Two key steps renewable energy companies can take to manage tax risks in the U.S.

Last year, the Internal Revenue Service (IRS) was flushed with funding from the Inflation Reduction Act (IRA).^[1] Today, the IRS will be lucky to maintain even a portion of its pre-IRA budget.

Pre-January 2025: The IRS was poised to amplify enforcement

The IRA – a cornerstone of the Biden administration’s activities – was signed into law in August 2022 and gave the IRS $79.4 billion in funding to transform tax administration and to improve enforcement^[2]. In response to this funding, the Department of the Treasury and IRS announced in September 2023 a Strategic Operating Plan for the fiscal year 2023-2031^[3]. Under the plan, of the $79.4 billion provided to the IRS under the IRA, the IRS allocated $45.6 billion (over 57%) to enforcement over the 2023-2031 period.^[3]

To implement this plan, the IRS made two significant announcements relevant to the renewable industry:

• First, it announced the opening of more than 3,700 positions nationwide to help with expanded enforcement focusing on complex partnerships and large corporations^[4]
• Second, the IRS announced changes to its organizational structure, consolidating two deputy commissioner positions into a single role with four chiefs reporting to the new consolidated Deputy Commissioner^[5]

With these structural changes, practitioners were advising clients to expect increased audits of pass-through entities, better trained auditors on partnership issues, likelihood of improved IRS identification of potential noncompliance, and a better deployment of audit reserves.

By the end of 2024, the IRS looked poised to do some serious enforcement.

Since January 2025: Major personnel changes

2025 changes at a glance:

• Reduced IRS audit staff^[6]
• Signals from the IRS Acting Chief Counsel that the reduction in force would impact the attorneys at the Associate Chief Counsel’s Office in charge of regulatory guidance
• Another tax bill on the horizon
• U.S. tax administration function will change in the years ahead

The IRS is on track to lose nearly a third of its workforce this year after about 20,000 employees accepted a second deferred resignation offer – an opportunity to resign and be placed on paid administrative leave through the end of September.^[7]

Losing 20,000 employees alongside natural attrition due to retirement, would bring the agency’s total staff to about 70,000, effectively undoing the hiring blitz of technical experts funded by the IRA.^[7]

This planned reduction is happening in the midst of a planned promulgation of a new tax bill – dubbed ‘the big beautiful bill’^[8], which is expected to modify provisions relating to the IRA, with new restrictions, new definitions, and new analysis in need of interpretation.

What this means for tax risks in the renewable energy sector

The implication of these abrupt resignations and reduction in work force suggest that, at least for the short term, the IRS will need to narrow its audit focus and scale up on the threshold size of an issue that would be picked up for audit.

Tax credits, given their prominence in the IRS and the Office of the Comptroller of the Currency (OCC) organizational structure, will likely stay an audit focus, but its impact will likely be felt more by large developers and large banks claiming the tax credits and the large corporate taxpayers purchasing them.

After pulling $3.7 billion in clean energy funding^[9] and suspending all funding disbursements under the IRA, clean energy projects are unable to rely confidently on federal support. Private equity and other investments are under pressure to keep renewable energy projects moving. But private investment in clean energy manufacturing, which reached $89 billion in two years^[10], faces uncertainty due to the administration’s stance and regulatory delays. Some companies are reconsidering or halting projects, particularly in hydrogen electrolyzer manufacturing and electric vehicle supply chains, due to unclear tax credit regulations and policy shifts^[11].

Two ways renewable energy companies can take action

“Unlocking project financing is a major priority for the renewables sector and without a doubt, tax insurance will have to play a part in continuing to facilitate tax credit claims and transfers in this period of uncertainty.” Shirley Chin, Head of Tax Insurance, North America

1. 01

   Invest in tax insurance

   Tax insurance eliminates the uncertainty inherent in tax compliance by transferring the risk of loss arising from a tax challenge to an insurance company, creating a more stable financial and operating environment to secure financing, stabilize supply chains and revenue flows, and pursue growth opportunities.

2. 02

   Bring tax expertise in house

   An effective tax leader can craft a legal position on open tax questions, ensure internal buy-in and consistency, analyze the cost vs. benefit of obtaining tax insurance, and defend the tax position if and when challenged.

Download the full article to find out more about how you can take action to managing tax risks amid geopolitical volatility.

Footnotes

1. U.S. Treasury Inspector General For Tax Administration (2024) Return to article undo
2. IRS (2025) Return to article undo
3. Internal Revenue Service Inflation Reduction Act Strategic Operating Plan Return to article undo
4. IRS (2023) Return to article undo
5. IRS (2023) Return to article undo
6. Forbes (2025) Return to article undo
7. Politico (2025) Return to article undo
8. The White House (2025) Return to article undo
9. Trump administration Return to article undo
10. Rhodium Group (2024) Return to article undo
11. New York Times (2025) Return to article undo

Renewable energy contact

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Steven Munday ACII

Global Renewable Energy Leader, Natural Resources

email Email phone +44 20 3124 7171

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