 
• Rolling back environmental protections: Certain environmental regulations could be rolled back or revised. This may particularly affect recently finalized rules and those still in the public comment phase. Power plant emissions standards and vehicle efficiency regulations could face significant review. 
• Credit incentives: Certain electric vehicle credits and the Carbon Sequestration incentives could be a target for revision or other scrutiny. The focus may shift toward domestic manufacturing requirements and stricter eligibility criteria. This could include modifications to foreign entity restrictions and domestic content requirements.

Areas of stability and growth 

Despite these anticipated changes, several fundamental aspects of the IRA demonstrate remarkable resilience. The mainstay tax incentives surrounding Wind, Solar, and Geothermal energy and Battery storage are likely to remain intact.  

These provisions include the ability for taxpayers to monetize credits through transferability (i.e., selling credits to third parties) or direct pay options for non–profit organizations. These provisions have created substantial economic activity in key states and developed strong business constituency support. 

Implementation timeline and process 

Understanding how these changes might unfold requires examining the likely mechanisms for implementation. The implementation timeline for any changes would likely follow established legislative and regulatory processes. This could include: 

• Congressional Review Act resolutions for recent guidance 
• New budget reconciliation proposals 
• Executive orders affecting regulatory enforcement 
• Agency reinterpretation of existing rules

Market impact considerations 

While policy changes may reshape certain aspects of the IRA, market forces and existing momentum will play crucial roles in determining outcomes. Several factors may influence how changes affect various sectors: 

• Existing investments and commitments will likely maintain grandfathered status 
• Supply chain developments and manufacturing facilities already in progress should continue 
• State-level incentives and requirements may provide stability regardless of federal changes 
• Market momentum in renewable energy deployment may transcend policy shifts

In summary

While we will monitor legislation closely, we do not expect widespread changes to the IRA outside of certain specific targeted incentives, IRS funding, and environmental regulations. The concentrated economic benefits in Republican states, established business investments and implementation progress create significant momentum for maintaining core provisions. 

How BPM can support your organization

Our team at BPM stays closely connected to legislative developments and maintains deep knowledge of IRA provisions and implementation guidance. We can help navigate potential changes, identify stable opportunities and optimize available incentives for your organization.  

Whether you’re looking to understand credit transferability options, evaluate direct pay opportunities or assess the impact of potential regulatory shifts, our professionals can provide targeted insights and practical solutions. Connect with our team to discuss your specific situation and how we can help position your organization for success amid these evolving policy dynamics.